<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB

                                   (Mark One)

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

                For the six month period ended December 31, 1999

    /X/      TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
        For the transition period from July 1, 1999 to December 31, 1999

                             Commission file number
                                    0-28456

                       Metropolitan Health Networks, Inc.
                 (Name of small business issuer in its charter)

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

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

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

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

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

                              Title of each class

                         Common Stock, $.001 par value
               Class A Redeemable Common Stock Purchase Warrants
             Series A Convertible Preferred Stock, $.001 par value
             Series B Convertible Preferred Stock, $.001 par value

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                                Yes / / No /X/


<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 $34,768,921 (computed using
the closing price of $1.875 per share of Common Stock on August 31, 2000, as
reported by NASDAQ, based on the assumption that directors and officers and more
than 5% stockholders are affiliates).

         (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

There were 18,543,425 shares of the registrant's Common Stock, par value $.001
per share, and 3,277,625 of the registrant's Class A Redeemable Common Stock
Purchase Warrants outstanding on August 31, 2000.

         DOCUMENTS INCORPORATED BY REFERENCE

None.

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


<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") in which, instead of owning and managing Physician
Practices and Ancillary Services, it would manage the total care of patients
through "Global Risk" managed care contracts. As a result, the Company undertook
to divest of or unwind several of its acquisitions.

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

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

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

RECENT DEVELOPMENTS

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

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

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

<PAGE>

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

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

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

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

INDUSTRY

         General
         -------

         A Health Care Financing Administration ("HCFA") study projects spending
for health care in the United States will increase from $1.035 trillion in 1996,
or to $2.1 trillion by 2007. Health care costs per person are expected to jump
from $3,759 to $7,100. Americans are expected to spend $171 billion on
prescription drugs in 2007, up from $62 billion a decade earlier. A number of
factors are at work, which are affecting the patient, healthcare provider and
payer relationship. Healthcare spending has been fairly stable in recent years,
as consumers and employers have switched to managed care plans, holding down
costs. Today, with 85% of working Americans now covered by managed care, the
opportunity for additional savings is becoming harder to find. Managed care
plans that have traditionally competed on price are starting to increase
premiums to improve their profit margins. Medical costs are increasing due to
inflation and the relative high cost of new medical technologies. The Balanced
Budget Act is constraining health care spending for Medicare and Medicaid,
putting greater pressure on payments to doctors and hospitals. Due to those
trends, the study projects that insurance companies and consumers will see
bigger increases in health bills than Medicare. Private sources are expected to
pay nearly 55% of healthcare costs in 2007 compared to 53% in 1996. Hospitals
will receive less, receiving 30 percent of healthcare expenditures by 2007,
compared with 35% in 1996, due to the trend toward more outpatient care. Of the
$1.035 trillion spent in healthcare in 1996 over 19% was directly attributable
to physician services while nearly 58% was under physicians' direction.

         Changes in Industry
         -------------------

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

<PAGE>

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

BUSINESS

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

         HMO Agreements
         --------------

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

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

<PAGE>

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

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

         Physician Practices
         -------------------

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

         GMA
         ---

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

         Skylake Medical Center
         ----------------------

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

<PAGE>

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

         Advanced Health Care is comprised of two primary care centers, which
currently provide medical care on a fee-for-service basis to patients in St.
Lucie and Martin counties. These centers will be integrated into the Network
with the implementation of the new HMO contract. On March 17, 1999 the Company
purchased the assets and certain liabilities of Advanced Health Care for
$512,000. The purchase price consisted of assumed liabilities of approximately
$387,000 and payments of approximately $90,000 in cash and 70,000 shares of
common stock of the Company. As of June 30, 1999 the shares were held in escrow.
Subsequently, the note was paid through cash payments and by tendering the
70,000 shares for the any balance owed on the Promissory Note. The acquisition
was accounted for as a purchase, and accordingly, the purchase price was
allocated to the net assets acquired based on their estimated fair market
values. The results of operations beginning March 17, 1999 are included in the
Company's statement of operations for the period ended June 30, 1999. As a
result of this acquisition, $125,000 was recorded as goodwill.

         Dr. Federgreen
         --------------

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

         Purchase of Dr. Sreekumar
         -------------------------

         This primary care practice that services Humana and other
fee-for-service patients is located in Palm Beach County and is part of our
Network. Effective August 12, 1999, the Company acquired the medical practice of
Dr. P. Sreekumar. The purchase price consisted of assumed liabilities of
approximately $300,000, cash of $200,000 and the issuance of a note payable in
the amount of $300,000. The acquisition was accounted for as a purchase and
accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair market values. The results of operations beginning
August 13, 1999, have been be included in the Company's statement of operations
for the six months ended December 31, 1999. As a result of this acquisition,
approximately $700,000 was recorded as goodwill.

DISPOSITION OF PHYSICIAN PRACTICES AND ANCILLARY SERVICES

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

         Sale of Magnetic Imaging Systems (MIS)
         --------------------------------------

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


<PAGE>

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

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

AGREEMENTS

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

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

         Alpha Clinical Laboratory, Inc.
         -------------------------------

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

IMPACT OF THE Y2K COMPUTER ISSUE

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

COMPETITION

         The healthcare industry is highly competitive and is subject to
continuing changes in the provision of services and the selection and
compensation of providers. In addition, certain businesses, including hospitals
and insurers, are expanding their presence in the physician management market.
The Company's operations compete with national, regional and local companies in
providing its services. Excluding individual physicians and small medical
groups, many of the Company's competitors are larger and better capitalized,
provide a wider variety of services, have greater experience in providing health
care management services and may have longer established relationships with
buyers of such services.

<PAGE>

RISKS OF CHANGES IN PAYMENT FOR MEDICAL SERVICES

         The United States Congress and many state legislatures routinely
consider proposals to reform or modify the health care system, including
measures that would control healthcare spending, convert all or a portion of
government reimbursement programs to managed care arrangements and reduce
spending for Medicare, Medicaid and state health programs. These measures can
affect a healthcare company's cost of doing business and contractual
relationships. There can be no assurance that such legislation, programs and
other regulatory changes will not have a material adverse effect on the Company.
The profitability of the Company may also be adversely affected by cost
containment decisions of third party payors and other payment factors over which
the Company has no control.

EMPLOYEES

         As of December 31, 2000, the Company had approximately 70 full-time
employees down from 168 on June 30, 1999. Of the total, seventeen (17) were
employed at the Company's executive offices. No employee of the Company is
covered by a collective bargaining agreement or is represented by a labor union.
The Company considers its employee relations to be good.

