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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           ---------------------------
                                    FORM 10-K

(MARK ONE)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

OR

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

          FOR THE TRANSITION PERIOD FROM ___________ TO _______________

                         COMMISSION FILE NUMBER 0-22162

                                CARECENTRIC, INC.
             (Exact name of Registrant as specified in its charter)

             DELAWARE                                    22-3209241
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)

           2625 CUMBERLAND PARKWAY, SUITE 310, ATLANTA, GEORGIA 30339
               (Address of principal executive offices) (Zip Code)
       Registrant's telephone number, including area code: (678) 264-4400

                    Securities registered pursuant to Section
                               12(b) of the Act:

                                                    NAME OF EACH EXCHANGE
         TITLE OF EACH CLASS                        ON WHICH REGISTERED

               NONE                                          NONE

                    Securities registered pursuant to Section
                               12(g) of the Act:
                          COMMON STOCK, $.001 PAR VALUE
                                (Title of class)

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]
     Aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant on April 8, 2002 was $2,173,957.
     There were 4,371,350 shares of Common Stock outstanding at April 8, 2002.
     Documents  incorporated  by  reference  in this Form 10-K:  Portions of the
definitive  proxy statement  relating to the 2002 Annual Meeting of Stockholders
in Part III, Items 10 (as related to Directors), 11, 12 and 13.

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

<PAGE>

     Note: The discussions in this Form 10-K contain forward-looking  statements
that involve  risks and  uncertainties.  Statements  contained in this Form 10-K
that are not historical facts are forward-looking statements that are subject to
the safe harbor created by the Private Securities Litigation Reform Act of 1995.
A number of important  factors could cause future results of CareCentric and its
subsidiaries  to differ  materially and  significantly  from those  expressed or
implied in past  results and in any forward  looking  statements  made by, or on
behalf  of,  the  Company.  Factors  that  could  cause  or  contribute  to such
differences  include,  but are not limited to, those discussed in "Business" and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"  as well as those  discussed  elsewhere  in this Form  10-K.  These
factors  include,  without  limitation,  those  listed in "Risk  Factors" in the
Company's Registration Statement on Form S-4 (File No. 333-96529).

PART I

ITEM 1.  BUSINESS

OVERVIEW

     CareCentric,  Inc.  (formerly  known as  Simione  Central  Holdings,  Inc.)
("CareCentric" or the "Company") is a leading provider of enterprise information
technology  systems  and  related  services  designed  to help home  health care
providers more effectively operate their businesses in today's environment.  The
Company's  focus  is  to  help  home  health  care  providers  streamline  their
operations and better serve their patients. For more than 15 years,  CareCentric
has  provided  comprehensive   enterprise  solutions  to  its  markets  in  home
healthcare.  Currently,  the  Company  is moving  forward to  leverage  its long
history and success to migrate its product solutions to new technology platforms
that are currently in design.  These new technology platforms are being designed
to:  create  long term  scalable  technology  platforms  using  state of the art
technologies; streamline real-time customer service, shorten decision cycles for
our customers;  add new product solutions;  and revolutionize  customer options,
while meeting the business  requirements of the enterprises served.  CareCentric
currently  offers  several  comprehensive  software  solutions.  Each  of  these
solutions provides a basic set of software  applications and specialized modules
that can be added based on customer needs. These software solutions are designed
to  enable  customers  to  provide  clinical  case  management,  administrative,
operating and financial solutions and payment processing efficiencies. Currently
the STAT product  serves  hundreds of home  medical  agencies as it has done for
many years with a full  enterprise  suite of products.  Similarly,  MestaMed and
Dezine DME VI services  thousands of home healthcare  equipment  providers at an
enterprise level, streamlining the delivery,  recording and payment of services.
More  recently,  the  introduction  of  three  point-of-care   products,   Smart
ClipBoard,  Visit Assistant and Delivery Assistant, are adding real value to the
capture of administrative  and clinical data at the time services are offered to
the patient. This complete line of products offers, in management's opinion, the
most complete  suite of home  healthcare  software  solutions  available  from a
single provider.

CareCentric has over 1,500 customers nationwide, including:

<TABLE>
<CAPTION>
<S>                                                           <C>
     o   hospital-based facilities;                           o  home medical, IV, infusion and rehabilitation equipment providers;
     o   free-standing home health care providers;            o  integrated delivery networks (IDN); and
     o   alternate-site care organizations;                   o  government-managed organizations.
</TABLE>

     CareCentric formerly provided  comprehensive agency support services (which
included  administrative,  billing and collection,  training,  reimbursement and
financial  management  services,  among others) and home health care  consulting
services.  CareCentric discontinued these lines of business in December 1999 and
September 2001, respectively.

     Unless the context otherwise  requires,  references to CareCentric  include
CareCentric,  Inc. and its  subsidiaries.  Our executive  offices are located at
2625 Cumberland  Parkway,  Suite 310,  Atlanta,  Georgia 30339 and the telephone
number is 678-264-4400.

<PAGE>

RECENT DEVELOPMENTS

     In January 2002, Dennis Brauckman,  Chief Financial Officer of CareCentric,
resigned as an officer and  employee  of the  Company to pursue  other  personal
interests.  In the absence of an employed Chief Financial  Officer,  the Company
has  designated H. Forest Ralph, a financial  consultant  engaged by the Company
since January 2002, as the Company's  principal financial and accounting officer
for purposes of signing this Form 10-K.

     In February 2002,  Nasdaq  notified  CareCentric  that its shares failed to
meet the Nasdaq Small Cap market's minimum price  requirement of $1.00 per share
for 30 consecutive trading days.  CareCentric's shares are subject to de-listing
unless,  prior to  August  13,  2002,  the  shares  close at $1.00 or more for a
minimum of 10 consecutive  trading days. If the price qualification has not been
met by that time,  depending on whether  CareCentric  then meets initial listing
criteria,  the shares will either be  de-listed  or an  additional  180 calendar
grace period will go into effect.  The initial listing  criteria include minimum
levels  of market  value of  publicly  traded  stock  and  stockholders  equity.
CareCentric currently does not satisfy these criteria.

     In February 2002,  CareCentric  reorganized its management structure.  This
reorganization  was designed to i) streamline  management  and shorten  decision
processes,  ii) reallocate  funds to the  development of new generation  product
platforms,  iii) create single line functional responsibility and accountability
in the management staff, and iv) reduce  unnecessary  overhead  operating costs.
The  reorganization  reduced  management  and cut  head  count  by  nearly  25%.
Management  believes  that this  reduction  of costs  will  free up  substantial
resources  to be  reallocated  to the  development  of new  systems and the next
generation platforms.

     In April 2002, the Company accepted commitment letters from each of Mestek,
Inc. (Mestek) and John E. Reed (Reed),  the Company's  chairman and the chairman
and chief executive  officer of Mestek,  to restructure  the Company's  existing
financing  facilities from such parties.  The  refinancing and  recapitalization
transactions  between the Company and each of Mestek and Reed are subject to the
satisfaction  of  various  conditions,   including  approval  by  the  Company's
shareholders  at its  annual  meeting  expected  to be  held in  June  2002  and
approvals by Mestek's board of directors and the Company's  senior  lender.  The
transactions  contemplated  by the  commitment  letters,  if approved,  would i)
reduce the total  financing  facilities  of the  Company by  approximately  $0.3
million,  ii) extend the  guaranty  by Mestek of the  Company's  senior  line of
credit  with  Wainwright  Bank  through  the end of June  2003,  iii)  refinance
existing  debt owed by the  Company to Mestek and Reed to provide a deferral  of
both  interest and  principal  for a period of two (2) years  following the date
that the commitment  letters are approved,  and iv)  restructure  certain of the
Company's existing voting securities and warrants held by Mestek and Reed.

INDUSTRY OVERVIEW

     Home  health  care is an  important  part  of the  health  care  industry's
continuum of care services.

     Home health care consists of various lines of services, including:

<TABLE>
<CAPTION>
<S>                                                             <C>
     o    skilled nursing;                                      o        durable medical and rehabilitation equipment and supplies;
     o    private duty;                                         o        intravenous and infusion therapy; and
     o    physical, occupational and speech therapies;          o        hospice.
</TABLE>

     The  importance  of home health care  throughout  the 1980's and 1990's was
principally a result of payer choices and significant  economic pressures within
the  health  care  industry.  In those  years,  U.S.  health  care  expenditures
increased rapidly. In response to these escalating expenditures, payers, such as
Medicare and managed care  organizations,  have applied  increasing  pressure on
physicians, hospitals and other providers to contain costs. During the 1980s and
early 1990s, this pressure led to the growth of lower cost alternate-site  care,
such as home health  care,  and to reduced  hospital  admissions  and lengths of
stay.  In addition,  home health grew rapidly as a result of advances in medical
technology,  which  facilitated  the  delivery of services in  alternate  sites,
demographic trends, such as an aging population,  and preferences among patients
to receive  health care in their  homes.  Historically,  this  industry has been


                                       2
<PAGE>

highly fragmented and characterized by small, local providers offering a limited
range of  services.  With the advent of  managed  care and  integrated  delivery
networks  (IDNS) and changes in state  regulations,  home health care  providers
sought to  expand  their  geographic  scope and  range of  product  and  service
offerings.  As a result of these  developments  and  legislation  and regulatory
pressures,  the home health care industry went into a period of rapid growth and
consolidation.

     This  trend  of  growth  and  consolidation   began  to  reverse  with  the
implementation  of the Interim  Payment  System (IPS) by the Health Care Finance
Administration  (HCFA,  now  known  as the  Center  for  Medicare  and  Medicaid
Services-"CMS") the federal agency that administers  Medicare  reimbursement for
the home  health care  industry,  pursuant  to the  Balanced  Budget Act of 1997
enacted on August 5, 1997. Medicare traditionally  reimbursed a majority of home
health care services at reasonable  and customary  amounts that could not exceed
the costs of services provided,  resulting in a direct relationship  between the
number of home health  care  visits and  reimbursement.  However,  the  Balanced
Budget Act of 1997 contained provisions that significantly changed the manner in
which home health  agencies and home care services were  reimbursed by Medicare.
The  legislation  created IPS which lowered the cost per visit  limitations  and
created   restrictions  on  the  amount  of  cost   reimbursement  per  Medicare
beneficiary. In late January 1998, HCFA published a notice revising the schedule
of limits on home health agency costs for cost reporting periods beginning on or
after October 1, 1997, which reduced the cost per visit limitations. At the same
time,  HCFA  issued  a  rule  setting  forth  surety  bond  and   capitalization
requirements for home health agencies.  IPS has had a significant  impact on the
home health  industry,  resulting in numerous  closings of home health agencies,
consolidation  of agencies and  decisions  by home health  agencies to no longer
participate   in  the  Medicare   program  or  serve   Medicare   beneficiaries.
Consolidation of the industry continued in 2001, but at a slower pace, as first,
uncertainties  about the effect of IPS,  and second,  the  significantly  poorer
operating results  (especially for home health agencies that were part of an IDN
or hospital-based  system or had modified  operations to adapt to a managed-care
environment), slowed the pace of home health merger and acquisition activity.

     Also,  as mandated by the  Balanced  Budget Act,  the  prospective  payment
system (PPS) was  implemented  on October 1, 2000.  This payment  system  limits
reimbursement  to a fixed amount for all  services  rendered per episode of care
based upon home  health  care  resource  groups  (HHRG)  indicated  by  clinical
assessments (OASIS). In addition to the impact of IPS and PPS, the growth in the
number of Medicare  members  enrolling in managed  care plans,  which have taken
measures to contain  costs,  has and will have a significant  impact  providers'
operations as they strive to maintain profitability. The uncertainty in the home
health  care  industry  concerning  these  changing   regulations,   and  HCFA's
continuing "clarifications" of the regulations, adversely impacted CareCentric's
business in 1998, 1999 and 2000 as many providers dissolved, conserved cash, cut
back on IT spending or delayed purchasing decisions.

     These negative  factors  increased during the fourth quarter of 2000 as PPS
took effect and home health providers faced greater uncertainty and were further
distracted.  These  trends  continued  throughout  2001 as  providers  worked to
understand the short and long-term  effects of PPS. By mid-2001,  most providers
understood  what they  were  facing  financially  and  operationally,  with many
concluding  that with good  management,  training  and  information  technology,
better financial  results would be possible.  While HME and IV/infusion  service
providers  were not  significantly  affected by IPS or PPS,  other  cost-cutting
initiatives  of HCFA had a deleterious  effect on these  providers'  interest in
upgrading or acquiring information technology products and services. CareCentric
cannot  predict  how new  regulations  will  impact its  business in the future,
although the costs of  addressing  hundreds of pages of  regulations  with fixed
implementation  dates,  last minute  changes and  post-effective  amendments and
"clarifications"  in  comprehensive  and  integrated  legacy  and  client/server
systems are extensive  and  disruptive to product  development,  deployment  and
support operations.

     As a result of consolidation and measures to address ongoing cost pressures
and the  complexities  of PPS,  home health  care  providers  will  increasingly
require  enhanced  management  expertise,  specialized  industry  knowledge  and
standardized financial,  operational and clinical data, information, reports and
transactional forms in order to compete. CareCentric believes that many existing
home health care  information  systems are  inadequate  to address the  changing
needs of home health care providers.  Generally,  these systems were designed to
generate patient billing information and cost reports for Medicare reimbursement


                                       3
<PAGE>

and, as a result, may be unable to provide the detailed information required for
meaningful  business  analyses and financial and clinical data collection  under
the new system.  The Company  believes  providers  need  reports,  real-time and
point-of-care  generated data on operational and financial matters and complete,
organized  and timely  clinical  records to  effectively  treat  patients and to
co-manage  the cost and  quality  of the  clinical  care  necessary  to  achieve
favorable patient outcomes.

     Thus PPS, in transferring  the cost risk to home health  providers  already
committed to quality clinical outcomes,  creates the opportunity for the Company
and its competitors to work with the providers to develop information technology
software  applications that will be useful tools in facilitating best practices,
process improvement,  decision support,  activity-based  costing, and electronic
records and form  transmission.  The  increased  pressure  that PPS  presents to
providers  to  manage  costs,  generate  profits  and  manage  outcomes  greatly
increases the need for new generation software.  CareCentric's opportunity is to
provide  software  that helps the agency  provide  program  continuity  for each
patient,  detailed clinical support at the point-of-care,  better administrative
payment  and  regulatory  record  keeping/reporting/processing.  Together  these
capabilities will enable an agency to better manage costs, stay current, improve
productivity and patient outcomes and ultimately  profitability through enhanced
revenues and lower costs.


MARKET POSITION

     CareCentric's  objective  is to enhance  and grow its  position  as a major
provider of  comprehensive  and  integrated  information  technology  solutions,
focused  on  the  home  health  care   industry.   The  principal   elements  of
CareCentric's  business and product strategies are described below.  During 2000
and 2001,  significant  progress in the execution of many of the  strategies was
made.  Specifically,  the  absorption  of The Smart  Clipboard(R)  and  Outcomes
Planner  products  acquired  in  1999  combined  with  the  acquisition  of  the
MestaMed(R)  and HMExpress  products  through the merger with MCS, signed in May
1999 and completed in March 2000,  has provided an increased  breath of products
and services capable of enhancing  CareCentric's  market position.  In 2001, the
Company continued to augment its existing products, to develop and stabilize the
Smart  Clipboard(R)  through  Release 3.1, to create a "gateway"  from the Smart
Clipboard(R) to its existing STAT 2 and MestaMed HHA billing systems, to upgrade
and re-release its TEMS telephony system, to release a windows based PharmMed IV
pharmacy  system as a  specialized  module of MestaMed,  to introduce  the Visit
Assistant, a PDA point-of-care device and to introduce Delivery Assistant, a PDA
point of service device. Accordingly, the products and services that have become
part of  CareCentric's  offerings  to the  industry  have been  included  in the
current  Core  Software  Solutions,   Specialized  Software  Product  Solutions,
Clinical Content Options and Service Solutions sections below.


BUSINESS STRATEGIES

     Under the  guidance of John R. Festa,  the  Company's  new Chief  Executive
Officer,  CareCentric  has  embarked  upon an  aggressive  new strategy in 2002,
focusing on the future of the Company. CareCentric will continue to leverage its
deep domain knowledge,  systems knowledge,  and proven product offerings,  while
adding new services and capabilities.  Current examples include the introduction
of innovative PDA based solutions, HIPAA related system enhancements,  alliances
to provide HIPAA and asset  management  consulting  services and the  industry's
first  electronic  Certificate of Medical  Necessity  product  (eCMN).  The eCMN
solution combines customers'  existing  investment in CareCentric  software with
the latest technology available on the Internet.

     Recently,  the  Company  made a  major  step  forward  on its  strategy  by
launching  several  new  products  to maintain a  leadership  position  with its
current line of products.  Visit Assistant  provides small and medium-sized home
health  agencies  with a solution to  point-of-care  data capture at  attractive
pricing levels.  Delivery  Assistant,  currently in beta testing, is expected to
provide a similar  opportunity for the home equipment  market. At the higher end
of the product spectrum, Smart ClipBoard(R) 3.1 is expected to provide upgraded,
comprehensive  clinical,   administrative  and  reimbursement   capabilities  to
streamline   productivity,   speed  up  reimbursement,   provide  clinical  data
continuity and meet current and future  regulatory  requirements.  PharmMed adds


                                       4
<PAGE>

another key clinical  and  administrative  product  offering to service the home
pharmacy market. These products,  combined with the new eCMN offering and a more
comprehensive  telephony offering,  continue  CareCentric's central mission as a
complete and wide-ranging home health software solution provider.

     Recently,   the  Company   successfully   completed  a   reallocation   and
reorganization of resources representing the first step in its new strategy. Key
benefits include:

     o    bringing its key business managers closer to direct customer contact,
     o    driving  more  development  resources  to  focus  on the  new  product
          platforms,
     o    reducing layers of management,
     o    realigning  along   functional  lines  to  improve   productivity  and
          institutionalization of processes across product lines,
     o    assigning  technical  support  directly  within the  customer  service
          department, and
     o    empowering all levels of the organization with greater decision making
          authority.

     These  changes  have  created and  intensified  an existing  commitment  to
improve customer service and responsiveness. Activities will continue throughout
the year to  review  and  create a "best  practices"  environment  reaching  all
functional  areas of the Company.  More  importantly,  management  believes that
these changes  position  CareCentric  for rapid and aggressive  development  and
deployment  of its  new  generation  product  platforms.  Leveraging  off of its
existing   comprehensive   product  offerings,   management  believes  that  the
reorganization  will  allow  faster  decision  making,   decentralized  parallel
execution of plans and shorter time to market  solutions for  CareCentric's  new
product platforms.

     CareCentric management believes that CareCentric's products are regarded by
many home health care providers as the most feature rich in the industry. In the
coming years,  CareCentric  will invest  heavily in new delivery and  technology
platforms for servicing its customers in creative new ways,  combining increased
flexibility, proven technology, scalable and open/ubiquitous platforms.

     The rapid evolution of computer  technology provides for "faster to market"
products and more open platforms,  which use more industry  accepted  technology
tools that can remain ever  flexible to meet future  needs.  During the next two
years,  CareCentric will devote substantial  capital and human resources to take
advantage  of these new  technologies.  CareCentric  fully  expects  to  provide
seamless  migration  to its  new  technology  platforms  while  maintaining  the
features and functions its  customers so highly value today.  In addition,  this
platform  will  provide  customer  specified   configurations   allowing  scale,
function,  and  financial  characteristics  to be designed and  determined on an
individual  basis.  Significant cost efficiencies will continue to be recognized
through the use of HIPAA standards and the Internet.

     CareCentric will continue to sell its current and future products through a
direct  sales  force and  through  industry  partners  in  related  fields.  The
Company's  strategy is to make these new product offerings  available to a wider
customer base than it currently services today as a result of increased delivery
efficiencies  and a more flexible cost structure.  CareCentric will seek to keep
all products current and innovative by maintaining a constant communication with
the  marketplace,  a relentless  focus on regulatory  changes and  technological
improvements.


THE CARECENTRIC SOLUTIONS

     CareCentric  offers a comprehensive set of product and service solutions to
address the changing  needs of home health care  providers  through  information
technology  software  systems,  training,  technical,  deployment  and  customer
support.  CareCentric's  systems and services are designed to enable home health
care providers to generate and utilize comprehensive financial,  operational and
clinical information and address organizational issues in order to make informed
business  decisions,  more cost effectively  operate their businesses,  generate
more revenues and compete in a managed care and/or PPS  environment.  Management
believes these  information  technology  solutions  should help home health care
providers:

                                       5
<PAGE>

     o    improve revenue opportunities
     o    reduce costs, improve cash flow and build financial strength
     o    accelerate payment reimbursement
     o    co-manage cost and quality, establish outcomes-based clinical practice
          and empower clinicians to make better decisions at the point-of-care
     o    maximize return on technology investment through comprehensive product
          deployment services to optimally configure and run the application
     o    increase  understanding  of key  industry  issues and optimal  product
          usage with  specialized  training receive real time response to system
          usage issues through in-depth customer support and call tracking
     o    leverage  best  practice  solutions  against a large  national base of
          current users

     CareCentric's  key  solutions  provide a  comprehensive  set of home health
enterprise software:

     o    STAT services the home health agency market and tracks patient visits,
          reports on action, follows regulatory  requirements,  and accounts and
          provides for reimbursement of services for the home health agency.
     o    MestaMed and Dezine DME VI service the home medical  equipment markets
          with a complete suite of accounting,  regulatory, tracking, reporting,
          invoicing  and  utilization  management  systems  for  agencies of all
          sizes.
     o    Smart  ClipBoard  services the high end  point-of-care  market for the
          acquisition of clinical, accounting, administrative, reimbursement and
          regulatory data.
     o    Visit  Assistant  also services the  point-of-care  market with a less
          expensive,  less comprehensive data acquisition product to service the
          moderate size to smaller home health agency.
     o    Delivery  Assistant is analogous to the home healthcare  point-of-care
          products and services the home equipment market in capturing  delivery
          data for accounting, tracking and reimbursement purposes.
     o    Remaining product offerings include TEMS (i.e. telephony data capture)
          and eCMN which  provide  critical  ancillary  products to complete the
          suite of critical home health enterprise applications.

     PPS,  in  transferring  the  cost  risk to home  health  providers  already
committed to quality clinical  outcomes,  creates an opportunity for the Company
to extend its current offerings and to develop additional software  applications
and related  services that will be tools in  facilitating  new revenues,  faster
pay, best  practices,  process  improvement,  decision  support,  activity-based
costing and efficient,  electronic  transmission  of medical  records and forms.
Patient  information,  which is the life-blood of quality  health care,  must be
accurate, organized, efficiently captured, available and affordable.  Investment
in  information  technology  is more  critical in home  health care  because the
information  needs  both to be  shared  and  secured  while  the  users are both
distributed   and   disconnected.   CareCentric  is  directing  its  information
technology  solutions at these  opportunities.  CareCentric plans to package and
customize  information  technology  solutions to serve the  individual  needs of
customers.


INFORMATION SYSTEMS

     CareCentric offers comprehensive and flexible software solutions to address
the information  processing needs defined by a number of unique home care market
segments   including  home  medical  equipment   suppliers,   infusion  pharmacy
providers,  home health  agencies,  hospice  service  providers  and  integrated
delivery  networks.  Each of CareCentric's  software  products offers a suite of
core application  modules that address the financial,  administrative,  payment,
regulatory and  operational,  and in some cases,  clinical  requirements of home
health care providers. These applications are designed to:

     o    Generate revenue
     o    Promote  improvement  in the  efficiency  of  customer  processes  and
          operations
     o    Operate in a number of popular technology environments


                                       6
<PAGE>

     o    Speed reimbursement for services
     o    Improve patient care
     o    Provide scalability and growth options
     o    Facilitate open data access
     o    Produce management reporting and decision support tools
     o    Facilitate regulatory compliance


CORE SOFTWARE SOLUTIONS

     CareCentric's current core software solutions are as follows:

STAT2

     STAT2 is designed as a stand-alone complete,  flexible and fully integrated
home  health  agency  management   system.   The  STAT2  core  set  of  software
applications includes:
<TABLE>
<CAPTION>
<S>                                                      <C>
     o   Client Intake                                   o   Billing/Accounts Receivable
     o   Treatment Plans                                 o   General Ledger
     o   Employee Tracking                               o   Accounts Payable
     o   Scheduling                                      o   Payroll
     o   Electronic Transmission and Remittance          o   Hospice
</TABLE>

     This core set of applications and their  underlying  features and functions
can be enhanced with specialized features including, telephony (through the TEMS
system described in Specialized Product Solutions below) and SQL reporting.  The
STAT2 system allows a customer to exchange  clinical and  financial  information
with  external  systems  such as  demographics  and  patient  master  files from
affiliates or referring institutions in either a real-time or batch mode through
HL-7 interface engine technology or customized interfaces.  STAT2 is designed to
increase  staff   productivity  by  fully  integrating  the  system's  clinical,
financial and operational  applications and thereby  eliminating  redundant data
entry. STAT2 has the ability to customize system features as well as the ability
to expand with the customers' business.  The STAT2 system is further enhanced by
the use of the Smart  Clipboard(R)  point-of-care  system  and Visit  Assistant.
SmartClipboard(R) and Visit Assistant are discussed further below.

MestaMed(R)

     MestaMed(R)  is a stand-alone  fully  integrated  billing,  accounting  and
inventory control system for providers of home health services including:

     o   Home Medical Equipment & Supplies          o   Rehabilitation Equipment
     o   Home Health Care                           o   Hospice Services
     o   Infusion and IV Therapy                    o   Retail Sales

     MestaMed(R) customers are home health care providers who use MestaMed(R) to
track the delivery of home medical  equipment and related  supplies and infusion
pharmacy,  skilled  nursing  and hospice  services  to patients  and to meet the
complex requirements  necessary to obtain reimbursement from Medicare,  Medicaid
and other  third-party  payers.  CareCentric  believes  MestaMed(R)  is the only
system that fully integrates information on operational and financial management
for multiple lines of service homecare providers.

     MestaMed(R)  is in  use  nationwide  by  hundreds  of  organizations,  from
independent providers to large, regional and national companies.  In practice it
has proven to be well  suited to meet the needs of larger,  multi-location  home
care providers. MestaMed(R) is designed to be cost-effective and scalable and to
readily expand to meet future  information  processing  requirements and provide
management  flexibility.   Multi-service  providers  can  de-centralize  certain


                                       7
<PAGE>

operations,  such as intake,  by location or line of  business;  and  centralize
other functions, such as billing and collections,  across locations and business
lines.

     A number of  additional  add-on  features and  supplemental  modules can be
optionally  purchased to satisfy the  information  technology  requirements of a
particular  home care  provider.  Delivery  Assistant,  a point of delivery  PDA
solution,  is the latest example  value-driven  add-on  systems to  MestaMed(R).
MestaMed(R) is designed to easily and cost  effectively  meet the needs of large
providers who have high transaction  volumes,  large numbers of users,  multiple
branches  and remote  processing  requirements.  MestaMed(R)  is  available on a
variety of hardware  platforms and operating  environments  including  Open VMS,
UNIX, Windows NT, AIX and various Intel, Alpha and RS 6000 computer systems.

DME VI

     DME VI is a  PC-based  software  application  for  mid-size  to large  home
medical equipment and medical supply businesses. The DME VI core set of software
applications includes:

     o   Order Entry                             o   Billing
     o   Inventory Management                    o   Accounts Receivable
     o   General Ledger                          o   Purchase Orders

     DME VI features add-on modules such as retail sales and bar coding. The DME
VI  software  provides  easy  to use  data  import/export  capabilities.  DME VI
customers are also afforded  real-time  customer  support coverage and services.
DME VI was purchased in 1997.

HMExpress(TM)

     HMExpress(TM)  is a  Windows-based,  cost-effective  and  proven  suite  of
applications  designed for small to mid-sized home medical equipment  providers.
HMExpress  automates  order  processing,   CMN  management,   billing,  accounts
receivable,  inventory and rental management;  the core operational areas of any
HME  business.  HMExpress  packages  years of research and  development  into an
affordable out-of-the-box HME solution.

     HMExpress(TM)  features HME patient intake and order processing,  equipment
pickups and exchanges,  rental equipment  management,  recurring rental billing,
capped rental  processing,  CMN printing and  tracking,  Medicare Form 1500 bill
printing,  private-pay  statements,  Durable Medical Equipment  Regional Carrier
(DMERC)  Electronic  Claims  Submission,  billing  system,  accounts  receivable
system,  perpetual inventory,  management reporting and multi-branch processing.
HMExpress(TM)  can grow  with a  business  or  customers  can  upgrade  to other
compatible CareCentric products.


SPECIALIZED SOFTWARE PRODUCT SOLUTIONS

     CareCentric offers the following specialized software solutions:

The Smart Clipboard(R)

     The Smart  Clipboard(R)  is a  point-of-care  clinical  information  system
designed to enable home health  agencies to compete  effectively in the changing
health care delivery environment. Originally conceived in 1993, it was the first
home health point-of-care information system developed around pen-based computer
technology and home health clinical processes. The Smart Clipboard(R) provides a
clinical solution designed to assist home care providers in co-managing the cost
and quality of the care they deliver by helping them  understand  their clinical
and administrative processes. The Smart Clipboard(R) software suite was released
in  1996  and  has  been  significantly  enhanced  every  year  since.  It  is a


                                       8
<PAGE>

Windows-based  client/server  application  that uses  replication  technology to
maintain synchronized subsets of the master database in each tablet computer for
data  collection  and  validation  at  the   point-of-care.   This   facilitates
disconnected,  distributed  operations  that  characterize  the  information and
operational  needs of home health operations spread over large areas or across a
region.  Home  health  agencies  that  install  Smart  Clipboard(R)  and use its
features with a well-trained  clinical staff generally  experience a significant
return on investment due to the automation of previously manual tasks and access
to  electronically  linked  information  replacing  some aspects of  paper-based
systems. The Smart Clipboard(R) provides home care nurses, therapists, and other
clinicians with a means to capture  complete  patient  information and assist in
making  timely,  informed  clinical  decisions at the  point-of-care.  The Smart
Clipboard(R)  application was created to organize all clinical  information in a
structured,  interrelated fashion that automatically links problems to outcomes,
and outcomes to interventions and actions.

     By using The Smart Clipboard(R), a home health agency has a tool to use and
modify its existing  clinical  assessment  criteria and care plans. As a result,
structured clinical data is presented and captured in a user-friendly  manner at
the  point-of-care.  Through a relationship  with Outcome Concept  Systems,  the
system   provides  OASIS  and  ORYX  data  entry,   validation,   submittal  and
benchmark-reporting capabilities as required under federal regulations and JCAHO
industry  standards.  The Company designed The Smart Clipboard(R) system to work
in  conjunction  with the STAT2 system through our  proprietary  data gateway to
give home health agencies seamless data exchange from clinical to operational to
financial functions and back as indicated or required. The gateway was completed
and  refined  in  2001.   A  data  gateway  to  the   comprehensive   integrated
MestaMed(R)HHA system is in the final stages of development.