ITEM 2.  DESCRIPTION OF PROPERTY

         As of December 31, 1999 the Company was located at 5100 Town Center,
Boca Raton, Florida. However, as of the date of filing, the Company's Executive
offices are presently located at 500 Australian Avenue South, Suite 1000, West
Palm Beach, Florida where it occupies 10,936 square feet at a current monthly
rental of approximately $12,000 pursuant to a sublease expiring December 31,
2002. The Company relocated its corporate offices April 15, 2000.

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

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

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

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

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

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


<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

MRI SCAN CENTER, INC. AND DR. KAGAN

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

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

PRIMEDICA HEALTHCARE, INC.

         The Company entered into litigation with regard to the Primedica
acquisition agreement. This litigation was subsequently settled whereby the
parties entered into a settlement agreement that reduced the total outstanding
debt to $1,512,235 from $4,745,364. The settlement agreement provided for
payments of $25,000 per week. A change in anticipated payments under a full risk
contract caused the Company to default on the agreement. As a result of this
change, the Company and Primedica then entered into a forbearance agreement,
which increased the amount of the debt to $2,000,000 while maintaining the
weekly payments of $25,000. At June 30, 1999 the Company was in default of the
Forbearance Agreement and, accordingly, the amount owed to Primedica was
adjusted to $4,745,364. As of August 4, 2000 the Company entered into a new
agreement in which Primedica acknowledged payments of $700,000 and provided for
continued weekly payments of $25,000 for 32 weeks, with a balloon payment of
$500,000 in March 2001, which would result in total payments of $2,000,000. In
the event the Company is not able to meet this obligation, the Company may
continue payments through December 2001 with a balloon payment, bringing the
total to $2,500,000. In the event of a default by the Company in the required
payments to Primedica, the Company shall be obligated to pay the full amount of
$4,745,364. The recorded liability at December 31, 1999 was $4,524,462. This
liability was settled in full in September 2000 through a negotiation and
subsequent payment of $350,000. A gain of approximately $3,500,000 will be
recognized in the quarter ended September 30, 2000 in connection with this
settlement.

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

         No matter was submitted to a vote of the security holders, through the
solicitation of proxies or otherwise, during the six months ended December 31,
1999.


<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:

                                                    High         Low
                                                    ($)          ($)

      Common Stock
      Quarter ended September 30, 1997              6.125        3.375
      Quarter ended December 31, 1997               7.375        5.625
      Quarter ended March 31, 1998                  6.125        2.500
      Quarter ended June 30, 1998                   4.063        2.750
      Quarter ended September 30, 1998              3.813        2.500
      Quarter ended December 31, 1998               2.875        1.188
      Quarter ended March 31, 1999                  1.870        0.065
      Quarter ended June 30, 1999                   1.938        0.344
      Quarter ended September 30,1999               0.563        0.203
      Quarter ended December 31, 1999               0.422        0.188

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

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

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

RESULTS OF OPERATIONS

OVERVIEW: The Company had revenues of $10,020,795 for the six month period ended
December 31, 1999 compared to $8,377,103 for the same period in 1998, an
increase of 19.6%. Operating expenses for those same periods were $13,829,744
and $11,008,810 respectively, a 25.6% increase of $2,820,934 in 1999. The loss
from operations for the six months ended December 31,1999 amounted to $3,808,949
compared to $2,631,707 in 1998. The Company recognized a net loss of $5,994,486
and $2,720,512 for the six-month period ended December 31, 1999 and 1998,
respectively. The current period results included a $2,185,537 loss on disposal
of assets related to the Company's restructuring.

REVENUES: As previously noted, revenues for the six-month period ended December
31, 1999 increased $1,643,692 (19.6%) over the same period in 1998, from
$8,377,103 to $10,020,795. MSO revenues for the two periods were $6,838,390 and
$3,445,053, respectively, a $3,393,337 (98.5%) increase from 1998 to 1999. This
was offset in part by a $1,749,645 (35.5%) decrease in diagnostic and physician
billings. MSO revenues for the six months ended December 31, 1999 represented
68.2% of total revenues compared to 41.1% in the prior year's period, reflecting
the Company's shift to the MSO business model.

<PAGE>

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

OPERATING EXPENSES: Total operating expenses increased 25.6% for the six-month
period ended December 31, 1999 compared to the prior year, rising from
$11,008,810 to $13,829,744. Direct medical costs, expenses directly related to
MSO revenue, increased from $2,506,228 for the six months ended December 31,
1998 to $6,455,678 for the same period in 1999. Medical expenses include all
costs associated with providing services of the MSO operation including direct
medical payments to physician providers, hospitals and ancillary services on a
capitated and fee for service basis.

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

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

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

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

General and administrative expenses decreased by $920,697 or 41.6% to $1,290,497
for the six months ended December 31, 1999. General and administrative expenses
were 12.9% of total revenue for the six months ended December 31, 1999 compared
to 26.4% of revenue the for prior year period. This improvement was primarily
due to decreases in legal and professional fees related to litigation and
reduction in costs associated with the disposition of physician offices and
diagnostic operations. The Company effectively settled all material litigation
as of December 31, 1999.

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

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

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

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

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

         While the Company's net loss was nearly $6 million for the six months
ended December 31, 1999, approximately $3,278,347 was attributable to non-cash
items, including stock and stock options issued for services and compensation,
loss on disposal of assets, and depreciation and amortization. The Company's
cash needs in fiscal 1999 were met in part by an advance from an HMO of
approximately $107,000 and certain private borrowings totaling approximately
$850,000.

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

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

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

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

ITEM 7.  FINANCIAL STATEMENTS

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

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

         None.


<PAGE>

PART III

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

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

         NAME                       AGE     TITLE

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

--------------
As of August 31, 2000, the directors, control persons and executive officers of
the Company are as follows:

         NAME                       AGE     TITLE

         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

         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.

<PAGE>

         PAUL PRESTE, M.D. has served as a member of the Board of Directors
since March 15, 1999. He owned and operated a private medical practice from 1981
through 1992. From 1993 to 1994, he was associated with Intermed and returned to
his private practice in 1995. Dr. Preste was owner of a 30-bed retirement
facility from 1983 to 1987 and a 100-bed retirement home from 1987 to 1991. He
is affiliated with Holy Cross Hospital, AMI - North Ridge Medical Center and HTI
- Cleveland Clinic Hospital (Ft. Lauderdale, Florida). Dr. Preste received his
Bachelor of Science degree, summa cum laude, from the University of Florida in
1974, his Doctor of Medicine degree from the University of South Florida in 1978
and completed his residency in Internal Medicine at the University of South
Carolina in 1981.

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

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

         DAVID S. GARTNER, CPA joined the Company in November 1999 as its Chief
Financial Officer. He has 19 years experience in accounting and finance,
including nine years of specialization in the healthcare industry. Most
recently, Mr. Gartner served for two years as Chief Financial Officer of Medical
Specialists of the Palm Beaches, Inc., a large Palm Beach County multi-practice,
multi-specialty group of 40 physicians. Prior to Medical Specialists, he held
the position of Chief Financial Officer at National Consulting Group, Inc., a
treatment center licensed for 140 inpatient beds in New York and Florida, from
1991 to 1998.

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

         MARVIN HEIMAN has served as a director of the Company since March 2000.
He is President and Chairman of the Board of Sussex Financial Group, Inc. and
Sussex Insurance Group, an asset money manager for hundreds of physicians in the
Chicago area. He also manages group health plans for many physician practices.
From 1970 to 1981 he was President of Curtom Record Company and Division
Vice-President of Curtom/Warner Bros. Record Company from 1975-1978. Mr. Heiman
is a licensed Broker/Dealer with NASD and licensed with the SEC. He is also a
member of the International Association for Financial Planners, Real Estate
Securities Syndication Association, a recognize Platinum member of the
International Association for Financial Planners, AIPAC and a member of the
International Platform Association. Mr. Heiman's biography appears in Who's Who
in America, Who's Who in Finance, Who's Who in Emerging Leaders in America, and
Men of Achievement 1990/91 Cambridge, England. He has also been the recipient of
the American Jewish Committee "Humanitarian" award in 1978. Mr. Heiman is also a
partner in the Chicago White Sox baseball team.

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

<PAGE>

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

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

BOARD OF DIRECTORS

         Election of Officers
         --------------------

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

         Board Committees
         ----------------

         The Company has three committees, an Audit and Compensation Committee,
Executive Committee and Regulatory Compliance Committee. The Audit and
Compensation Committee consists of Messrs. Sachs, Cahr and Heiman. The Audit and
Compensation Committee makes recommendations to the Board of Directors regarding
the compensation for executive officers and consultants of the Company,
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors, reviews and
evaluates the Company's internal control functions. During fiscal 1999, the
Audit and Compensation Committee members were Messrs. Guillama, Fox and
Gerstenfeld.

         The Executive Committee was established as of June 30, 1999 and has and
may exercise the power of the Board of Directors in the management of the
business and affairs of the Corporation at any time when the Board of Directors
is not in session. The Executive Committee shall, however, be subject to the
specific directions of the Board of Directors. It is composed of Messrs. Cahr,
Gerstenfeld, and Heiman. All actions of the Executive Committee require a
unanimous vote. During fiscal 1999, the Executive Committee consisted of Messrs.
Guillama and Gerstenfeld.

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


<PAGE>

         Compensation of Directors
         -------------------------

         The Company reimburses all Directors for their expenses in connection
with their activities as Directors of the Company. The Directors make themselves
available to consult with the Company's management. One of the seven Directors
of the Company is also an employee of the Company and did not receive additional
compensation for his services as Director. A formal compensation and stock
option plan has been adopted for the Company's outside Directors in the amount
of $12,000 per year. The Directors have elected to receive this compensation for
the present time in stock. All outside directors have received 40,000 options
upon joining the Board, of which 20,000 vest immediately and the other 20,000
after one year.

         Compliance with Section 16(a) of the Securities Exchange Act of 1934
         --------------------------------------------------------------------

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

         Based solely on its review of the copies of such reports furnished to
the Company or written representations that no other reports were required, the
Company believes that all Section 16(a) filing requirements applicable to its
officers, directors and greater than (10%) percent beneficial owners were
complied with during the six months ended December 31, 1999.

ITEM 10. EXECUTIVE COMPENSATION.

         The following tables present information concerning the cash
compensation and stock options provided to the Company's Chief Executive Officer
and each additional executive officer whose total annualized compensation
exceeded $100,000 for the year ended December 31, 1999 ("fiscal 1999").

SUMMARY COMPENSATION TABLE

         Annual Compensation
         -------------------

<TABLE>
<CAPTION>

                                                                                  Long-term
                                                                                  Compensation
                                                                                  Awards
                                                                                  Securities
                                                                  Other Annual    Underlying
Name and                          Fiscal   Salary        Bonus    Compensation    /Options SARs     All Other
Principal Position                Year       $             $          ($)             (#)           Compensation
------------------                ------   ------        -----    ------------    -------------     ------------
<S>                              <C>      <C>           <C>        <C>            <C>               <C>
Noel J. Guillama
Chairman of the Board,            1998      41,466                   11,592
President,
Chief Executive Officer           1999      64,200                  197,989

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

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

</TABLE>


<PAGE>

Options Granted in the Year Ended December 31, 1999 to Executives

             Number of       % of Total
             Securities      Options/
             Underlying      SARs
             Options/        Granted to       Exercise or
             SARs            Employees in     Base Price       Expiration
             Granted         Fiscal Year      ($/Share)        Date
             ----------      ------------     -----------      ----------

Name
NONE

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

Aggregated Fiscal Year-End Option Value Table

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

<TABLE>
<CAPTION>

                                                                 Value of Unexercised
                         Number of Unexercised Options               In-the-Money
                           Held at December 31, 1999       Options at December 31, 1999 (1)
                         -----------------------------     --------------------------------
Name                     Exercisable     Unexercisable     Exercisable        Unexercisable
----                     -----------     -------------     -----------        -------------
                         (#)             (#)               ($)                ($)
                         ---             ---               ---                ---
<S>                       <C>              <C>             <C>                <C>
Robert Kagan                80,000          20,000
Donald B. Cohen            306,000

</TABLE>

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

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

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

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


<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. (I am
not reviewing this section)

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

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

Noel J. Guillama (1)                    1,490,666                     8.04%
Martin Harrison, M.D. (2)               5,291,372                    28.54%
Fred Sternberg (3)                        923,850                     4.98%
Paul Preste, M.D. (4)                      57,500                     0.31%
Karl Sachs (5)                            240,000                     1.21%
Mark Gerstenfeld (6)                      255,666                     1.24%
Michael Cahr (7)                          303,615                     1.64%
Marvin Heiman (8)                         131,100                     0.71%
Michael Earley (9)                         20,000                     0.11%
David Gartner (10)                         50,000                    .0.27%
Debbie Finnel (11)                        200,000                    1. 08%
Directors and Executive
Officers as a group
(9 persons)                             2,456,731                    11.63%

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

(1)      Includes (1) 1,021,000 held by Mr. Guillama, (32) 265,000 shares held
by Guillama Family Holdings, Inc., a corporation in which Mr. Guillama is an
officer, (3) 142,000 shares held by Mr. Guillama as trustee for his minor son,
and (4) 68,666 shares owned by Beacon Consulting Group, Inc., a corporation in
which Mr. Guillama is a director. Does not include (1) 1,500,000 shares
currently held as collateral for an existing loan, (2) 50,000 shares issuable
upon exercise of options at a price of $0.50 until July 23, 2005, (3) 50,000
shares issuable upon exercise of options at a price of $0.75 from January 28,
2001 to January 28, 2006, (4) 50,000 shares issuable upon exercise of options at
a price of $1.00 from July 28, 2001 to July 28, 2006 and (5) 50,000 shares
issuable upon exercise of options at a price of $1.25 from January 28, 2002 to
January 28, 2007.