Visit Assistant(R)

     CareCentric  Visit  Assistant  is an  intuitive,  easy  to  use,  hand-held
point-of-care  device.  It performs key  admission  and patient  care  functions
necessary  for  improved  cash flow  while  eliminating  manual  data  entry and
increasing  visit  data  accuracy.   Using  personal  digital   assistant  (PDA)
technology,  Visit  Assistant  is the  latest  in  CareCentric's  line of mobile
computing  solutions.  Visit  Assistant is based on a Palm  Operating  System(R)
device.  Therefore, it is much more cost effective for the smaller agency. Visit
Assistant  provides  an  excellent  alternative  tool  for  Smart  Clipboard(R).
Management  believes that the home health agencies that find Smart  Clipboard(R)
expensive  or too  comprehensive  for  their  needs see  Visit  Assistant  as an
attractive lower- end alternative. Conversely, management believes that the home
health agencies which view the  capabilities of Visit Assistant as too limiting,
appreciate the features and functional depth of Smart Clipboard(R). As a result,
management believes that the two products complement each other very well.

     Visit Assistant enables improved clinical  processes through the ability to
collect  OASIS,  485,  Assessment  and Clinical  Notes in the field.  With Visit
Assistant,  agencies can perform regulatory functions to generate 485, calculate
HHRG and  submit  OASIS  data  sets  validated  at the  point-of-care  to ensure
consistency and compliance. Visit Assistant is integrated to the STAT 2 clinical
and financial modules for billing and operational  efficiency.  Integration into
the  MestaMed  HHA module is planned for the second  quarter of 2002.  While not
nearly as  feature  rich as Smart  Clipboard(R),  Visit  Assistant  provides  an
attractive array of capabilities at a greatly reduced cost.

     Visit Assistant is a business alliance, based on a license and distribution
agreement  with a  vendor  company,  Golden  Rule  Software,  Inc.  Golden  Rule
originally  designed a generic  version of the base  point-of-care  product  and
offered  it as a  non-integrated,  stand  alone  point-of-care  capture  device.
CareCentric  has  integrated  the product to its STAT  BackOffice,  modified its
parameters  and is  reselling  the  product as its base  solution to home health
agencies.

Delivery Assistant(R)

     CareCentric  Delivery Assistant is an automated  inventory control solution
for  home  medical  equipment  providers.  Asset  control  including  serialized
inventory tracking can now be performed at the point of delivery. Using personal
digital  assistant  (PDA)  technology,  Delivery  Assistant is the first step in
CareCentric's next-generation of mobile computing applications. Fully integrated
to the MestaMed  management  system,  the Delivery  Assistant  enables  delivery
technicians  to scan  bar-coded  orders,  supplies and equipment  information to
confirm delivery  transactions.  In addition,  the Delivery  Assistant  captures


                                       9
<PAGE>

insurance  verification  information  and cash  receipts.  Daily activity can be
automatically  transferred  to the  MestaMed  system for  inventory  control and
operational  efficiency.  Delivery  Assistant  is a key addition to the MestaMed
Home Equipment line of products.  It provides valuable  inventory,  delivery and
payment needs that speed the delivery,  reduces backlog,  increase  productivity
and speeds reimbursement.

OASIS/ORYX Reporting and Benchmarking

     In 2000,  CareCentric  entered into a Value Added  Retailer  agreement with
Outcome Concept Systems, Inc. (OCS), establishing OCS as CareCentric's exclusive
ORYX and OASIS  benchmarking and outcomes solution partner.  This agreement will
enable  CareCentric  to  offer  the  complete  suite  of  OCS  products  to  all
CareCentric customers who use outcome measures to define patient care goals. The
OCS  products  allow home  healthcare  companies  to manage,  report and analyze
clinical data. HCFA has mandated the collection of a standardized set of patient
assessment  data  (OASIS).  Several  accreditation  organizations  such as JCAHO
require the collection and  submission of key  assessment  indicators  (ORYX) as
well. The OCS-OASIS(TM)  program  incorporates JCAHO accepted measures and OASIS
requirements into one program for data input,  real-time,  desktop reporting and
graphing,  and online access to quarterly benchmarks.  Comprehensive  collection
and benchmarking  software allows agencies to transmit required clinical data to
state agencies,  to provide flexible  in-house  reporting  features,  to receive
periodic  comparative  statistics  from  other  member  agencies  and to  access
clinical data in an open  architecture for ad-hoc  reporting.  The OCS-OASIS(TM)
program has been incorporated into The Smart Clipboard(R)  system to allow OASIS
and ORYX data entry and validation at the point-of-care.

PharmMed(TM)

     PharmMed (TM) is CareCentric's enhanced, comprehensive, Windows-based, home
care pharmacy software.  PharmMed (TM) works in conjunction with the MestaMed(R)
Management  System to fully  automate  many  processes  unique to home  infusion
therapy providers, including the billing of HME products and tracking of related
assets.  A  Windows-based  application  that adapts to both  centralized  and/or
decentralized  operations,  PharmMed (TM) supports multiple locations and offers
streamlined prescription processing,  enhanced clinical documentation,  improved
operations to facilitate more efficient workflow,  and improved reporting to aid
regulatory compliance. PharmMed(TM) seamlessly interfaces to MestaMed's back-end
enterprise software fostering a completely integrated solution for the customer.

TEMS (Telephone Entry Management System)

     TEMS is a Windows-based  software  application that enables home care field
employees to record  baseline  timecard  and visit  information  using  standard
touch-tone telephones. It was designed as a simple, low-cost means for capturing
key information at the point-of-care.  TEMS confirms staff visits through caller
identification.  Once collected,  information is automatically  exported into an
agency's  payroll  and  billing  applications.  TEMS is well  suited  for use by
paraprofessionals  or home health  aides.  TEMS,  under a patent  licensed  from
MCI/WorldCom(R),  uses telephones like terminals to affordably document baseline
visit, mileage,  payroll and billing information.  TEMS interfaces directly into
the STAT enterprise  software to provide a fully integrated solution to the Home
Health Care provider for data capture, reporting and billing.


CLINICAL CONTENT OPTIONS

SmartPlans

     The  SmartPlans  suite of patient  care plans and  assessments  allows home
health agencies to implement paper-based and electronic clinical data collection
processes by defining  treatment plans for a variety of medical  diagnosis-based
conditions  common to skilled nursing,  hospice services and therapies.  Over 30
plans of care and supported assessments facilitate immediate implementation of a
structured clinical process.

                                       10
<PAGE>

Outcomes Planner System

     The Outcomes  Planner  System (OPS) is currently  available to  CareCentric
customers   in   electronic   form  and  is   designed   to  give   agencies   a
teaching-oriented set of clinical care pathway options.  CareCentric's  Outcomes
Planner  System  is  a  disease-specific,  clinical  care  path  and  care  plan
documentation   package  that  includes   discipline-specific   OASIS  and  ORYX
assessments for skilled nursing. Compliant with both OASIS and ORYX, OPS defines
and  measures  outcomes  for  each  visit  or  patient  encounter  and  provides
documentation  along  critical  paths for  management  of a variety  of  medical
conditions. Modules for physical, occupational and speech therapy were developed
in 2001 and are offered in Release 3.1 of the Smart ClipBoard(R)  system. OPS is
a highly  effective tool for use under PPS. Home health  agencies can use OPS to
assist  them in  meeting  the  continuing  challenge  of fewer  dollars,  sicker
patients  and  shorter  lengths of stay.  OPS  enables a home  health  agency to
sharpen its management focus while ensuring quality of patient care to:

     o    access disease-specific clinical care pathways based on best standards
          of care
     o    document visits based on standardized, measurable clinical assessments
     o    investigate  care  behavior  that  affects  patient  outcomes  and PPS
          reimbursement
     o    provide payers/surveyors with documentation of quality care
     o    ensure compliance with the approved  Outcome-Based Quality Improvement
          Model (OBQI)

Regulatory Enhancements

     CareCentric will continue to expend  professional  resources to address the
healthcare-related  regulatory  issues  currently  facing  home  care  providers
including:

     Prospective Payment System (PPS). As a result of the Balanced Budget Act of
     1997 and the OCESSA Act of 1999,  implementation  of a prospective  payment
     system (PPS) was mandated for home health  agencies.  CareCentric  provides
     educational  and  consulting  services  as well as  clinical  and  software
     modifications necessary for PPS compliance.

     HIPAA.  The  Company  expects  that the Health  Insurance  Portability  and
     Accountability Act of 1996 (HIPAA) will necessitate  security,  privacy and
     electronic transmission-related  enhancements to current software products.
     As specific  implementation  regulations,  guidelines  and  timetables  are
     promulgated  and  finalized,  CareCentric  will respond by  allocating  the
     resources  it  believes  will  be  needed  to gain  compliance  for its own
     employees, product and service offerings and its operations.

Through March 2002, CareCentric has achieved the following with respect to HIPAA
compliance:

o    CareCentric Internal HIPAA Compliance Assessment

     All  internal  CareCentric  processes  related to  management  of Protected
Health  Information  (PHI) have been assessed to ensure that current  operations
comply with HIPAA privacy and security requirements. Educational HIPAA awareness
sessions have been conducted for all employees and key contractors. In addition,
on-going employee  communication and education of HIPAA-related  issues is being
facilitated  through the internal  corporate  Intranet.  Other  active  projects
include:

     1.   Standardization of policies and procedures across all service centers.
          This will  protect  the privacy  and  security  of  customer  PHI data
          disclosed to CareCentric  employees in the course of customer  support
          and system integration's, installations, upgrades and migration.
     2.   Modification of selected internal operating policies and procedures to
          better formalize HIPAA-specific language.
     3.   Improvement in the infrastructure  supporting internal  communications
          network security and reliability.
     4.   Construction of Chain-of-Trust language to supplement existing support
          service agreements.
     5.   On-going internal HIPAA education and deployment.

                                       11
<PAGE>

     The Company's  objective remains fixed on ensuring PHI  confidentiality and
trust  in the  Company's  relationships  with  employees,  customers  and  other
business partners.

o    HIPAA Electronic Transaction Format and Coding Standards

     CareCentric remains committed to product  enhancements that will facilitate
customer  compliance  with HIPAA EDI and coding  standards  before  they  become
effective.  HIPAA EDI changes will be included in future  release  updates at no
cost to  customers  with  licensed  EDI modules as a function of the  customer's
recurring  maintenance  contracts.  Significant  progress  has been  achieved on
product development  activities required to meet HIPAA ANSI format standards for
electronic    transaction    formats.     Claims    transactions    (ANSI    837
Institutional/Professional),  Payment/Remittance Advice transactions (ANSI 835),
and  the  NCPDP  claims  transaction  formatting  software  projects  have  been
completed for most  products and are ready for payer  testing.  CareCentric  has
contacted  payers to obtain test  schedules  and will commit to test as early as
possible.

     CareCentric products currently meet national coding standards. However code
sets (ICD-9,  NDC, CPT-4,  HCPCS)  continue to be under review by HHS.  National
identifiers  for  Health  Plan ID and  Individual  ID remain  undefined  by HHS.
CareCentric  will remain  close and respond to any  developments  that result in
changes to these code sets.

o    HIPAA Privacy and Security Regulations

     The  privacy  and  security  components  of HIPAA  regulations  will pose a
significant challenge for many providers,  particularly those who have not begun
their  HIPAA   implementation   activities.   Customers  must  be  knowledgeable
concerning HIPAA regulations, on going "clarifications," and amendments in order
to develop new privacy and  security  policies and  procedures  for their unique
facilities and operations.  For HIPAA  compliance,  particular  emphasis must be
focused on policies and procedures related to the collection,  storage,  access,
manipulation, disclosure, and destruction of PHI.

     CareCentric's current products already contain many tools and features that
will be of great value to customers  as they  implement  their  privacy/security
compliance  strategies.  CareCentric  is  expanding  the  scope  of  many of its
products to include 'optional' features including, but not limited to, automatic
log-off, automatic password expiration, and PHI audit capabilities.

o    HIPAA Survey Questionnaires

     To date,  CareCentric has received and responded to a significant number of
HIPAA survey  questionnaires  from customers and prospects needing to understand
the  details  of how and when our  products  will meet HIPAA  requirements.  The
CareCentric  HIPAA  team  employs  a  process  that  facilitates  a  prompt  and
qualitative response to these surveys.  Additionally,  CareCentric is developing
fully secure  options for all  customers to meet the HIPAA  requirements  in the
release of its new generation product platforms.

     CareCentric's  HIPAA Team has developed a HIPAA Standard Response Model for
each  of  our  core  products.   These  documents  provide  general  information
concerning  CareCentric's  HIPAA plans, as well as FAQ's  concerning  HIPAA EDI,
Privacy and Security issues.  The CareCentric  HIPAA team monitors all internal,
external and regulatory  issues related to HIPAA,  evaluates the requirements on
CareCentric  and manages  the  development  and  implementation  of  CareCentric
responses in product systems and process to meet customer needs.

     See also the section below entitled  Government  Regulation and Health Care
Reform.


                                       12
<PAGE>

SERVICE SOLUTIONS

Software Services

CareCentric believes that providing comprehensive software services to customers
is critical to its success in the home health care industry. CareCentric employs
in excess of  seventy-eight  (78)  professionals  dedicated  to this  effort who
provide the following services:

     o    Implementation:  Implementation  services provide a monitored approach
          to implementing and supporting a CareCentric software system. Services
          include a formal  implementation plan, periodic review of the schedule
          and on-going  progress with customer  management,  and coordination of
          CareCentric installation, training and system integration resources.
     o    Training:  Training and education services are offered on a continuing
          basis  to  existing  customers  either  at  the  customer's  site,  at
          CareCentric classroom training facilities in Pittsburgh, Pennsylvania;
          Pompano Beach,  Florida and Norcross,  Georgia or at a remote facility
          in conjunction with major industry trade shows.
     o    Data Conversion  Services:  Data conversion  services are offered on a
          fee for  service  basis to those  customers  that  require  electronic
          creation of certain  databases  required  for use of with  CareCentric
          Software  solutions.  This critical aspect of sales and implementation
          provides the  customer  with the critical  technical  and  operational
          support to effect a smooth, accurate and comprehensive data transition
          to CareCentric's platforms.
     o    Software Support:  CareCentric offers telephone support Monday through
          Friday, emergency telephone support evenings and weekends. The support
          is available  Monday  through  Friday at various hours tailored to the
          different  types of  healthcare  operations  serviced by the  product.
          Weekend support is available on an on-call basis by technical staff of
          the Company.  Customers can purchase added support. In these cases key
          support  personnel  are on  call  to  handle  critical  issues  during
          extended hours.  Support includes covered training  questions,  system
          bugs,  non-compliance  issues,  system  breakdowns and  diagnostics of
          critical functions to keep the customer operational.  The Company also
          provides software  maintenance releases on a periodic basis to address
          non-conforming  software,   certain  regulatory  updates  and  certain
          product features and  improvements.  Maintenance  Releases of software
          are  made   available  to  customers   periodically.   These  software
          maintenance  releases include unspecified  improvements and regulatory
          updates.  These  updates do not include  major  functional or computer
          platform  changes  that would be offered to  customers  as new product
          sale opportunities.
     o    Technical Consulting:  CareCentric provides software customization and
          integration,  technical audits of the customer's  information systems,
          integration   and  network   planning  and   strategic   and  tactical
          information systems planning.
     o    Custom Programming: CareCentric provides customer specific changes for
          its products on a fixed fee or per hour basis.
     o    Data Migration Services:  CareCentric provides customer data migration
          routines to support transitioning from a competitive software product.

Software support  services  represents a major source of recurring  revenue,  as
these  services are provided  through  monthly,  quarterly and annual  renewable
maintenance  contracts  which  provide  access  to  customer  support,  software
releases to respond to changes in regulatory  policies,  and certain unspecified
product  improvements.  The software at customer  installations that do not have
maintenance  agreements  rapidly becomes obsolete.  Other services are generally
charged on a time and materials usage basis. Travel costs are billed separately.
CareCentric  technical  personnel  also  provide  on-site and on-call  technical
support as requested.

Business Consulting Services:

     This segment was discontinued at the end of the third quarter of 2001.

                                       13
<PAGE>

CareCentric has over 1,500 customers  nationwide,  including:

     o    hospital-based companies;
     o    home health care providers;
     o    alternate-site care organizations;
     o    home medical equipment providers;
     o    integrated delivery systems;
     o    government-managed organizations; and
     o    home infusion therapy providers.


SALES AND MARKETING

     CareCentric, led by a Senior Vice President of Sales and Marketing, markets
its information  technology systems and services through a direct national sales
force led by two Vice  Presidents,  one focused on home health  agencies and the
other  focussed on home medical  equipment  and IV pharmacy  providers.  Account
executives  numbered twelve (12) at March 22, 2002. An inside sales force of six
(6) handles additional licenses, add-on modules,  accessories,  CBT's, forms and
supplies sales.  CareCentric also employs a marketing and sales support staff to
assist its sales force.

     Recognizing the importance of maintaining good  communication and obtaining
valuable input from its customers, CareCentric sponsors customer advisory groups
and national user group meetings.  Regional user group meetings are also held to
discuss customer  comments,  suggestions,  industry  trends,  and related system
issues.  CareCentric also maintains an active web site promoting important news,
customer   training   events,   web   based   educational    opportunities   and
demonstrations.


BACKLOG

     CareCentric  had backlog of $3.2 million at December 31, 2001, $4.1 million
on December 31, 2000, and $1.0 million on December 31, 1999. Backlog consists of
the  unrecognized  portion of  contractually  committed  software  license fees,
hardware,  estimated  installation fees and professional services. The length of
time required to complete an implementation  depends on many factors outside the
control  of  CareCentric,   including  the  state  of  the  customer's  existing
information systems and the customer's ability to commit the personnel and other
resources  necessary  to  complete  the  implementation  process.  As a  result,
CareCentric  may be unable to predict  accurately  the amount of revenue it will
recognize in any period and, therefore,  can make no assurances that the amounts
in backlog will be recognized in the next twelve months.


TECHNOLOGY

SMART  CLIPBOARD(R)   TECHNOLOGY  PLATFORM.   CareCentric's  Smart  Clipboard(R)
point-of-care  clinical product is built upon a Client/Server Remote Distributed
Relational Database technology platform. Smart Clipboard(R) utilizes iAnywhere's
(Sybase)  relational  database engine,  Adaptive Server  Anywhere,  for its rich
feature set and replication  support.  Data replication is the primary method of
data transport and synchronization  between  disconnected remote devices and the
centralized  data  repository.  Several third party software modules provide HL7
messaging and OASIS verification services to Smart Clipboard(R) through COM/DCOM
interfaces.  Smart  Clipboard(R)  supports HL7 interfaces to the MestaMed(R) and
STAT back office systems using TCP/IP for data transport. The Smart Clipboard(R)
product is currently deployed on Microsoft's Windows operating systems platforms
with the various  software  components  utilizing NT Server,  NT  Workstation or
Windows  98  as  required.  User  interaction  with  the  system  is  through  a
Windows-based  Graphical User Interface  (GUI),  with a pen-based user interface
provided at the point-of-care.

                                       14
<PAGE>

THE STAT2.  The STAT2  system is a MSM-based  solution  and operates on multiple
operating  systems,  including  Windows,  SCO-UNIX  and AIX.  MSM is a reliable,
hierarchical  database  that is very fast and requires low  maintenance.  MSM is
also a programming  language that was designed to  efficiently  manage the large
amounts of text that the medical  industry uses.  STAT2 is a back-office  system
that allows a customer to  exchange  clinical  and  financial  information  with
external systems in either an immediate  connection  (using the HL7 standard) or
by accumulating data to transmit later in batch mode.

THE DME VI. The DME VI  software  system is a complete  billing  and  operations
management  system  that  addresses  the  business  needs  of the  Home  Medical
Equipment (HME) market.  The solution is a PC based,  Windows compliant software
system  that  operates  on a variety of  platforms,  including  Windows 95 / 98,
Windows NT, and  Windows  2000.  The  software  is  scaleable,  and can run as a
separate  stand-alone  system or as part of a local area  network  (LAN) or wide
area network (WAN).  The DME VI software uses the highly regarded  Pervasive SQL
2000 database software to ensure the accuracy and integrity of the data.

MESTAMED.  The  MestaMed  software  system is a completely  integrated  billing,
operations and financial management system for the Home Medical Equipment (HME),
Home Infusion  Therapy (IV) and/or Home Nursing (HHA)  market.  The  MestaMed(R)
solution can be deployed in an integrated health care delivery  environment,  or
implemented  as a stand-alone  solution in any of the  operational  disciplines.
MestaMed(R) can operate on multiple operating systems including Window NT, Unix,
AOIX or Open VMS. The system fully supports local and wide area networks through
TCP/IP  network  protocol.  The  MestaMed(R)  product is powered by the  Synergy
Development Tool set, a comprehensive  cross-platform set of advanced tools that
enable programmers to rapidly create and deploy  system-independent,  extensible
Enterprise  solutions.  Within this Tool set is the xfServer Plus  component,  a
robust,  scalable server that enables access to remote data and logic. This Tool
set provides MestaMed(R) with an integral open-ended,  scalable capability which
provides a seamless gateway to the very latest technologies.

THE VISIT ASSISTANT(R).  The Visit Assistant (VA) operates on the PALM operating
system.  The handheld units  synchronize to any PC on the same network where the
Visit Assistant server resides. The VA server uses an SQL database and users can
work with the  synchronized  handheld data from a workstation.  Visit  Assistant
data is exchanged  with the  back-office  STAT2 product,  eliminating  dual data
entry.  Visit Assistant is a joint venture,  based on a license and distribution
agreement  with a vendor  company,  Golden  Rule  Software,  Inc..  Golden  Rule
originally  designed a generic  version of the base  point-of-care  product  and
offered  it as a  non-integrated,  stand  alone  point-of-care  capture  device.
CareCentric  has  integrated  the product to its STAT  BackOffice,  modified its
parameters  and is  reselling  the  product as its base  solution to home health
agencies.

THE DELIVERY  ASSISTANT(R).  The  MestaMed(R)  Delivery  Assistant is a handheld
point of delivery system.  The solution is deployed on a Personal Data Assistant
(PDA)  using  the  Palm  operating  system.  The  delivery  assistant  is  fully
integrated  with the  MestaMed(R)  System  to  automatically  confirm  delivered
orders.  Information is shared between the PDA and  MestaMed(R)  Host system via
HTTP requests from a JAVA Virtual Machine running on any Windows 95/98,  Windows
NT or Windows 2000 client in the network.

THIRD PARTY SOFTWARE.  CareCentric's systems are dependent upon many third-party
software and hardware  products and related  services and  alliances  with other
product and  development  partners.  There can be no assurance that financial or
other  difficulties  experienced  by such  third-party  vendors will not have an
adverse  effect on  CareCentric's  abilities  to  provide  its  systems  or that
CareCentric  will be able to replace such  third-party  products and services if
they become unavailable.

The   third-party   software  is  composed  of  varying  types  and  contractual
arrangements.  The software  licensed  from third parties falls into one of four
categories consisting of operating systems,  medical content,  report writer and
data base manager. All of CareCentric's  products use these third-party software
products  to  some  varying   degree.   The  software  is  either   embedded  in
CareCentric's software prior to sale or accessed by CareCentric's software as an
external data file. Fees charged by the third-party  software vendors are passed
on to  CareCentric's  customers in the license fees,  annual fees or maintenance
fees charged by CareCentric.

                                       15
<PAGE>

RESEARCH AND DEVELOPMENT

     CareCentric maintains a staff of approximately thirty-four (34) product and
project  managers,  programmers,  data base engineers and analysts,  systems and
application analysts,  quality assurance analysts and documentation  specialists
who monitor developments in the computer software and health care industries and
who   continuously   work  to  enhance   and  develop   CareCentric's   systems.
CareCentric's  research and development  expenses were approximately $6.1, $6.2,
and $1.1  million  for the  years  ended  December  31,  2001,  2000,  and 1999,
respectively.  As a percentage of total net revenues,  research and  development
expense increased to 30.4% in 2001, from 28.3% in 2000 and 6.3% in 1999.

     CareCentric continuously engages in enhancing selected features of existing
products to help its customers  improve  workflow and  operational  and clinical
processes.  The Company believes that such activities will help customers manage
and reduce costs while maintaining quality clinical outcomes, which are believed
to be a necessity for business  survival  under the  prospective  payment system
(PPS) and the regulatory climate surrounding the HIPAA initiatives.

     Focus projects  driven by the desire to support  CareCentric's  value-added
philosophy  and to respond  quickly to the needs of its  customers  include  the
HIPAA EDI suite of products, HIPAA Privacy and Security add-ons, API development
to support innovative,  web-enabled eCMN solutions, clinical content development
and  platform  upgrades.  These  projects  represent  a sampling of the types of
continuing  initiatives  that will  occur  throughout  the  current  and  future
development cycles.

     CareCentric  recognizes  the need to  respond  to the  rapid  technological
change that is occurring in the software and healthcare industries.  CareCentric
has implemented a multi-disciplinary  approach to product development based upon
the Rational Unified  Process,  a  risk-mitigation  driven,  iterative  software
engineering process that management believes is reliable, measurable, repeatable
and  scalable.   Management  believes  that  this   industry-standard,   proven,
recognized  development  methodology  will ensure  greater  product  development
success and will improve  CareCentric's  ability to partner and communicate with
other leading software development entities.

     CareCentric's  recent product  add-on  projects  include  delivery of open,
component-based architectures (as evidenced by the recently deployed, JAVA-based
Delivery Assistant product). Recent development resource acquisitions,  expected
to continue during 2002 and 2003,  bring new technical  talent to the Company to
ensure  that  its new  platforms  represent  architectures  that  are  the  most
flexible, scalable and ubiquitous in the industry.

     A large  development  team  remains  in  place to add new  features  to the
Company's  existing  products  while a new product team builds off the Company's
existing base to develop the technology platforms for future products.


COMPETITION

     Competition  in the market for home  health  care  information  systems and
services is intense and is expected to increase.  CareCentric  believes that the
primary factors affecting competition are:

     o   features/ functions
     o   technology platforms
     o   system performance and reliability
     o   ability to operate in a changing regulatory environment
     o   customer support
     o   service
     o   system flexibility and ease of use
     o   potential for providing feature enhancements
     o   delivery mechanisms
     o   reputation


                                       16
<PAGE>

     o   financial stability
     o   pricing

     CareCentric  believes  it is a  strong  competitor  in  features/functions,
system performance and reliability,  ability to provide regulatory enhancements,
customer  support and potential for  enhancements,  thus  providing the customer
with an excellent return on investment.  CareCentric  provides  customer support
through  a  real-time,  telephone-based  system  that has  proven  effective  in
satisfying  customer  needs.  CareCentric  has a  competitive  advantage  in the
service  area due in large  part to a  tenured  staff  and a deeply  experienced
installation  and  training  team  leading to stronger  customer  relationships.
Pricing  in this  industry  is very  competitive,  with no  particular  company,
including  CareCentric,  having a clear advantage.  CareCentric's  reputation is
tied mainly to the  performance  of each of its products  and the deep  industry
knowledge and feature/function of the products.

     Management  believes that CareCentric's name recognition has been expanding
since its debut in January 2001.  Advertising of the name, new logo and tag line
-Achieve Your  Potential--continued  throughout 2001 and is intended to increase
the  Company's  visibility  in the market  place.  Management  believes that the
market still tends to identify more with CareCentric's products - MestaMed, STAT
2, Smart Clipboard(R), PharmMed, TEMS, versus the company name.

     CareCentric's  competitors  include  other  providers  of home  health care
information  systems and  services,  management  companies  and home health care
consulting firms. Furthermore, other major health care information companies not
presently  offering home health care information  systems,  or major information
system  companies not currently in the health care  industry,  could develop the
technology  and  enter  CareCentric's  markets.  CareCentric  believes  its most
significant competitors are:

     o    Delta Health Systems (a division of Shared Medical Systems Corp. owned
          by Siemens);
     o    McKesson HBOC;
     o    Patient Care Technologies, Inc. (partially owned by Meditech);
     o    Home Care Information Systems, Inc. (owned by Misys PLC);
     o    3M;
     o    Beyond Now Technologies;
     o    FastTrack Healthcare System; and
     o    Computer Applications Unlimited.

     Increased  competition  could result in new products and technology,  price
reductions,  reduced gross margins and loss of market share,  any of which could
materially  adversely affect  CareCentric's  business,  financial  condition and
results of  operations.  In  addition,  many of  CareCentric's  competitors  and
potential competitors have significantly greater financial,  technical,  product
development,   marketing  and  other  resources  and  market   recognition  than
CareCentric.  Many of  CareCentric's  competitors  also  currently  have, or may
develop or acquire; substantial installed customer bases in the home health care
industry. As a result of these factors, CareCentric's competitors may be able to
respond  more  quickly to new or emerging  technologies  and changes in customer
requirements or to devote greater  resources to the  development,  promotion and
sale of their systems and services than  CareCentric.  There can be no assurance
that CareCentric will be able to compete successfully against current and future
competitors  or  that  competitive  pressures  faced  by  CareCentric  will  not
materially  adversely  affect its business,  financial  condition and results of
operations.


PROPRIETARY RIGHTS AND PRODUCT PROTECTION

     CareCentric  owns the  copyrights on its STAT2 system,  the DME VI acquired
from  Dezine,  The Smart  Clipboard(R)  system  acquired in its 1999 merger with
CareCentric  Solutions,  Inc. (CSI) and the MestaMed(R),  PharmMed and HMExpress
products acquired in its 2000 merger with MCS, Inc. (MCS).  CareCentric  depends
upon a combination  of trade  secret,  copyright  and  trademark  laws,  license
agreements,  nondisclosure  and other  contractual  provisions,  confidentiality
policies and various security measures to protect its proprietary rights.  There
can be no assurance  that the legal  protections  afforded to CareCentric or the


                                       17
<PAGE>

precautions taken by CareCentric will be adequate to prevent misappropriation of
CareCentric's   technology.  In  addition,  these  protections  do  not  prevent
independent  third-party  development  of  functionally  equivalent  or superior
technologies,  systems or services, or the obtaining of a patent with respect to
CareCentric's  technology by third parties. Any infringement or misappropriation
of CareCentric's core proprietary  software could have a material adverse effect
on CareCentric.  Although there has been no significant  litigation with respect
to these claims, as the number of home health care software  information systems
increases  and the  functions  of these  systems  further  overlap,  health care
information systems may increasingly become subject to infringement claims.

     CareCentric  believes that its current systems and products do not infringe
on the patent or trademark rights of any third parties. There has, however, been
substantial  litigation and uncertainty  regarding  copyright,  patent and other
intellectual property rights involving computer software companies and there can
be no assurance that CareCentric will prevail in any infringement  litigation in
which it becomes  involved.  Any claims or  litigation,  with or without  merit,
could be costly and could result in a diversion of management's  attention which
could  have a  material  adverse  effect on  CareCentric's  business,  financial
condition and results of operations.  Adverse  determinations  in such claims or
litigation may require CareCentric to cease selling certain systems or products,
obtain a license  and/or pay  damages,  any of which  could also have a material
adverse effect on  CareCentric's  business,  financial  condition and results of
operations.


GOVERNMENT REGULATION AND HEALTH CARE REFORM

     The health care  industry is subject to changing  political,  economic  and
regulatory  influences that may affect the procurement  practices and operations
of home health care  organizations.  During the past several  years,  the United
States  health care  industry  has been  subject to an increase in  governmental
regulation of, among other things,  reimbursement rates and certain proposals to
reform various aspects of the United States health care system have periodically
been considered by Congress. Future proposals may result in increased government
involvement in home health care and otherwise  change the operating  environment
for CareCentric's  customers.  Home health care organizations may react to these
proposals  and the  uncertainty  surrounding  such  proposals by  curtailing  or
deferring investments in CareCentric's systems and services.  CareCentric cannot
predict what impact, if any, such factors might have on its business,  financial
condition and results of operations.