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The Company had a consulting agreement with Sternco, Inc., an affiliate
of Fred Sternberg that provided for commissions on any acquisition for which
Sternco is or was the introducing party or materially contributed to such
acquisition. Prior to becoming an officer and director of the Company any and
all obligations under this agreement were satisfied with the payment of $24,000
cash and 160,000 shares of common stock.

<PAGE>

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

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

         All future transactions between the Company and any officer, director
or 5% shareholder will be on terms no less favorable than could be obtained from
independent third parties and will be approved by a majority of the independent
disinterested directors of the Company. The Company believes that all prior
affiliated transactions except those identified above were made on terms no less
favorable to the Company than available from unaffiliated parties. Loans, if
any, made by the Company to any officer, director or 5% stockholder, will only
be made for bona fide business purposes.

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

(a) (1) Financial Statements


<PAGE>

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



                              METROPOLITAN HEALTH

                        NETWORKS, INC. AND SUBSIDIARIES

                       CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1999



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


<PAGE>

C O N T E N T S
                                                                            Page
--------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT                                                   1

CONSOLIDATED FINANCIAL STATEMENTS

     Balance Sheets                                                            2

     Statements of Operations                                              3 - 4

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

     Statements of Cash Flows                                             7 - 10

     Notes to Financial Statements                                       11 - 34


<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 sheets of Metropolitan
Health Networks, Inc. and Subsidiaries as of December 31, 1999 and June 30,
1999, and the related consolidated statements of operations, changes in
stockholders' equity (deficiency in assets), and cash flows for the six month
period ended December 31, 1999 and each of the two years in the period ended
June 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with 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 December 31, 1999 and June 30, 1999, and
the results of their operations and their cash flows for the six month period
ended December 31, 1999 and each of the two years in the period ended June 30,
1999, in conformity with generally accepted accounting principles. We have not
audited the consolidated statements of operations and cash flows for the six
months ended December 31, 1998. Accordingly, we do not express an opinion or any
other form of assurance on them.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company
has sustained substantial operating losses and negative cash flows from
operations since inception. In the absence of achieving profitable operations
and positive cash flows from operations or obtaining additional debt or equity
financing, the Company may have difficulty meeting current and long-term
obligations. These factors raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.



                                        KAUFMAN, ROSSIN & CO., P.A.

June 16, 2000, except for the fourth paragraph of Practices of Note 3, which is
August 2, 2000
Miami, Florida


<PAGE>

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

<TABLE>
<CAPTION>

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

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

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

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

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

LIABILITIES AND DEFICIENCY IN ASSETS
====================================================================================================

CURRENT LIABILITIES
      Accounts payable                                              $  2,608,950       $  2,529,884
      Advances from HMO                                                1,596,000          1,089,000
      Due to related parties (Note 10)                                    95,705            300,144
      Accrued expenses                                                 2,793,466          1,665,399
      Medical costs payable                                               98,907            357,940
      Line of credit (Note 8)                                          1,520,668            132,231
      Unearned revenue                                                   125,000               --
      Current maturities of capital lease obligations (Note 7)           378,094            848,120
      Current maturities of long-term debt (Note 9)                    6,366,181          5,764,221
----------------------------------------------------------------------------------------------------
           Total current liabilities                                  15,582,971         12,686,939

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

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

COMMITMENTS AND CONTINGENCIES (NOTE 14)

DEFICIENCY IN ASSETS (NOTE 12)                                        (9,292,606)        (3,500,799)
----------------------------------------------------------------------------------------------------

                                                                    $  7,033,580       $ 11,944,747
====================================================================================================

</TABLE>


                            See accompanying notes.


                                       2

<PAGE>

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998
================================================================================

<TABLE>
<CAPTION>

                                                                               Unaudited
                                                              1999               1998
=========================================================================================
<S>                                                      <C>                <C>
REVENUES                                                  $ 10,020,795       $  8,377,103
-----------------------------------------------------------------------------------------
EXPENSES
      Direct medical costs                                   6,455,678          2,506,228
      Payroll, payroll taxes and benefits                    3,280,791          3,503,208
      Depreciation and amortization                            918,145            911,934
      Bad debt expense                                          54,418            630,184
      Rent and leases                                        1,225,910            672,061
      Consulting expense                                       304,283            157,188
      Interest                                                 300,022            416,813
      General and administrative                             1,290,497          2,211,194
-----------------------------------------------------------------------------------------
           Total expenses                                   13,829,744         11,008,810
-----------------------------------------------------------------------------------------

LOSS FROM OPERATIONS                                        (3,808,949)        (2,631,707)
-----------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE)
      Loss on disposal of assets (Note 3)                   (2,185,537)            (9,158)
      Other                                                       --              (79,647)
-----------------------------------------------------------------------------------------
           Total other income (expense)                     (2,185,537)           (88,805)
-----------------------------------------------------------------------------------------

NET LOSS                                                  $ (5,994,486)      $ (2,720,512)
=========================================================================================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING        10,738,757          6,501,185
=========================================================================================

      NET LOSS PER SHARE, basic and diluted               $      (0.55)      $      (0.42)
=========================================================================================

</TABLE>


                            See accompanying notes.


                                       3

<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)
=========================================================================================

</TABLE>


                            See accompanying notes.


                                       4

<PAGE>

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY IN
ASSETS)
SIX MONTH PERIOD ENDED DECEMBER 31, 1999
================================================================================

<TABLE>
<CAPTION>
                                                                                                      Common
                                                                 Preferred      Preferred             Stock            Common
                                                                   Shares         Stock               Shares           Stock
================================================================================================================================
<S>                                                              <C>          <C>                  <C>             <C>
BALANCES - JUNE 30, 1999                                           5,500       $  1,000,000          9,351,765      $      9,352

Conversion of preferred shares into common shares (Note 12)         (500)          (500,000)         2,300,000             2,300

Shares issued in lieu of compensation                               --                 --               62,700                63

Shares issued for consulting services                               --                 --               29,000                29

Shares issued for loans                                             --                 --               70,000                70

Shares issued for director's fees                                   --                 --               11,500                11

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

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

Dividends on preferred stock (Note 12)                              --                 --                 --                --

Issuance of options in lieu of compensation (Note 13)               --                 --                 --                --