     The office of the Inspector  General of the  Department of Health and Human
Services had  identified in its Work Plan for fiscal Year 2001 several  projects
within the home health industry, which were the focus of the Inspector General's
scrutiny in fiscal  year 2001.  Each year the  Inspector  sets forth in its Work
Plan for that year the areas that will be  scrutinized.  For  example,  the 2001
Work Plan sets forth  that the  Inspector  General  would  focus on home  health
compliance  programs,  physician  involvement in approving home health care, the
impact of prospective  payment system controls,  and payments based on locations
of service.  In the Work Plan for 2002,  the Inspector has reduced the number of
areas within home health to be  scrutinized.  While the  Inspector  General will
continue to evaluate  home health  compliance  programs and home health  payment
system controls in 2002, the Work Plan  identifies two new areas,  which include
oversight of home health care quality and coding of home health resource groups.
Physician  involvement  in  approving  home  health care and  payments  based on
location of service are not  included in the 2002 Work Plan.  Additionally,  the
Inspector  General  has  focused  in  recent  years on how  third-party  billing
companies,  such as CareCentric,  provide billing and collection services to its
customers.  The Inspector General has also stressed the importance of compliance
programs  for  aspects  of  the  health  care   industry.   Although   currently
implementation  of such  programs is  voluntary,  such  compliance  programs may
become a requirement in the future as a condition of being  reimbursed under any
federal or state  programs  or by private  health  plan  payers.  The  Inspector
General  released in December 1998 a compliance  program intended as guidance to
third-party  medical billing  companies and their agents and  subcontractors  in
developing  internal  controls  promoting  adherence to  applicable  law and the
program  requirements  of federal,  state and private  health plan  payers.  Any
changes  resulting  from the  Inspector  General's  review  of the  home  health
industry and how home health  services  are billed could  increase the costs and
time  necessary for  CareCentric to provide its  administrative  services to its
customers  and  could  affect   CareCentric  in  other  respects  not  currently
foreseeable.

                                       18
<PAGE>

     The  confidentiality  of patient records and the circumstances  under which
such  records  may  be  released  for  inclusion  in  databases   maintained  on
CareCentric's systems are subject to substantial regulation by state governments
and federal legislation  governing  specialized medical information and records.
Although   compliance  with  these  laws  and  regulations  is  principally  the
responsibility  of the hospital,  physician or other home health care  providers
with access to CareCentric's information systems,  regulations governing patient
confidentiality  rights are evolving rapidly.  For example, the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) includes provisions directing
the Secretary of the Department of Health and Human Services to adopt  standards
governing the  electronic  transmission  of data in connection  with a number of
transactions  involving  health  information,  including  submission  of  health
claims.  These standards are intended to cover security  measures and safeguards
with  respect  to  health  information,  as well  as  standardization  of  data,
assignment of identifiers and authentication of electronic signatures. There are
a number of standards to be included in the  rulemaking  for the  provisions  of
HIPAA. Of the nine provisions,  a Notice of Proposed Rule has been published for
five of the  standards.  Of these  five  standards,  only two  have  final  rule
publication.  The Standards for Electronic Transactions and Code Sets Final Rule
was  published  in the August 17, 2000  Federal  Register  and became  effective
October 16,  2000,  setting an  effective  compliance  date of October 16, 2002.
Congress enacted a one-year extension to this standard for covered providers who
submit a compliance  plan prior to October 16, 2002. The goal of this regulation
is to  simplify  electronic  transfer  of  data by  requiring  a  single  set of
standards  be used  throughout  the health  care  industry.  This  single set of
electronic  standards  will be required for all health plans and  providers,  as
well as claims clearinghouses, whether in the government or private sector. This
regulation includes eight electronic  transactions and four code sets to be used
in those transactions. These are:

     o    Health claims and equivalent encounter information
     o    Enrollment and dis-enrollment in a health plan
     o    Eligibility for a health plan
     o    Coordination of benefits
     o    Health care payment and remittance advice
     o    Health plan premium payments
     o    Health claim status
     o    Referral certification and authorization

     Many of these  transactions  are  integrated  into the  operations  of home
health  agencies  and  the  Company  expects  that  they  will  impact  a few of
CareCentric's coding and transaction processes.

     The Standards for Privacy of Individually  Identifiable  Health Information
Final Rule was issued on December 20, 2000. This regulation protects all patient
records, including paper, electronic,  and oral communications.  HHS has delayed
the effective  date of the privacy rules by two months,  setting a new effective
date as of April 14, 2001,  with a new compliance  date of April 14, 2003.  This
rule  will  require  significant  changes  in  CareCentric's   systems  and  its
operations regarding access to records, masking, and confidentiality.

     In January  1999,  HCFA  published  an interim  final rule and a final rule
requiring home health agencies to report  electronically  data obtained from the
Outcome and Assessment Information Set ("OASIS") as a condition of participation
by such agencies in the Medicare program.  OASIS requires information  regarding
patients to be submitted  electronically to HCFA, and the January 1999 rules set
forth   requirements  for  maintaining  the  privacy  of  patient   identifiable
information  generated by OASIS.  Further,  these rules  require the home health
agency or its agent to maintain the confidentiality of all patient  identifiable
information  contained  in the  clinical  record and neither  can  release  such
patient identifiable OASIS information to the public. Any agent acting on behalf
of an agency in connection with the  transmission of OASIS data must be doing so
pursuant  to a  written  agreement  with  the  home  health  agency.  Additional
legislation  governing the dissemination of medical record  information has been
proposed  at both the state and  federal  level.  This  legislation  may require
holders of such information to implement  additional security measures which may
be difficult to implement and costly to  CareCentric.  There can be no assurance
that  changes  to state or  federal  laws and  regulations  will not  materially
restrict the ability of home health care  providers to submit  information  from
patient  records  to  CareCentric's  systems  or impose  requirements  which are
incompatible  with  CareCentric's  current systems.  During 2000, HCFA announced
that  OASIS  assessments  must be  completed  on all  adult  patients,  with the
exception of  maternity or personal  care/housekeeping  services.  However,  the


                                       19
<PAGE>

encoding and transmission requirement currently applies to Medicare and Medicaid
patients only. OASIS  requirements have been delayed for patients receiving only
personal care (non-skilled) services.

     On July 3, 2000,  HCFA  released the  Prospective  Payment  System for Home
Health  Agencies Final Rule for  reimbursement  of home health  providers  under
Medicare  which was  effective  on October 1,  2000.  Under this rule,  Medicare
reimburses  home health  providers  fixed  amounts  for 60 day  episodes of care
determined by home health resource group case-mix  classifications  on the basis
of an initial OASIS assessment adjusted for regional labor cost differences. The
Rule specifies that  reimbursement will be 60% at the start of the first episode
and 40% after the final claim with all  adjustments  has been  transmitted.  For
subsequent episodes, the agency will be paid 50% at the start of the episode and
50% upon  receipt  of the  final  claim.  Agencies  must  submit a  Request  for
Anticipated Payment (RAP) after the first billable visit, which will trigger the
initial  payment.  Adjustments  will be  allowed  for low  utilization,  partial
episodes,  significant  changes in condition,  delivery of therapy  services and
other  excessive  cost  situations.   Additional   submittals  required  include
identification  of the appropriate  case mix group,  source of admission,  and a
one-line universal bill submission.

     These  changes to the  Medicare  payment  system  have  required  extensive
changes to the manner in which home health care  providers  do business  because
they are required to reduce or manage the costs of care per episode so the costs
will not exceed the  allowed  reimbursement,  while  maintaining  the quality of
medical  outcomes  required  by the  patient,  the  payer or other  governmental
regulatory  and  self-regulating  organizations.   Such  changes  have  required
extensive  changes to CareCentric's  software  products,  especially  STAT2, The
Smart Clipboard(R) and the MestaMed(R) HHA module.

     In the Omnibus Consolidated and Emergency Supplemental Appropriation Act of
1999,  the portions of the Balanced  Budget Act of 1997 that were  applicable to
the reimbursement of home health care providers under Medicare were amended to:

     o    defer the 15% additional funding cut until October 2000;
     o    provide  for  three  year   extended   payments   of  prior   Medicare
          over-reimbursements with the first year interest-free;
     o    eliminate  the bundling of home medical  equipment  billings with home
          health agency billings; and
     o    provide other minor relief.

     These  changes were intended to increase the cash flow of our customers and
potential  customers  but do not  provide  the  permanent  relief  sought by the
industry.  The  non-bundling  change  eliminates  an  opportunity  to  sell  the
MestaMed(R)  product,  which has a software  program that would  facilitate such
bundling of billing.  This legislation will not require  significant  changes to
our software programs.

     The Medicare,  Medicaid,  and SCHIP Benefits Improvement and Protection Act
(BIPA) of 2000  established  positive  payment changes for home health agencies.
These changes were:

     o    Additional delay in application of 15% reduction on payment limits for
          home health services until October 1, 2002;
     o    Restoration of full market basket update for home health  services for
          fiscal year (FY) 2001;
     o    Temporary two-month periodic interim payment extension;
     o    Clarification  in the use of  telehealth  in  delivery  of home health
          services;
     o    General Accounting Office (GAO) study on costs to home health agencies
          of purchasing non-routine medical supplies;
     o    Clarification  of  criteria  for  branch  offices  and a GAO  study on
          supervision of home health care provided in rural areas;
     o    Clarification of the "Homebound" definition;
     o    Temporary  10%  increase for home health  services  furnished in rural
          areas;
     o    Revisions to Medicare appeals process; and
     o    A full market basket update for home medical equipment for fiscal year
          2001.

                                       20
<PAGE>

     The United States Food and Drug  Administration is responsible for assuring
the safety and effectiveness of medical devices under the Federal Food, Drug and
Cosmetic Act administered by the Food and Drug  Administration  (FDA).  Computer
products are subject to regulation when they are used or are intended to be used
in the  diagnosis of disease or other  conditions,  or in the cure,  mitigation,
treatment or prevention  of disease,  or are intended to affect the structure or
function of the body.  Although  CareCentric  believes  that its systems are not
subject to FDA regulation, the FDA could determine in the future that predictive
applications of  CareCentric's  systems could make them clinical  decision tools
subject to FDA regulation.  Compliance with FDA regulations could be burdensome,
time  consuming and expensive.  CareCentric  also could become subject to future
legislation and regulations  concerning the manufacture and marketing of medical
devices and health care information systems.  These could increase the costs and
time  necessary  to market new systems  and could  affect  CareCentric  in other
respects not presently  foreseeable.  CareCentric  cannot  predict the effect of
possible future legislation and regulation.


EMPLOYEES

     As of December 31, 2001, CareCentric employed 199 individuals.  That number
was  reduced  to 158 at March 22,  2002.  CareCentric  believes  that its future
success depends in large part upon  recruiting,  motivating and retaining highly
skilled  and  qualified  employees  in all  aspects of  CareCentric's  business,
especially product development.  None of CareCentric's  employees is represented
by a labor union. CareCentric believes that its employee relations are good.


ITEM 2.  PROPERTIES

     CareCentric's  principal  executive  offices are located at 2625 Cumberland
Parkway,  Suite 310,  Atlanta,  Georgia 30339. The principal  executive  offices
consist of approximately  12,431 square feet. The lease on this space expires on
January 31, 2003.

     CareCentric  also leases  office space for its  operations in the following
locations:
<TABLE>
<CAPTION>
<S>                                            <C>                       <C>
         LOCATION                              SQUARE FOOTAGE            LEASE EXPIRATION
         --------                              --------------            ----------------

         Norcross, Georgia                            19,704               August 31, 2006 *
         Pompano Beach, Florida                        6,535             December 31, 2004
         East Brunswick, New Jersey                    1,082               August 31, 2005
         Pittsburgh (Monroeville), Pennsylvania       24,308            September 30, 2005
         Stafford, Texas                               2,868             November 30, 2002
</TABLE>

     *See description of subleases below

     The listing of locations  and square  footage  above does not include space
for which the Company has sublease agreements. Such subleased facilities include
the following:

     o    CareCentric has entered into two non-cancelable agreements to sublease
          64,324 square feet formerly  occupied by  CareCentric as its principal
          executive  offices in Atlanta,  Georgia through December 31, 2002, the
          remaining term of the lease.  In September  1999, the Company  entered
          into an agreement to sublet 42,883 square feet of the former executive
          offices and in February 2001, the Company entered into an agreement to
          sublet the  remaining  21,441  square feet of such  space.  In January
          2002, CareCentric entered into a non-cancelable  agreement to sublease
          approximately  3,000  square feet in its  Norcross,  Georgia  facility
          through the remaining  term of the lease.  The Company has also sublet
          all 1,645  square  feet of its former  office  space in Irving,  Texas


                                       21
<PAGE>

          through  January  31,  2003.  All  subleases  are   coterminous   with
          CareCentric's  leases.  The Company is actively  trying to continue to
          reduce its leased space expense.

     CareCentric  believes that its present  facilities are adequate to meet its
current and foreseeable needs.


ITEM 3.  LEGAL PROCEEDINGS

     Neither CareCentric nor any of its subsidiaries is currently a party to any
legal proceedings which would be material to the business or financial condition
of CareCentric on a consolidated basis.

     Simione Central Holding,  Inc., a subsidiary of CareCentric now known as SC
Holding,  Inc.  ("SC  Holding")  was  one  of  several  defendants  named  in  a
"whistleblower"  lawsuit related to alleged Medicare fraud filed under the False
Claims  Act in the  Northern  District  of  Georgia  (U.S.  ex re.  McLendon  v.
Columbia/HCA  Healthcare  Corp., et al., No. 97-VC-0890 (N.D. Ga.)). The lawsuit
involves alleged claims that SC Holding  allegedly  participated in a conspiracy
with Columbia/HCA and other third parties to bill inflated and fraudulent claims
to Medicare.  On July 21, 1999, the Justice Department issued notice that it had
elected  not to join  in the  claims  asserted  against  SC  Holding  by  Donald
McLendon,  who  is a  former  employee  of  an  unrelated  service  provider  to
Columbia/HCA.  Although  the Justice  Department  joined the suit with regard to
other  defendants,  it  specifically  declined  to  intervene  with regard to SC
Holding.  In late 2000,  CareCentric was advised by Mr. McLendon's attorney that
notwithstanding the declination by the Justice Department,  Mr. McLendon intends
to pursue "whistleblower" claims against SC Holding directly.  Through March 22,
2002,  no such  action has been taken and  nothing  further  has been heard from
McLendon's  attorney for over one year.  Management believes that this claim has
been abandoned.  In the event a claim is asserted,  however,  CareCentric and SC
Holding intend to vigorously defend against it.


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

     None.

EXECUTIVE MANAGEMENT OF THE REGISTRANT
<TABLE>
<CAPTION>
<S>                                                        <C>      <C>
John R. Festa......................................        50       Chief Executive Officer, President and
                                                                      Director
Mark A. Kulik......................................        44       Senior Vice President of Sales and
                                                                      Marketing
Michael Quinn......................................        48       Senior Vice President
                                                                      of Operations
Ana M. McGary......................................        40       Vice   President   Human   Resources  and
                                                                      Administration
</TABLE>

     John R. Festa became  President and Chief Executive  Officer of the Company
on November 1, 2001. Prior to joining the Company,  Mr. Festa served as Managing
Director  and  General   Partner  of  the  EGL  III  venture   capital  funds  ,
Atlanta-based  family of venture investment firms. Prior to founding the EGL III
Funds in 1999 with his  partners,  Mr. Festa was  President  and CEO of Iterated
Systems,  a software  manufacturer of high-end image and image asset  management
products,  from 1994 to 1998 and  President  and CEO of BuyPass  Corporation,  a
national leader in software and processing  systems for all forms of transaction
payments and medical  claims  processing  from 1984 to 1994.  Prior to 1984, Mr.
Festa held various senior positions in American Express Company and Citicorp.