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

BALANCES - DECEMBER 31, 1999                                       5,000       $    500,000         12,111,888      $     12,112
================================================================================================================================
<CAPTION>
                                                                  Additional
                                                                   Paid-in
                                                                    Capital             Deficit             Total
=====================================================================================================================
<S>                                                              <C>                <C>                <C>
BALANCES - JUNE 30, 1999                                          $ 12,781,486       $(17,291,637)      $ (3,500,799)

Conversion of preferred shares into common shares (Note 12)            497,700               --                 --

Shares issued in lieu of compensation                                   19,770               --               19,833

Shares issued for consulting services                                    5,686               --                5,715

Shares issued for loans                                                 34,930               --               35,000

Shares issued for director's fees                                        5,681               --                5,692

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

Contingent shares issued in connection with acquisition                   (157)              --                 --

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

Issuance of options in lieu of compensation (Note 13)                   97,205               --               97,205

Net loss                                                                  --           (5,994,486)        (5,994,486)
---------------------------------------------------------------------------------------------------------------------

BALANCES - DECEMBER 31, 1999                                      $ 13,488,391       $(23,293,109)      $ (9,292,606)
=====================================================================================================================
</TABLE>
                            See accompanying notes.

                                       5
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                                       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 12)                          5,000            500,000           --                 --

Issuance of series B Preferred Stock (Note 12)                          1,200          1,200,000           --                 --

Issuances of common stock                                                --                 --          625,142                625

Issuance of options in lieu of compensation                              --                 --             --                 --

Exercise of options (Note 13)                                            --                 --          470,602                471

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

Dividends on preferred stock (Note 12)                                   --                 --             --                 --

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

Conversion of preferred shares into common shares (Note 12)              (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 13)                                            --                 --          252,318                252

Dividends on preferred stock (Note 12)                                   --                 --             --                 --

Options granted for services rendered (Note 13)                          --                 --             --                 --

Issuance of options in lieu of compensation (Note 13)                    --                 --             --                 --

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

BALANCES - JUNE 30, 1999                                                5,500       $  1,000,000      9,351,765       $      9,352
===================================================================================================================================

<CAPTION>

                                                                      Additional                   Unrealized Gain On
                                                                       Paid-in                        Securities
                                                                       Capital         Deficit     Available For 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 12)                            (40,000)          --                --            460,000

Issuance of series B Preferred Stock (Note 12)                            (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 13)                                               3,959           --                --              4,430

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

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

Net loss                                                                     --       (5,166,325)             --         (5,166,325)
------------------------------------------------------------------------------------------------------------------------------------
BALANCES - JUNE 30, 1998                                               10,450,452     (6,924,318)             --          5,232,441

Conversion of preferred shares into common shares (Note 12)               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 13)                                              89,748           --                --             90,000

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

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

Issuance of options in lieu of compensation (Note 13)                     153,292           --                --            153,292

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

BALANCES - JUNE 30, 1999                                             $ 12,781,486   $(17,291,637)     $       --       $ (3,500,799)
====================================================================================================================================

</TABLE>


                            See accompanying notes.


                                       6

<PAGE>

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS PERIODS ENDED DECEMBER 31, 1999 AND 1998
================================================================================

<TABLE>
<CAPTION>

                                                                                                      Unaudited
                                                                                       1999              1998
=================================================================================================================
<S>                                                                               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                                     $(5,994,486)      $(2,720,512)
-----------------------------------------------------------------------------------------------------------------
      Adjustments to reconcile net loss to net cash provided by (used in)
           operating activities:
           Depreciation and amortization                                               918,145           911,934
           Loss on disposal of assets                                                2,185,537              --
           Provision for bad debts                                                      54,418           630,184
           Stock options granted in lieu of compensation                                97,205              --
           Stock issued for professional services and compensation                      31,240              --
           Stock issued for loans, interest and late fees                               46,220              --
           Changes in operating assets and liabilities:
               Accounts receivable                                                     403,166         1,079,356
               Trading securities                                                         --                (204)
               Other current assets                                                   (209,951)         (272,261)
               Other assets                                                             24,585           (72,092)
               Accounts payable and accrued expenses                                 1,130,062         1,331,322
               Unearned revenue                                                        125,000              --
               Medical claims payable                                                     --              13,626
-----------------------------------------------------------------------------------------------------------------
                     Total adjustments                                               4,805,627         3,621,865
-----------------------------------------------------------------------------------------------------------------
                          Net cash provided by (used in) operating activities       (1,188,859)          901,353
-----------------------------------------------------------------------------------------------------------------

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

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

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

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

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

</TABLE>


                            See accompanying notes.


                                       7

<PAGE>

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

<TABLE>
<CAPTION>

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

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

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

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

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

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

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

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

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

</TABLE>


                            See accompanying notes.


                                       8

<PAGE>

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999 AND 1998
================================================================================

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

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

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

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

CASH AND CASH EQUIVALENTS - BEGINNING                                                   916,464          1,667,887
-------------------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS - ENDING                                                 $       --         $    916,464
===================================================================================================================
</TABLE>
                            See accompanying notes.

                                       9
<PAGE>

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED JUNE 30, 1999 AND 1998
================================================================================

<TABLE>
<CAPTION>

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

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

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

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

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

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

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

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

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

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

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

</TABLE>


                            See accompanying notes.


                                       10

<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), Advanced Healthcare Consultants, Inc. (Advanced),
         Family Medical Plaza, Inc. and several physician practices. The
         consolidated group is referred to, collectively, as the Company. All
         significant intercompany balances and transactions have been eliminated
         in consolidation.

         Organization and Business Activity

         The Company was incorporated in January 1996, under the laws of the
         State of Florida for the purpose of acquiring and operating health care
         related businesses. The Company operates in South Florida, and during
         the periods ended December 31, 1999 and June 1999 and 1998, owned and
         operated a radiology practice, a magnetic resonance imaging (MRI)
         outpatient center, a diagnostic testing company and various general
         medical practice offices. During the six months ended December 31, 1999
         the Company sold the radiology practice and magnetic resonance imaging
         (MRI) outpatient center (see Note 3). The Company and certain of the
         general medical practices operate under capitation agreements with a
         national health maintenance organization (HMO). Commencing in 1999, the
         Company entered into additional capitation agreements with the HMO in
         locations where it did not have owned medical practices and in
         connection therewith, began providing medical care to certain patients
         through non-owned medical practices. (See accounts receivable and
         revenue recognition.) The Company also provided medical billing
         services to third party medical related businesses, however, as these
         services were not significant, the Company is deemed to be operating in
         one segment.

         Cash and Cash Equivalents

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

         Property and Equipment

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

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


                                       11
<PAGE>

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

         Depreciation and Amortization

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

                  Machinery and equipment                            5 - 7 years
                  Computer and office equipment                      5 - 7 years
                  Furniture and fixtures                             5 - 7 years
                  Auto equipment                                         5 years
                  Leasehold improvements                                 5 years

         Use of Estimates

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

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

         Fair Value of Financial Instruments

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

                  Cash and cash equivalents - The carrying amount approximates
                  fair value because of the short maturity of those instruments.

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


                                       12
<PAGE>

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

         Net Loss Per Share

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

         Accounts Receivable and Revenue Recognition

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

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

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

<TABLE>
<CAPTION>

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

</TABLE>

         Advances from HMO

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


                                       13
<PAGE>

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

         Goodwill

         In connection with its acquisitions of physician and ancillary
         practices, the Company has recorded goodwill of $2,644,446 and
         $4,801,562 as of December 31 and June 30, 1999, respectively, which is
         the excess of the purchase price over the fair value of the net assets
         acquired. The goodwill is attributable to the general reputation of
         these businesses in the communities they serve, the collective
         experience of the management and other employees, contracts with health
         maintenance organizations, relationships between the physicians and
         their patients, patient lists and other similar intangible assets. The
         Company evaluates the underlying facts and circumstances related to
         each acquisition in establishing amortization periods for the related
         goodwill. The goodwill related to current and prior year's acquisitions
         is being amortized on a straight-line basis over 10 years.

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

         Trading Securities

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

         Income Taxes

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

         Reclassification

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


                                       14
<PAGE>

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

         New Accounting Pronouncements

         During 1998, the Company adopted Financial Accounting Standards Board
         ("FASB") statement No. 131, "Disclosure about Segments of an Enterprise
         and Related Information." The Company has considered its operations and
         has determined that it operates in a single operating segment for
         purposes of presenting financial information and evaluating
         performance. As such, the accompanying financial statements present
         information in a format that is consistent with the financial
         information used by management for internal use.

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

NOTE 2. GOING CONCERN

         The accompanying financial statements have been prepared in conformity
         with generally accepted accounting principles, which contemplate
         continuation of the Company as a going concern. 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.

         The Company's ability to continue as a going concern is dependent upon
         achieving profitable operations and positive cash flows from operations
         or obtaining additional debt or equity financing. These conditions
         raise substantial doubt about the Company's ability to continue as a
         going concern. The financial statements do not include any adjustments
         that might result from the outcome of these uncertainties.

         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.


                                       15
<PAGE>

NOTE 3. ACQUISITIONS AND DISPOSALS

         MIS

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

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

         Datascan

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


                                       16
<PAGE>

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

         Wand

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

         Certain Assets of IFHC

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

         GMA

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


                                       17
<PAGE>

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

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

         The Practices

         Effective April 1, 1998, the Company acquired two physician practices
         (the Practices) from Primedica Healthcare, Inc. (Primedica) for
         $2,431,123. The purchase price consisted of a 7.5% note payable of
         $3,500,000, which is amortized over 20 years, with a balloon payment
         due on April 1, 2003 (the Promissory Note). The Company discounted this
         Promissory Note $1,068,877 based upon the Company's incremental
         borrowing rate at April 1, 1998 (16%) (see Note 9). The acquisition was
         accounted for as a purchase, and accordingly, the purchase price was
         allocated to the net assets acquired based on their estimated fair
         market values. The results of operations beginning April 1, 1998 are
         included in the Company's statement of operations. As a result of this
         acquisition, $1,588,349 was allocated to goodwill.

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

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


                                       18
<PAGE>

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

         Subsequent to June 30, 1999, the Company and Primedica reached a
         settlement whereby the Company agreed to pay Primedica $1,513,235,
         subject to a provision stating that if timely payments were not
         received by Primedica, the Company would be liable for $4,745,364. On
         October 26, 1999, the Company was notified by Primedica that it was in
         default of this settlement agreement. Effective August 2, 2000 the
         parties entered into a second stipulation for forbearance providing for
         a discount on amounts owed of $2,000,000 to $2,500,000 contingent upon
         timely weekly payments of $25,000 to Primedica. In the event of a
         default by the Company in connection with the timely required payments,
         the Company shall be obligated to pay the full amount of the
         $4,745,364. At December 31, 1999 the Company owed Primedica $4,524,462,
         which is included in current maturities of long-term debt.

         Disposal of Dr. Glickman's Practice

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

         Family Medical Plaza, Inc.

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

         Advanced Healthcare, Inc.

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


                                       19
<PAGE>

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

         Pro Forma - Unaudited

         Unaudited pro forma results of operations, assuming the acquisition of
         Family Medical Plaza, Inc. and Advanced occurred as of the beginning of
         the fiscal year ended June 30, 1999 and June 30, 1998, after giving
         effect to certain adjustments such as the elimination of intercompany
         transactions resulting from the acquisitions were as follows:

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

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

         Purchase of Dr. P. Sreekumar

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

         Purchase of Dr. Federgreen

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

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


                                       20
<PAGE>

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

         Pro Forma - Unaudited

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

                                      (Unaudited)          (Unaudited)
                                   December 31, 1999    December 31, 1998
         =======================================================================
         Revenues                    $ 10,560,795         $  8,917,103
         Net loss                    $ (5,874,486)        $ (2,600,512)
         Loss per share              $      (0.55)        $      (0.40)

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

NOTE 4. PROPERTY AND EQUIPMENT

         Property and equipment consisted of the following:


                                           December 31, 1999   June 30, 1999
         =======================================================================

         Machinery and medical equipment      $   222,805       $ 1,694,841
         Furniture and fixtures                   531,721           254,154
         Leasehold improvements                   365,931           813,941
         Computer and office equipment            425,259           492,589
         Automobile equipment                      61,380           160,086
         -----------------------------------------------------------------------
                                                1,607,096         3,415,611
         Less accumulated depreciation           (569,835)       (1,346,948)
         -----------------------------------------------------------------------

                                              $ 1,037,261       $ 2,068,663
         =======================================================================


                                       21
<PAGE>

================================================================================
NOTE 4.  PROPERTY AND EQUIPMENT (Continued)
================================================================================

         Property and equipment under capital leases consisted of the following:

                                           December 31, 1999       June 30, 1999
         =======================================================================
         Machinery and equipment              $      --             $ 3,137,399
         Computer and office equipment            436,836               436,959
         -----------------------------------------------------------------------
                                                  436,836             3,574,358
         Less accumulated amortization           (245,681)           (1,326,893)
         -----------------------------------------------------------------------
                                                  191,155             2,247,465
         -----------------------------------------------------------------------
                                              $ 1,228,416           $ 4,316,128
         =======================================================================

NOTE 5. INVESTMENTS

         During the year ended June 30, 1999, the Company disposed of all
         investments in trading securities. The change in unrealized gain (loss)
         on trading securities for the years ended June 30, 1999 and 1998 was
         $85,314 and $(131,817), respectively, and these changes are included in
         other income (expense) in the consolidated statements of operations.