     Mark A. Kulik  became  Senior  Vice  President  of Sales and  Marketing  of
CareCentric  in October  2000.  Mr.  Kulik has spent the majority of his 21-year
career in the healthcare industry including hospital supply  distribution,  home
health care, home medical equipment,  home infusion,  and healthcare information
management.  Prior to joining  CareCentric,  Mr. Kulik served as Executive  Vice


                                       22
<PAGE>

President for several health care management and information  service companies,
the most recent being Healthcare  Credentials  Management Services from December
1998 to February 2000 and Equifax Healthcare Information Services from July 1994
to December 1998.  Earlier in his career, he served as Area  Vice-President  for
Abbey/Foster Medical, Inc. from July 1986 to February 1991.

     Michael  Quinn served as Senior Vice  President of  Operations of MCS, Inc.
since 1985 and became an officer of  CareCentric  upon the merger with MCS, Inc.
when he became Senior Vice  President of Operations,  responsible  for corporate
resources and customer  support.  He was a director of MCS, Inc. from 1992 until
the  merger  with  Simione.  From 1977 to 1985,  Mr.  Quinn  worked  in  various
programming  and  sales   capacities  for  MCS,  Inc.  and  its  parent  company
supervising sales, product development and product support.

     Ana M.  McGary  has  served  as  Vice  President  of  Human  Resources  and
Administration of CareCentric since April of 1999. Ms. McGary is responsible for
all aspects of human resource employee and management development.  In August of
2000 Ms. McGary was elected Secretary of the Company.  From 1992 until 1999, Ms.
McGary  managed  human  resources  for  several  business  units of  First  Data
Corporation.  She has led and managed many  recruiting  and  training  teams for
various  companies  through the U.S. Her  experience  includes  company  culture
transformations,  strategic planning and senior management development. In 1999,
she received her Professional Human Resource  Certification  (PHR) from Kennesaw
State University in Marietta,  Georgia. She is a member of the Society for Human
Resources Management and the American Society of Corporate Secretaries.


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     As more  fully  explained  in Notes 1 and 2 to the  Consolidated  Financial
Statements,  MCS, Inc. is considered to have acquired Simione Central  Holdings,
Inc. on March 7, 2000, and the historical  financial statements of the "Company"
as discussed  herein are therefore the historical  financial  statements of MCS,
Inc. only, except where specifically noted.

     Conversely,  the table  below sets  forth the high and low sales  prices of
CareCentric  common  stock  subsequent  to the merger and the high and low sales
prices of Simione prior to the merger as reported on the Nasdaq Stock Market for
the calendar periods indicated.

     The common stock of  CareCentric  has traded on The Nasdaq  Stock  Market's
SmallCap Market under the symbol CURA since December 26, 2000. From June 6, 2000
until December 26, 2000, the common stock traded on the Nasdaq  SmallCap  Market
under the symbol SCHI.  From June 30, 1997 until June 6, 2000,  the common stock
traded on the Nasdaq  National  Market under the symbol SCHI,  and prior to June
30, 1997 it traded on the OTC Bulletin Board under the symbol SCHI. During March
2000, the common stock was traded  temporarily  under the symbol SCHID on Nasdaq
to reflect the 1-for-5 reverse stock split.

     In February 2002,  Nasdaq  notified  CareCentric  that its shares failed to
meet the Nasdaq Small Cap market's minimum price  requirement of $1.00 per share
for 30 consecutive trading days.  CareCentric's shares are subject to de-listing
unless,  prior to  August  13,  2002,  the  shares  close at $1.00 or more for a
minimum of 10 consecutive  trading days. If the price qualification has not been
met by that time,  depending on whether  CareCentric  then meets initial listing
criteria,  the shares will either be de-listed or an additional 180 calendar day
grace period will go into effect.  The initial listing  criteria include minimum
levels  of market  value of  publicly  traded  stock  and  stockholders  equity.
CareCentric currently does not satisfy these criteria.

     As of April 8, 2002,  CareCentric  common  stock was held by  approximately
3,988 holders of record. For this purpose, stockholders whose shares are held by
brokers on behalf of stockholders are not included.

                                       23
<PAGE>

     The table below shows the reported  quarterly  high and low sales price for
CareCentric  common  stock on the Nasdaq  National  Market  and Nasdaq  SmallCap
Market for the periods after January 1, 2000.  The  information  set forth below
does not include retail mark-ups, markdowns or commissions. The sales prices for
the first  quarter  of 2000 have been  adjusted  to  reflect  the  effect of the
1-for-5 reverse stock split that occurred on March 7, 2000.

                            2001                   2000
                     --------------------  ---------------------
                       HIGH       LOW         HIGH       LOW
                     --------------------  ---------------------

First Quarter          4.530     1.500      11.250      3.250
Second Quarter         3.000     1.630       4.875      2.000
Third Quarter          2.950     1.340       3.500      1.500
Fourth Quarter         1.700     0.460       4.125      2.250

     CareCentric has never declared or paid cash dividends on CareCentric common
stock.  CareCentric  currently  intends to retain future  earnings,  if any, for
future  growth  and  does  not  anticipate  paying  any  cash  dividends  in the
foreseeable  future.  CareCentric's line of credit includes  restrictions on the
payment of dividends.

     On November 10, 2001,  the Company  committed  to issue  210,000  shares of
Series E  Preferred  Stock,  $.001 par value per share,  to John R.  Festa.  The
rights  of the  Series E  Preferred  Stock  are  described  in the  notes to the
Financial Statements.


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     The following table sets forth selected consolidated  financial data of the
Company. The selected consolidated financial data in the table as of and for the
years ended December 31, 2001,  2000,  1999, 1998, and 1997 are derived from the
audited  consolidated  financial  statements  of  the  Company.  As  more  fully
explained  in Note 1 to the  Consolidated  Financial  Statements,  MCS,  Inc. is
considered to have acquired Simione Central Holdings, Inc. on March 7, 2000, and
the  historical  financial  statements of the "Company" as discussed  herein are
therefore the historical  financial  statements of MCS, Inc. only,  except where
specifically otherwise noted. On September 28, 2001 the Company discontinued its
Consulting  business  segment  and as  more  fully  described  in  Note 2 of the
Financial Statements,  the results of the discontinued  Consulting business have
been separately  presented in the Financial  Statements.  See Note 1 to Notes to
Consolidated  Financial  Statements for information about the Company's history.
The data should be read in conjunction with "Item 7. Management's Discussion and
Analysis of Financial  Condition and Results of Operations" and the Consolidated
Financial Statements and Notes thereto of the Company included herein.



                                       24
<PAGE>

<TABLE>
<CAPTION>
                                           SUMMARY OF OPERATIONS

<S>                                     <C>           <C>            <C>          <C>          <C>
                                                              YEAR ENDED DECEMBER 31,
                                        --------------------------------------------------------------------
                                           2001           2000          1999         1998          1997
                                        ------------  -------------  -----------  ------------ --------------
                                                       (in thousands, except per share data)
Net revenues:                              $ 20,446       $ 19,574      $16,648       $14,901       $15,433

Costs and expenses:
    Cost of revenues                          8,217          8,478       10,563         9,225         8,885
    Selling, general and
      administrative                         10,715         10,756        4,077         3,780         3,659
    Research and development                  6,158          6,174        1,051           231             -
    Amortization and depreciation             3,865          3,481          230             -             -
    Write down of intangibles                11,799              -            -             -             -
    Restructuring Charge                        675              -            -             -             -
                                        ------------  ------------- ------------  -----------  ------------
    Total costs and expenses                 41,429         28,889       15,921        13,236        12,544
                                        ------------  ------------- ------------  -----------  ------------

(Loss) income from operations              (20,983)        (9,315)          727         1,665         2,889

Other (expense) income:
    Other (expense) income                        -            (6)            -             -             -
    Interest expense                        (1,314)          (710)            -             -             -
    Interest and other income                    37             74           45            47            74
                                        ------------  ------------- ------------  -----------  ------------
(Loss)  income before taxes                (22,260)        (9,957)          772         1,712         2,963
                                        ------------  ------------- ------------  -----------  ------------

    Income tax benefit (expense)               (15)            154        (306)         (686)       (1,195)
                                        ------------ -------------  ------------ ------------ ------------
(Loss) income from continuing
    operations                             (22,275)       (9,803)           466         1,026        1,768
                                        ------------ -------------  ------------ ------------ ------------

Discontinued operation
    Loss on disposal of discontinued
      operations                            (2,632)             -             -             -            -

    (Loss) Income from operations of
      discontinued segment before
      taxes                                   (483)          (442)          251           671           401

    Applicable tax expense                                                  100           268           160

                                        ------------  ------------- ------------  -----------  ------------
(Loss) income from operations and
    disposal of discontinued segment        (3,115)          (442)          151           403           241
                                        ------------  ------------- ------------  -----------  ------------

Net  (loss) income                        $(25,390)      $(10,245)          617        $1,429       $ 2,009
                                        ============  ============= ============  ===========  ============

Cumulative preferred dividends                (722)          (569)            -            -             -

Net (loss) income available to
    common shareholders                   $(26,112)      $(10,814)          617        $1,429       $ 2,009
                                        ============  ============= ============  ===========  ============

Net (loss) income per share - basic
    and diluted
    From continuing operations             $ (5.21)      $  (2.87)         0.31        $ 0.69       $  1.19
    Weighted average common shares
      --basic and diluted                     4,272          3,418        1,490         1,490         1,490
                                        ============  ============= ============ ============  ============
Net (loss) income per share - basic
    and diluted
    From discontinued operations            $(0.73)       $ (0.13)       $ 0.10        $ 0.27       $  0.16
    Weighted average common shares -
      basic and diluted                       4,272          3,418        1,490         1,490         1,490
                                        ============  ============= ============  ===========  ============
Net (loss) income per share - basic
    and diluted
    From operations                        $ (5.94)      $  (3.00)       $ 0.41        $ 0.96       $  1.35
    Weighted average common shares -
      basic and diluted                       4,272          3,418        1,490         1,490         1,490
                                        ============  ============= ============  ===========  ============

Net (loss) income per share - basic
    and diluted for common shareholders    $ (6.11)      $  (3.16)       $ 0.41        $ 0.96       $  1.35

Weighted average common shares -
    basic and diluted                         4,272          3,418        1,490         1,490         1,490
                                        ============  ============= ============  ===========  ============
</TABLE>

                                       25
<PAGE>
<TABLE>
<CAPTION>
                                           SUMMARY OF FINANCIAL POSITION

<S>                                     <C>           <C>            <C>          <C>          <C>
                                                             AS OF DECEMBER 31,
                                     ----------------------------------------------------------------
                                        2001         2000        1999         1998         1997
                                     ------------ ----------- ------------ ----------- --------------
                                                  (in thousands, except per share data)

Cash and cash equivalents                 $  201     $   362       $   47      $   60         $   40
Working capital (deficit)               (15,618)    (13,765)      (1,542)     (1,745)        (2,110)
Total Assets                              12,808      35,120        6,696       5,279          4,895
Long-term obligations                      6,093         728            -           -              -
Shareholders' equity (deficit)         $(14,310)    $ 11,080       $  505    $  (981)      $ (1,640)
</TABLE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     Certain  statements  set forth in  Management's  Discussion and Analysis of
Financial  Condition  and  Results  of  Operations  constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
the Private  Securities  Litigation  Reform Act of 1995,  and are subject to the
safe  harbor  created  by such  sections.  When used in this  report,  the words
"believe",  "anticipate",  "estimate",  "expect",  "plans", "intend",  "likely",
"will"  and  similar  expressions  are  intended  to  identify   forward-looking
statements. All statements,  other than statements of historical facts, included
or incorporated by reference in this Form 10-K which address activities, events,
or developments  which the Company  expects or anticipates  will or may occur in
the future,  including statements regarding the Company's  competitive position,
the successful  development of its software products,  the impact on the Company
of actual or proposed regulatory changes, the Company's  expectations  regarding
the  adequacy  of  current  financing  arrangements,  product  demand and market
growth, and other statements regarding future plans and strategies,  anticipated
events  or  trends  and  similar  expressions  concerning  matters  that are not
historical facts are forward-looking  statements.  These statements are based on
certain  assumptions and analyses made by the Company in light of its experience
and its perception of historical trends, current conditions, and expected future
developments  as well as  other  factors  it  believes  are  appropriate  in the
circumstances.   The  Company's  future  financial   performance   could  differ
significantly  from  that  set  forth  herein,  and  from  the  expectations  of
management.   Important  factors  that  could  cause  the  Company's   financial
performance to differ  materially  from past results and from those expressed in
any forward looking statements  include,  without  limitation,  the inability to
obtain additional capital resources, variability in quarterly operating results,
customer concentration,  product acceptance, long sales cycles, long and varying
delivery  cycles,  the  Company's  dependence  on  business  partners,  emerging
technological standards,  changing regulatory standards,  inability to retain or
hire   experienced   and   knowledgeable   employees,   risks   associated  with
acquisitions,   increased  regulation  of  the  health  care  industry,   future
consolidation  of the health care  industry,  potential  liability in connection
with the Department of Labor investigation or IRS audit, the need to develop new
and  enhanced  products,  product  delays and  errors,  competition,  difficulty
protecting  intellectual  property rights,  and the risk factors detailed in the
Company's  Registration  Statement on Form S-4 (File No.  333-96529)  and in the
Company's  periodic  reports filed with the Securities and Exchange  Commission.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements, which speak only as of their dates. This Management's Discussion and
Analysis of  Financial  Condition  and Results of  Operations  should be read in
conjunction with the Company's  consolidated  financial statements and the notes
thereto.  The  Company  assumes  no  obligation  to  update  publicly  any  such
forward-looking  statements,  whether  as a result  of new  information,  future
events, or otherwise.

     The following is a discussion of the consolidated  financial  condition and
results of operation of the Company for the three years ended  December 31, 2001
and certain factors that will affect the Company's financial condition. In these
discussions,  most  percentages  and  dollar  amounts  have been  rounded to aid
presentation;  as a result, all such figures are  approximations.  References to
such approximations have generally been omitted.

     As more  fully  explained  in Notes 1 and 2 to the  Consolidated  Financial
Statements,  MCS, Inc. is considered to have acquired Simione Central  Holdings,
Inc. on March 7, 2000, and the historical  financial statements of the "Company"
as discussed  herein are therefore the historical  financial  statements of MCS,


                                       26
<PAGE>

     Inc. only,  except where  specifically  noted. Also as discussed in Note 2,
the Company  discontinued  its Consulting  business segment in September of 2001
and the  operating  results  of the  Consulting  segment  have  been  separately
presented  in the  financial  statements  for  the  years  2001  and  2000  as a
discontinued  operation.  The discontinued operations reported for the year 1999
related to MCS' ProfitWorks segment which was distributed to MCS' former parent,
Mestek.

OVERVIEW

     CareCentric,  Inc.  (formerly  known as  Simione  Central  Holdings,  Inc.)
("CareCentric" or the "Company") is a leading provider of enterprise information
technology systems and related services and consulting services designed to help
home health care providers more effectively  operate their businesses in today's
environment.  The  Company's  focus  is  to  help  home  health  care  providers
streamline  their  operations and better serve their  patients.  Currently,  the
Company is moving  forward to leverage  its long  history and success to migrate
its product solutions to new technology  platforms that are currently in design.
These new technology  platforms are being designed to: create long term scalable
technology  platforms using state of the art technologies;  streamline real-time
customer  service,  shorten  decision cycles for our customers;  add new product
solutions;  and  revolutionize  customer  options,  while  meeting the  business
requirements of the enterprises  served.  CareCentric  currently  offers several
comprehensive  software solutions.  Each of these solutions provides a basic set
of software  applications  and  specialized  modules which can be added based on
customer  demand.  These software  solutions are designed to enable customers to
provide  clinical  care  management,  administrative,  operating  and  financial
solutions  and payment  processing  efficiencies.  In  addition to its  software
solutions and related software support services,  CareCentric's home health care
consulting services assist providers in addressing the challenges of:

     o   reducing costs;
     o   regulatory compliance;
     o   maintaining quality;
     o   streamlining operations;
     o   re-engineering organizational structures; and
     o   leveraging best practice solutions

     CareCentric has over 1,500 customers nationwide:

     o   hospital-based companies;
     o   home health care providers;
     o   alternate-site care organizations;
     o   home medical equipment providers;
     o   integrated delivery systems (IDN);
     o   home infusion therapy providers; and
     o   government-managed organizations

     Through a subsidiary,  Simione Central Holdings,  Inc., prior to the merger
with MCS, formerly provided  comprehensive  agency support services,  previously
described as outsourcing, which included administrative, billing and collection,
training,  reimbursement and financial management  services,  among others. This
line of business  was discontinued in May of 1999.