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

NOTE 6. OTHER CURRENT ASSETS

         Alpha Clinical Laboratory Agreement

         During October 1999, the Company entered into a management agreement
         with Alpha Clinical Laboratory (Alpha) to act as Alpha's management
         company for a fee of 10% of Alpha's collections. Concurrently, the
         Company entered into an unconditional and irrevocable option to
         purchase or designate a third party to purchase at any time prior to
         October 31, 2000 all of the outstanding common stock of Alpha. The
         designated purchase price shall be three times the pre-tax profit for
         the twelve-month period preceding the measurement date, and shall be
         payable with the Company's common stock. Subsequent to October 1999,
         the Company began advancing Alpha funds to support its operations. At
         December 31, 1999 the Company had advanced approximately $210,000 to
         Alpha which is included in other current assets in the accompanying
         balance sheet. On May 12, 2000 these advances, plus additional advances
         in 2000 were converted into a promissory note in the amount of
         $512,000. The promissory note is payable upon demand, bears interest at
         18% per annum, and is collateralized by substantially all of the assets
         of Alpha.


                                       22
<PAGE>

NOTE 7. CAPITAL LEASE OBLIGATIONS

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

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

                                                                  $   449,515
         =======================================================================

NOTE 8. LINE OF CREDIT FACILITIES

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

         During June 1999, the Company entered into a three year line of credit
         agreement providing for maximum borrowings not to exceed $2,000,000.
         Any outstanding amounts under this credit facility are collateralized
         by substantially all assets of the Company and the Company can borrow
         up to 85% of eligible accounts receivable, as defined. This facility
         bears interest at prime plus 4% (12.50% and 11.75% at December 31 and
         June 30, 1999, respectively) and repayments are made directly through a
         lock box arrangement. At December 31, 1999 $1,520,668 was outstanding
         on this credit facility. At June 30, 1999 no amounts were outstanding
         on this credit facility.


                                       23
<PAGE>

NOTE 9. LONG-TERM DEBT

         Long-term debt consisted of the following:

<TABLE>
<CAPTION>

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

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

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

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

         Note payable to HMO in connection with the Advanced
            acquisition (see Note 3); interest at 6%, increased to
            14% if note defaults; payable in 60 monthly installments
            of $7,489 commencing May 1, 1999; collateralized by
            accounts receivable and property and equipment.                     371,620           377,223

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

</TABLE>


                                       24
<PAGE>

================================================================================
NOTE 9.  LONG-TERM DEBT (Continued)
================================================================================

<TABLE>
<CAPTION>

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

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

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

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

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

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

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

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

         Long-term debt                                                      $  293,700        $  477,902
         =================================================================================================

</TABLE>


                                       25
<PAGE>

================================================================================
NOTE 9.  LONG-TERM DEBT (Continued)
================================================================================

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

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

                                                                     $ 6,659,881
         =======================================================================

NOTE 10. RELATED PARTY TRANSACTIONS

         Office Rent

         The Company rented one of its office facilities from an individual who
         is the former majority owner of MIS and director of the Company, and
         another office facility from a company owned 50% by this individual.
         Total rent expense related to these leases amounted to approximately
         $105,000 for the six month period ended December 31, 1999 and $269,000
         and $235,000 for the years ended June 30, 1999 and 1998. These leases
         were canceled in December 1999 (See Note 3).

         Due to Related Parties

         During 1998, the Company entered into an agreement with an entity
         controlled by the current President of the Company (Related
         Consultant). Under the agreement, the Related Consultant provides
         consulting services to the Company. Fees and expenses paid to the
         Related Consultant for services amounted to approximately $60,000 for
         the six month period ended December 31, 1999 and $142,000 for the year
         ended June 30, 1999. As of December 31, 1999, approximately $85,000 was
         owed to the Related Consultant.

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


                                       26
<PAGE>

NOTE 11. INCOME TAXES

         The components of income taxes were as follows:

<TABLE>
<CAPTION>

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

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

         Increase in Valuation Allowance           (1,957,000)           (3,734,000)           (1,970,000)
         -------------------------------------------------------------------------------------------------

         Income Tax Benefit                       $      --             $      --             $      --
         =================================================================================================

</TABLE>

         The effective tax rate for the year ended December 31, 1999, differed
         from the federal statutory rate due to state income tax benefits of
         approximately $288,000, an increase in the valuation allowance of
         approximately $1,957,000 and permanent and other differences of
         approximately $369,000.

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

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

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


                                       27
<PAGE>

================================================================================
NOTE 11. INCOME TAXES (Continued)
================================================================================

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

                                            December 31, 1999   June 30, 1999
         =======================================================================

         Deferred tax assets:
         --------------------
         Allowances for doubtful accounts      $   868,000       $ 1,560,000
         Amortization                                 --             101,000
         Net operating loss carryforward         8,707,000         6,619,000
         -----------------------------------------------------------------------
         Total deferred tax assets               9,575,000         8,280,000
         -----------------------------------------------------------------------

         Deferred tax liabilities:
         -------------------------
         Cash basis subsidiaries                   674,000           914,000
         Depreciation                               14,000           436,000
         -----------------------------------------------------------------------
         Total deferred tax liabilities            688,000         1,350,000
         -----------------------------------------------------------------------

         Net deferred tax asset                  8,887,000         6,930,000
         Less valuation allowance               (8,887,000)       (6,930,000)
         -----------------------------------------------------------------------

                                               $      --         $      --
         =======================================================================

NOTE 12. DEFICIENCY IN ASSETS

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

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

         At December 31, 1999 and June 30, 1999, the Company has 3,517,625
         warrants outstanding.


                                       28
<PAGE>

================================================================================
NOTE 12  DEFICIENCY IN ASSETS (Continued)
================================================================================

         During 1998, the Company completed two separate placements of
         non-voting preferred stock. The Company has authorized 30,000 shares of
         Series A preferred stock, par value $.001, of which 5,000 were issued
         during the year ended June 30, 1998. Each share of Series A preferred
         stock has a stated value of $100 and pays dividends equal to 10% of the
         stated value per annum. At December 31, 1999 and June 30, 1999, the
         aggregate and per share amounts of cumulative dividend arrearages were
         approximately $150,000 and $30 and $92,000 and $18.40, respectively.
         Each share of Series A preferred stock is convertible into shares of
         common stock at the option of the holder at the lesser of 85% of the
         average closing bid price of the common stock for the ten trading days
         immediately preceding the conversion or $6.00. The Company has the
         right to deny conversion of the Series A preferred stock, at which time
         the holder shall be entitled to receive and the Company shall pay
         additional cumulative dividends at 5% per annum, together with the
         initial dividend rate to equal 15% per annum. For the year ended June
         30, 1998, gross proceeds from this issuance amounted to $500,000, less
         commissions and costs of $40,000. At December 31, 1999 and June 30,
         1999 there were 5,000 series A preferred shares issued and outstanding.
         In the event of any liquidation, dissolution or winding up of the
         Company, holders of the Series A preferred stock shall be entitled to
         receive a liquidating distribution before any distribution may be made
         to holders of common stock of the Company.

         The Company has also designated 7,000 shares of preferred stock as
         Series B preferred stock, with a stated value of $1,000 per share.
         During 1998, 1,200 shares of Series B preferred stock were issued.
         Holders of the Series B preferred stock are entitled to receive,
         whether declared or not, cumulative dividends equal to 5% per annum. At
         December 31, 1999, the aggregate and per share amounts of cumulative
         dividend arrearages was $57,503 and $114.81, respectively. Each share
         of Series B preferred stock is convertible into such number of fully
         paid and nonassessable shares of common stock as is determined by
         dividing the stated value by the conversion price. The conversion price
         shall be the lesser of the market price, as defined or $4.00. For the
         year ended June 30, 1998, gross proceeds from the issuance of series B
         preferred stock amounted to $1,200,000, less commissions and costs of
         $84,946. From September 1998 to May 1999, 700 shares of series B
         preferred stock were converted into 1,297,305 shares of the Company's
         common stock at various prices. At June 30, 1999, there were 500 shares
         of series B preferred stock issued and outstanding. During October
         1999, the remaining 500 shares of series B preferred stock were
         converted into 2,300,000 shares of the Company's common stock. There
         were no series B preferred shares outstanding at December 31, 1999.


                                       29
<PAGE>

NOTE 13. STOCK OPTIONS

         The Company adopted the disclosure-only provisions of Statement of
         Financial Accounting Standards No. 123, "Accounting for Stock-Based
         Compensation," ("SFAS 123") in 1997. The Company has elected to
         continue using Accounting Principles Board Opinion No. 25, "Accounting
         for Stock Issued to Employees" in accounting for employee stock
         options. Accordingly, compensation expense has been recorded to the
         extent that the market value of the underlying stock exceeded the
         exercise price at the date of grant. For the six month period ended
         December 31, 1999 compensation costs related to stock options amounted
         to approximately $97,200. For the years ended June 30, 1999 and 1998,
         compensation costs related to stock options amounted to approximately
         $729,600 and $127,000, respectively.

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

                                                    Number of   Weighted Average
                                                     Options     Exercise Price
         -----------------------------------------------------------------------

         Balance, June 30, 1999                     2,383,842       $   4.27
         Granted during period                        507,000       $   0.37
         Exercised and returned during period            --         $   --
         Forfeited during period                     (247,150)      $   4.29
         -----------------------------------------------------

         Balance, end of period                     2,643,692       $   3.70
         =====================================================

         Exercisable at end of period               1,907,554       $   3.54
         =====================================================

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

<TABLE>
<CAPTION>

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

</TABLE>


                                       30
<PAGE>

================================================================================
NOTE 13. STOCK OPTIONS (Continued)
================================================================================

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

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

                                                                 Period ended
                                                               December 31, 1999
         -----------------------------------------------------------------------
         Net loss                                               $  (6,052,057)

         Net loss per share                                     $       (0.56)

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

                                                    Number of   Weighted Average
                                                     Options     Exercise Price
         -----------------------------------------------------------------------

         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
         =====================================================

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

<TABLE>
<CAPTION>

                                     Options Outstanding                  Options Exercisable
                               --------------------------------    ----------------------------------
                                                     Weighted                              Weighted
                                                      Average                               Average
                                                     Remaining                             Remaining
                               Number of            Contractual    Number of              Contractual
         Exercise Price         Options                Life         Options                  Life
         ------------------------------------------------------    ----------------------------------
<S>                           <C>                      <C>        <C>                      <C>

         $0.100 - $1.000         814,925                5.0          537,542                4.8
         $1.250 - $2.000         237,250                4.7          214,083                4.6
         $2.500 - $3.000         629,117                3.7          582,517                3.5
         $3.125 - $5.000         147,050                3.8          135,400                3.6
         $5.250 - $8.000         380,000                3.7          299,250                3.3
         $9.000 - $18.000        175,500                3.7          160,000                3.6
                               ---------                           ---------
                               2,383,842                           1,928,792
                               =========                           =========

</TABLE>


                                       31
<PAGE>

================================================================================
NOTE 13. STOCK OPTIONS (Continued)
================================================================================

         The weighted average fair value per option as of grant date was $0.80
         for stock options granted during the fiscal year ended June 30, 1999.
         The determination of the fair value of all stock options granted during
         the fiscal year ended June 30, 1999 was based on (i) risk-free interest
         rate of 6.1%, (ii) expected option lives ranging from 5 to 7 years,
         depending on the vesting provisions of each option, (iii) expected
         volatility in the market price of the Company's common stock of 100%,
         and (iv) no expected dividends on the underlying stock.

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

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

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

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

NOTE 14. COMMITMENTS AND CONTINGENCIES

         Leases

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

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

         Total                                                       $ 1,449,000
         =======================================================================


                                       32
<PAGE>

================================================================================
NOTE 14. COMMITMENTS AND CONTINGENCIES (Continued)
================================================================================

                              Employment Contracts

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

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

                                                                       $ 846,000
         =======================================================================

         Other Litigation

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

         Other Contingencies

         At December 31, 1999 and June 30 1999, the Company had recorded accrued
         payroll taxes of approximately $1,290,000 and $598,000, respectively,
         which is included in accrued expenses in the accompanying balance
         sheet. The Company has requested an IRS agent be assigned to this
         matter and intends to negotiate a payment plan to repay this amount.

NOTE 15. CONCENTRATIONS

         Revenue Concentration

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


                                       33
<PAGE>

NOTE 16. SUBSEQUENT EVENTS

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

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


                                       34
<PAGE>

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  Description

Number
------

3.1      Articles of Incorporation.(1)

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

3.3      By-laws. (1)

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

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

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

4.1      Specimen Common Stock Certificate. (1)

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

4.3      Underwriter's Warrant. (1)

4.4      Warrant Agreement. (1)

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

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

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

10.1     Stock Option Plan. (1)

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

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

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

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


                                       35
<PAGE>

Exhibit  Description

Number
------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       36
<PAGE>

Exhibit  Description

Number
------

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)

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



                                       37
<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.

SIGNATURE                 TITLE                                  DATE

/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


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