     The Company defines  recurring  revenues as revenues derived under software
support   agreements,   whether   annual  or  otherwise.   These  revenues  were
approximately $11.3 million, or 55.1% of total net revenues,  for the year ended
December 31, 2001, $12.5 million,  or 57.1% of total net revenues,  for the year
ended December 31, 2000, and $3.5 million,  or 23.3% of total net revenues,  for
the year ended December 31, 1999. Unless and until revenues generated from sales
of new systems  increases,  recurring  revenues will represent a majority of its
total net revenues.

     The Company  believes that  continued  development  and  enhancement of its
software  systems are critical to its future success,  and anticipates  that the
total  amount of research and  development  expense  will  increase,  but should
decrease  as a  percentage  of total  net  revenues  as the  Company  grows  its
revenues. Costs incurred to establish the technological  feasibility of computer
software  products  are  expensed  as  incurred.  The  Company's  policy  is  to
capitalize  costs  incurred  between  the  point of  establishing  technological
feasibility and general release only when such costs are material. For the years
ended December 31, 2001, 2000, and 1999, the Company had no capitalized computer
software and development costs.

                                       27
<PAGE>

CRITICAL ACCOUNTING POLICIES

     Financial  Reporting  Release No. 60,  which was  recently  released by the
Securities  and  Exchange  Commission,  requires  all  companies  to  include  a
discussion of critical accounting policies or methods used in the preparation of
financial  statements.  Note  1 of  the  Notes  to  the  Consolidated  Financial
Statements includes a summary of the significant accounting policies and methods
used in the preparation of our Consolidated Financial Statements.  The following
is a brief  discussion of the more significant  accounting  policies and methods
used by us.

General

     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 the
disclosure of contingent  assets and  liabilities  at the dates of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting periods. The most significant  estimates and assumptions relate to the
intangible  assets,  realization  of deferred  income  taxes and the adequacy of
allowances  for returns and  doubtful  accounts.  Actual  amounts  could  differ
significantly from these estimates.

Our critical accounting policies are as follows:

     o   revenue recognition;
     o   estimate of allowance for uncollectible accounts; and
     o   valuation of long-lived and intangible assets and goodwill.

Revenue Recognition

     The Company sells its software pursuant to non-exclusive license agreements
which provide for the payment of a one-time  license fee. In accordance with the
American Institute of Certified Public  Accountants  Statement of Position 97-2,
"Revenue Recognition", these revenues are recognized when products are delivered
and the  collectability  of  fees  is  probable,  provided  that no  significant
obligations  remain  under  the  contract.  Revenues  derived  from  the sale of
software  products not requiring  significant  modification or customization are
recognized when products are delivered and  collectability  of fees is probable,
provided that no significant obligations remain under the contract. The price of
the  Company's  software  varies  depending  on the number of  software  modules
licensed and the number of users  accessing  the system and can range from under
ten thousand dollars to a few million dollars.  The Company  generally  requires
payment of a deposit  upon the  signing  of a customer  order as well as certain
additional payments prior to delivery.  As a result, the Company's balance sheet
reflects significant customer deposits.

     Third-party software and computer hardware revenues are recognized when the
related  products  are  shipped.   Software  support  agreements  are  generally
renewable  for one-year  periods,  and revenue  derived from such  agreements is
recognized  ratably  over  the  period  of  the  agreements.   The  Company  has
historically  maintained high renewal rates with respect to its software support
agreements. The Company generally charges for software implementation,  training
and technical  consulting services as well as management  consulting services on
an hourly or daily  basis.  The Company is now  offering  "tiered  pricing"  for
implementation  of new  systems  whereby  the  customer  pays a fixed  fee for a
certain  level of  packaged  services  and daily  fees for  services  beyond the
package.

     Revenues for post-contract customer support are recognized ratably over the
term of the support period,  which is typically one year. Post contract customer
support  fees  typically  cover  incremental  product  enhancements,  regulatory
updates  and  correction  of  software  errors.  Separate  fees are  charged for
significant product  enhancements,  new software modules,  additional users, and
migrations to different operating system platforms.

                                       28
<PAGE>

Estimate of Allowance for Uncollectible Accounts.

     The Company  continuously reviews the status of all its accounts receivable
with its customers for current collectability. The Company recognizes that there
are  circumstances  under which  customers  will delay payment  beyond the terms
offered  by the  Company  either  because  of their  own  payment  practices  or
temporary situations which need to be resolved before the customer will continue
payment.  Reserves  for  uncollectability  are  based on  various  ages of those
accounts  receivable  past their original due date for  collection.  The Company
does not write the account off  against  the reserve for  uncollectible  account
until all efforts to collect the accounts receivable have been exhausted.

Valuation of Long-Lived and Intangible Assets and Goodwill.

     The Company assesses the impairment of identifiable intangibles, long-lived
assets and related  goodwill and enterprise  level goodwill  whenever  events or
changes  in   circumstances   indicate  that  the  carrying  value  may  not  be
recoverable.  Factors the Company  considers  important  which could  trigger an
impairment review include the following:

     o    significant   underperformance  relative  to  expected  historical  or
          projected future operating results;
     o    significant changes in the manner of the Company's use of the acquired
          assets or the strategy for its overall business;
     o    significant negative industry or economic trends.

     When the  Company  determines  that  the  carrying  value  of  intangibles,
long-lived  assets and related goodwill and enterprise level goodwill may not be
recoverable  based upon the existence of one or more of the above  indicators of
impairment,  the Company measures any impairment based on a projected discounted
cash flow  method  using a discount  rate  determined  by our  management  to be
commensurate  with  the risk  inherent  in our  current  business  model.  After
recording a $11.8 million impairment adjustment,  net intangible assets amounted
to $5.4  million  as of  December  31,  2001.  See  Note 7 of the  Notes  to the
Consolidated Financial Statements.


RESULTS OF OPERATIONS

EFFECT OF REVERSE MERGER AND  DISCONTINUED  OPERATIONS ON MANAGEMENT  DISCUSSION
AND ANALYSIS

     On March 7, 2000,  CareCentric,  Inc.  (formerly  known as Simione  Central
Holdings  Inc.)  ("CareCentric")  and MCS, Inc.  ("MCS") merged in a transaction
("the CareCentric/MCS merger", also set forth above as "the MCS/Simione merger")
accounted for as a reverse acquisition for financial reporting purposes. As more
fully discussed in Note 1 of the  accompanying  Financial  Statements,  the 2001
Statement  of  Operations  presents  a full  year  of the  combined  results  of
operations of the former Simione Central Holdings, Inc./MCS businesses, the 2000
Statement  of  Operations  presents  a full year of MCS  results  of  operations
combined with the results of operations for the former Simione Central Holdings,
Inc.  since March 7, 2000 and the 1999  Statement  of  Operations  includes  MCS
historical  results  only.  Because  of these  differences  in the  accompanying
Financial Statements,  comparison of the results of operations of the Company as
reported would be misleading, if not meaningless.

     To  present  a more  meaningful  analysis  of  operating  performance,  the
comparison  of the years  ended  December  31, 2001 and 2000  compares  the 2001
reported  Financial  Statements in the  accompanying  Financial  Statements to a
Proforma 2000  statement of operating  results which combines the former Simione
Central Holdings Inc. business with MCS as if the merger had occurred on January
1, 2000.  For the  comparison of the years ended December 31, 2000 and 1999, the
Proforma  2000  statement  of operating  results,  prepared as if the merger had
occurred at January 1, 2000, is compared  against a Proforma  1999  statement of
operating results which was prepared by arithmetically adding the former Simione
Central Holdings, Inc. operating results with the historic MCS operating results
for the year ended December 31, 1999.

                                       29
<PAGE>

     In  addition  to  the  Proforma  information  discussed  in  the  paragraph
immediately  above,  the following  comparison  of the years ended  December 31,
2001,  2000 and 1999 have been prepared  after  reduction in all three years for
the  discontinued  operations  of the  Consulting  segment  of  Simione  Central
Holdings,  Inc. in  September  of 2001 and the Profit  Works  business of MCS in
1999. See Note 2 to the accompanying Financial Statements.


COMPARISON OF YEARS ENDED DECEMBER 31, 2001 AND 2000

     Net  Revenues.  Revenues  (exclusive  of the  Consulting  segment which was
discontinued  in September  2001) were $20.4 million for the twelve months ended
December 31, 2001 and $21.9  million for the twelve  months  ended  December 31,
2000.  The $1.5  million  decrease  was mainly  attributable  to a reduction  in
maintenance revenues of $1.1 million to $11.4 million in 2001 from $12.5 million
in 2000.  Revenues from  software  systems was unchanged at $9.5 million in both
2001 and 2000.

     The Company believes these reduced  revenues are attributable  generally to
adverse  economic  conditions  prevailing  in the home  healthcare  marketplace.
Additionally,  the Company believes certain customers are reluctant to invest in
existing  software  systems  while new products  with  technologically  advanced
platforms  are  under  development.  The  Company  believes  that  the  economic
conditions  for the home  healthcare  marketplace,  more fully  discussed in the
overview  section of this Form 10-K,  have now  stabilized,  and are expected to
improve in the years  ahead.  The Company  also  recognizes  the  importance  of
successfully  introducing new products using more current  technologies and will
continue to develop and invest in new products in 2002 and beyond.

     Cost of Revenues.  Cost of revenues  decreased $1.0 million,  or 11.1%,  to
$8.2  million in 2001 from $9.2 million in 2000.  As a  percentage  of total net
revenues,  cost of revenues  decreased to 40.2% in 2001 from 42.3% in 2000.  The
$1.0 million decrease  resulted  primarily from cost cutting,  product mix and a
slight decrease in revenues for software  systems.  The decrease as a percentage
of total net  revenues is due to the combined  impact of many factors  including
efficiencies  in  installation  and support costs resulting from the merger with
MCS, reduced sales discounts and changes in product mix.

     Selling,  General and Administrative.  Selling,  general and administrative
expenses  decreased $1.5 million,  or 12.3%, to $10.7 million in 2001 from $12.2
million in 2000.  As a percentage of total net  revenues,  selling,  general and
administrative  expenses  were  52.4% in 2001 and  55.8%  in 2000.  This  dollar
decrease was attributable to synergies  derived from the merger and cost savings
initiatives  implemented  in 2000 and  completed  in  2001.  Cost  savings  were
primarily  realized through the  centralization of administrative  functions and
elimination of non-essential facilities and excess capacity.

     Research and  Development.  Research  and  development  expenses  decreased
approximately $0.8 million,  or 11.4%, to $6.2 million in 2001 from $6.9 million
in 2000.  As a  percentage  of total  net  revenues,  research  and  development
expenses  decreased  to 30.1% in 2001 from  31.8% in 2000.  The  continued  high
expenditure of research and  development  funds was  attributable to development
effort on all continuing  products,  but especially for The Smart  Clipboard(R),
PharmMed Rx(TM) and HM Express.

     Amortization and Depreciation.  Amortization and depreciation  decreased by
approximately  $0.3  million to $3.9  million in 2001 from $4.2 million in 2000.
This  decrease is  attributable  to the net effect in preparing  these  Proforma
comparisons   eliminating   the   discontinued   consulting   business  and  the
amortization and  depreciation  expense of MCS from January 1 2000 through March
7,  2000,  the  MCS  merger  date.  See  Note 6 and  Note 7 to the  accompanying
Financial Statements.

     Impairment Loss - Intangible  Assets.  As more fully discussed in Note 7 to
the Financial  Statements,  and in accordance with Financial Accounting Standard
121, the Company is required to periodically  review the value of its intangible
assets. The Company's intangible assets were capitalized in conjunction with the
MCS merger on March 7,  2000.  At the end of the  fourth  quarter of 2001,  that
review  resulted in an $11.8  million  write down,  or  impairment  loss, of the


                                       30
<PAGE>

intangible assets of the Company.  The major reasons for the impairment were new
technologies  being  integrated  in the  Company's  current and future  products
causing its existing product platforms to have smaller future revenue generation
capability,  and an expectation  that immediate  opportunities  for new software
sales are lower than were forecasted at the time of the merger with MCS.

     Restructuring  Charge.  The restructuring  charge of $675,000 resulted from
the Company  approving a plan in April 2001 to close one remote  support  office
and to downsize the  workforce at its remaining  facilities.  As of December 31,
2001, that plan was fully completed and the restructuring  charge was completely
expended.

     Operating Loss. The Company's  operating loss from  continuing  operations,
reflecting  the  same  assumptions  as  above  for  purposes  of  comparability,
increased  from $10.8 million for the twelve  months ended  December 31, 2000 to
$21.5 for the twelve months ended  December 31, 2001.  Without the impact of the
Impairment  Loss  -  Intangible  Assets,  the  operating  loss  from  continuing
operations decreased from $10.8 million for the twelve months ended December 31,
2000 to $9.7  million  for the twelve  months  ended  December  31,  2001.  This
decrease in operating loss from continuing  operations,  before impairment loss,
is  primarily  due to the  reductions  in  selling  general  and  administrative
expenses.  Additionally,  continued  high  levels of  research  and  development
expenditures  over the last two  years  are a  material  cause of the  recurring
operating loss from continuing operations.

     Other Income  (Expense).  Interest  expense related to borrowings under the
Company's line of credit agreements and capital lease  obligations  increased by
approximately  $0.5 million to $1.3 million for the twelve months ended December
31, 2001 from $0.8  million  for the twelve  months  ended  December  31,  2000.
Interest and other income  consist  principally  of interest  income  related to
customer  finance charges and the Company's short term cash investments and have
decreased by  approximately  $31,000.  The Company expects further  increases in
interest expense in 2002 due to increased borrowing.

     Income Taxes.  The Company has not incurred or paid any substantial  income
taxes since March 2000. At December 31, 2001, CareCentric had net operating loss
("NOL")  carryforwards  for  federal  and state  income  tax  purposes  of $36.7
million.  Such losses expire beginning in 2010, if not utilized.  The Tax Reform
Act of 1986, as amended,  contains  provisions that limit the NOL and tax credit
carryforwards  available to be used in any given year when certain events occur,
including  additional sales of equity securities and other changes in ownership.
As a  result,  certain  of the NOL  carryforwards  may be  limited  as to  their
utilization  in any year.  The Company has concluded that it is more likely than
not that these NOL  carryforwards  will not be  realized  based on a weighing of
available  evidence at December 31, 2001, and  accordingly,  a 100% deferred tax
valuation  allowance has been recorded against these assets.  See Note 10 to the
accompanying Financial Statements.

     The income tax benefit of $154,000 reflected in the accompanying  Financial
Statements for 2000 relates  primarily to losses incurred by MCS between January
1, 2000 and March 7, 2000 while it was a  subsidiary  of Mestek.  The income tax
benefit arises due to the inclusion of MCS's results for this period in Mestek's
consolidated federal and state income tax filings for 2000.

     Loss on Discontinued  Operations.  As more fully described in Note 7 of the
accompanying  Financial  Statements,  the Company  completed the sale of certain
assets of the  Consulting  business  segment  and  discontinued  its  Consulting
business on September 28, 2001. The loss from the discontinuance of the business
was $3.1 million,  which  resulted  mainly from the write off of $2.6 million of
intangible  assets  recorded as associated  with the Consulting  business at the
time of the merger with MCS.

     Loss from  Operations of Discontinued  Segment.  The loss of ($483,000) for
the twelve months ended  December 31, 2001 from  operations of the  discontinued
Consulting segment compares to a (loss) for the twelve months ended December 31,
2000 of ($442,000).

                                       31
<PAGE>

COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999

     Net  Revenues.  Revenues  (exclusive  of the  Consulting  segment which was
discontinued  in September  2001) were $21.9 million for the twelve months ended
December 31, 2000 and $32.6  million for the twelve  months  ended  December 31,
1999.  Revenues from software systems decreased $10.6 million, or 52.7%, to $9.5
million in 2000 from $20.1 million in 1999. Software  maintenance  revenues were
unchanged in 2000 from 1999 at $12.5 million.

     These  significantly   reduced  "comparable   revenues"  were  attributable
principally  to reduced  bookings of software and  equipment  sales in the final
quarter of 1999 and early part of 2000, as well as relatively  weak software and
hardware sales in the last quarter of 2000.  The Company  believes these results
were  attributable  generally to adverse economic  conditions  prevailing in the
home healthcare  marketplace and more specifically to uncertainties  surrounding
the MCS/Simione  merger on March 7, 2000 and customer  concerns related to "Year
2000 functionality".  Other factors include discontinuation of product lines and
consolidation of certain  operations and functions in connection with the merger
or to reduce costs.  Finally,  the results were affected by uncertainties in the
marketplace related to a new home health care provider reimbursement system, the
Prospective  Payment  System,  or PPS,  implemented by the Health Care Financing
Administration  (HCFA) in October of 2000.  The PPS payment system is based upon
pre-set per episode  fees,  in contrast to the former  Interim  Payment  System,
(IPS),  which it  replaced,  which was based  upon  Medicare's  historical  cost
reimbursement  practice.  As such, PPS represented a radical departure from past
practice  and  introduced  significant  uncertainty  in  the  home  health  care
industry.  This  uncertainty  surrounding  PPS resulted in an adverse  effect on
information technology spending in the home health industry.

     Cost of Revenues.  Cost of revenues  decreased $12.5 million,  or 57.4%, to
$9.2 million in 2000 from $21.7  million in 1999.  As a percentage  of total net
revenues,  cost of revenues  decreased to 42.3% in 2000 from 66.6% in 1999.  The
$12.5 million decrease  resulted  primarily from the  corresponding  decrease in
revenue for software  and  services.  The decrease as a percentage  of total net
revenues is  principally  due to the impact of a higher ratio of margin sales to
total sales.

     Selling,  General and Administrative.  Selling,  general and administrative
expenses  decreased $6.8 million,  or 35.7%, to $12.2 million in 2000 from $19.0
million in 1999.  As a percentage of total net  revenues,  selling,  general and
administrative  expenses  were  55.8% in 2000 and  58.3%  in 1999.  This  dollar
decrease was attributable to synergies  derived from the merger and cost savings
initiatives  implemented in 2000. Cost savings were primarily  realized  through
the centralization of administrative  functions and elimination of non-essential
facilities and excess capacity. These initiatives continued in 2001.

     Research and Development.  Research and development expenses increased $0.9
million,  or 14.0%,  to $6.9  million in 2000 from $6.1  million  in 1999.  As a
percentage of total net revenues, research and development expenses increased to
31.8% in 2000 from 18.7% in 1999.  This  dollar  increase  was  attributable  to
additional development costs for all continuing products, but especially for The
Smart Clipboard(R), PharmMed Rx(TM) and HM Express.

     Amortization and Depreciation.  Amortization and depreciation  increased by
$1.0 million to $4.2 million in 2000 from $3.2  million in 1999.  This  increase
includes approximately $1.5 million of amortization expenses attributable to the
Simione/MCS  merger on March 7, 2000. See Note 6 and Note 7 to the  accompanying
Consolidated Financial Statements.

     Operating Loss. The Company's operating (loss) from continuing  operations,
reflecting  the  same  assumptions  as  above  for  purposes  of  comparability,
decreased  from $17.4 million for the twelve  months ended  December 31, 1999 to
$10.8 million for the twelve months ended December 31, 2000. Management believes
this  reduced  operating  loss,  despite  significantly  reduced  revenues  on a
comparable  basis,  is primarily  the result of the  aforementioned  cost saving
initiatives implemented subsequent to the MCS/Simione merger on March 7, 2000.

     Other Income  (Expense).  Interest  expense relates to the borrowings under
the Company's line of credit  agreements and capital lease  obligations  and has
increased  by  approximately   $657,000.   Interest  and  other  income  consist


                                       32
<PAGE>

principally  of  interest  income  related to customer  finance  charges and the
Company's  short  term cash  investments  and have  decreased  by  approximately
$130,000. The Company saw further increases in 2001 due to increased borrowing.

     Income Taxes.  The Company has not incurred or paid any substantial  income
taxes since March 2000. At December 31, 2000, CareCentric had net operating loss
("NOL")  carryforwards  for  federal  and state  income  tax  purposes  of $28.6
million.  Such losses expire beginning in 2010, if not utilized.  The Tax Reform
Act of 1986, as amended,  contains  provisions that limit the NOL and tax credit
carryforwards  available to be used in any given year when certain events occur,
including  additional sales of equity securities and other changes in ownership.
As a  result,  certain  of the NOL  carryforwards  may be  limited  as to  their
utilization  in any year.  The Company has concluded that it is more likely than
not that these NOL  carryforwards  will not be  realized  based on a weighing of
available  evidence at December 31, 2000, and  accordingly,  a 100% deferred tax
valuation  allowance has been recorded against these assets.  See Note 10 to the
accompanying Consolidated Financial Statements.

     The income tax benefit of $154,000  reflected in the  financial  statements
for 2000 relates primarily to losses incurred by MCS between January 1, 2000 and
March 7, 2000 while it was a subsidiary of Mestek. The income tax benefit arises
due to the inclusion of MCS's  results for this period in Mestek's  consolidated
federal and state income tax filings for 2000.

     Loss from  Operations of Discontinued  Segment.  The loss of ($442,000) for
the twelve months ended  December 31, 2000 from  operations of the  discontinued
Consulting  segment compares to a profit of $151,000 for the twelve months ended
December 31, 1999.


QUARTERLY FINANCIAL RESULTS

     The  Company's  quarterly  operating  results  have  been and  will  likely
continue to be subject to significant fluctuations.  Revenues can be expected to
vary  significantly  as  a  result  of  the  acceleration  or  delay  of  system
implementations  due to  customer  requirements  or  other  factors  beyond  the
Company's control,  fluctuations in demand for existing systems and services and
the Company's ability to manage successfully any future growth. The sales cycles
related to its systems offerings can be long and difficult to predict, resulting
in variability of revenues.  In addition,  the implementation  period related to
new  installations  of the  Company's  information  systems can range from a few
months to one year while add-ons can occur more quickly. The unpredictability of
revenues  could in any  quarter  result in a  shortfall  relative  to  quarterly
expectations. Many other factors may contribute to fluctuations in the Company's
operating  results.  Accordingly,  the Company  believes  that  period-to-period
comparisons of results of operations are not  necessarily  meaningful and should
not be relied upon as any indication of future performance.


LIQUIDITY AND CAPITAL RESOURCES

     In May 1999, Simione entered into a definitive agreement to merge with MCS,
a wholly owned  subsidiary of Mestek,  as more fully  explained in Note 1 to the
Consolidated Financial Statements. For every share of outstanding Simione common
stock,  Simione agreed to issue approximately 0.85 shares of its common stock to
Mestek in the exchange.  MCS was a leading  provider of information  systems and
services to the home health care  industry with  approximately  $14.9 million in
revenues and $1.4 million in net income in 1998.

     In August 1999, Simione acquired CareCentric Solutions, Inc. (CSI) pursuant
to a merger for  approximately  3.0  million  shares  (before  giving  effect to
Simione's  one for five  split)  of  Simione's  Series A  Preferred  Stock.  The
preferred stock was valued at $3.00 per share,  pre-split, at closing. The total
purchase price was approximately $12 million,  of which $0.2 million was paid in
cash, $2.7 million was in the form of assumed liabilities,  and $9.3 million was
in the form of Series A  Preferred  Stock of Simione.  At the  merger,  Series A
Preferred  Stock was  converted  into 606,904  shares of common  stock,  150,740
shares of which  remained  in escrow.  Pursuant  to a later  settlement,  88,586


                                       33
<PAGE>

shares were  released from escrow and 62,150  shares were  cancelled.  Under the
terms  of  the  merger,  Simione  was  required  to  issue  up to an  additional
approximately 3.0 million shares, pre-split, of common stock if Simione's common
stock did not meet  certain  price  targets  during the fourth  quarter of 2000.
Because  those price  targets were not  satisfied,  in March 2001,  Simione (now
CareCentric,  Inc.) issued  593,668 shares of its common stock to former holders
of CSI  preferred  stock and CSI  noteholders;  13,216  shares  were not  issued
pursuant to a settlement.  In conjunction  with the acquisition of CSI in August
1999,  Simione  assumed a loan from a bank with an  outstanding  balance of $1.5
million.  The $1.5 million bank loan was retired in  connection  with a new loan
extended  by  Mestek  to  Simione  in  September  1999,  described  in the  next
paragraph.

     In  September  1999,  in  connection  with an  amendment  of the MCS merger
agreement,  Simione  received  $3.0 million in loan  proceeds  from Mestek,  the
parent company of MCS. The Mestek loan accrued  interest at the BankBoston prime
rate plus 2%. The loan  proceeds  were used to retire $1.5 million of term loans
assumed with the  acquisition of CSI and to fund operating  needs.  When the MCS
merger  was  completed,  Mestek's  note  evidencing  this loan and  other  loans
described  below were converted  into Series B Preferred  Stock and a warrant to
purchase CareCentric common stock.

     In  November  1999,  Simione  received  $1.6  million of loans from  Mestek
($850,000) and two stockholders of Simione ($750,000),  Barrett C. O'Donnell and
David Ellis,  to fund  operating  needs and  continue  the  execution of product
strategies  in the fourth  quarter of 1999.  The  $850,000  loan from Mestek was
converted  into  850,000  shares of newly  issued  Series C  Preferred  stock of
Simione at the closing of the MCS merger having  170,000 common shares votes and
which are entitled to an 11.0%  annual  cumulative  dividend.  The loan from Mr.
O'Donnell  along with $100,000 in deferred  salary were exchanged for a $600,000
subordinated  note,  convertible  into  common  stock at $2.51 per  share,  with
interest at 9% per annum and a maturity date of August 8, 2005. In January 2002,
this loan was amended to change the interest  rate to prime plus two percent and
to change the terms of payment of interest for 2002 to require that  one-half of
the accrued  interest be timely paid each  quarter and the balance to be paid on
December 31, 2003 or to be converted  into an additional  convertible  note. The
loan from Dr.  Ellis was paid in full on July 12, 2000 from the credit  facility
provided by Wainwright  Bank and Trust Company.  See Note 8 to the  accompanying
Consolidated Financial Statements.

     In February  2000,  Simione  received an  additional  $1.0  million of loan
proceeds from Mestek.  The loan proceeds were used to fund  Simione's  operating
needs until  completion  of the merger with MCS,  and carried the same terms and
security as the $3.0 million loan  received  from Mestek in September  1999.  On
March 7, 2000, the merger with MCS was completed and Mestek's  notes  evidencing
the $1.0  million and $3.0  million  loans,  together  with an  additional  $2.0
million in cash from Mestek were converted  into Series B Preferred  Stock and a
warrant to purchase  CareCentric common stock. The consolidation of the accounts
receivable  of MCS into the  then  outstanding  balance  of  Simione's  accounts
receivable provided an additional $1.5 million of borrowing capacity on the $5.0
million bank line of credit established by Simione in September 1999.

     Immediately after the Simione/MCS  merger on March 7, 2000, the Company had
cash and cash  equivalents of $3.5 million and short and long term debt from all
sources  of  $2.5  million,   for  a  positive  net   cash/(debt)   position  of
approximately $1.0 million.  In order to supplement its capital  resources,  the
Company,  subsequent to the merger,  undertook a search for  additional  capital
resources  which  resulted  in the  creation  of the  following  credit and debt
facilities and preferred equity securities:

<TABLE>
<CAPTION>
<S>                              <C>                     <C>                     <C>
           SOURCE                      FUNDING                   FORM                  DATE CLOSED
------------------------------   --------------------    ----------------------  ------------------------

John E. Reed                          $ 1,000,000        Series  D   Preferred        June 22, 2000
                                                         Stock

John E. Reed                            6,000,000        Line of Credit               June 22, 2000

Wainwright Bank and Trust               6,000,000        Line of Credit               July 12, 2000
Company
                                 --------------------

                                     $ 13,000,000
                                 ====================
</TABLE>

                                       34
<PAGE>

     These three  transactions  are described in greater detail in Note 8 to the
accompanying  Consolidated  Financial Statements.  The Wainwright Bank and Trust
Company  line of  credit  was used to pay off the  Silicon  Valley  Bank line of
credit,  certain  short-term loans from Mestek, and the note payable to David O.
Ellis.  The  Wainwright  Line of Credit  expired  July 11,  2001 and was renewed
through July 11, 2002. Payment of the Wainwright Line of Credit is guaranteed by
Mestek.  Based upon  representations  received from Wainwright Bank, the Company
expects the Line of Credit to be renewed  through July 11, 2003.  As of April 8,
2002, the Company owes  Wainwright  approximately  $5,967,000  million under the
Line of Credit.

     The Company is obligated under an eighteen month unsecured  promissory note
in the  principal  amount of  $1,018,000  payable  to Mestek  Inc.  which  bears
interest at prime plus one and one half percent  (1.5%),  with interest  payable
semiannually and which matures on June 30, 2003. This note covers funds advanced
by Mestek to  CareCentric  to cover  payroll and  accounts  payable  obligations
incurred by the Company  during the period of its  transition of senior  lenders
from  Silicon  Valley Bank to  Wainwright  Bank and Trust  Company,  accrued and
unpaid interest thereon and the unreimbursed portion of Mr. Bruce Dewey's salary
for the periods from November 9, 1999 to October 31, 2001.

     On June 22,  2000,  the  Company  closed a financing  with John E. Reed,  a
CareCentric  director  and the chief  executive  officer of Mestek,  of up to $7
million.  The  financing  consisted  of $1 million  in equity,  and a $6 million
subordinated revolving line of credit facility, convertible into common stock of
CareCentric,  with a 9% interest  rate and five-year  maturity.  On December 31,
2001, the outstanding  amount under the Credit  Facility was $3.5 million,  $1.0
million of which was  participated to Mestek,  Inc. and the balance was retained
by Mr.  Reed.  On December  31,  2001,  the  facility  was amended to change the
interest rate to prime plus two percent,  to change the payment terms for unpaid
2001  interest  to  require  payment at  December  31,  2003 or to  convert  the
outstanding  unpaid  interest to additional  convertible  notes in the amount of
$184,438 at the option of Mr.  Reed,  and in the amount of $40,463 at the option
of Mestek,  and to change the terms of payment of  interest  for 2002 to require
that one-half be timely paid each quarter and the balance to be paid on December
31, 2003 or to be converted to additional convertible notes.

     During 2000 and 2001 the Company incurred  operating losses and experienced
significant problems collecting its accounts receivable because of the uncertain
operating  condition of its customers due to the negative effects of the current
government limits over home medical cost  reimbursement and the costs to date of
developing,  implementing and supporting The Smart Clipboard(R)  product,  which
have been much higher than anticipated.  In addition,  sales revenue in 2000 was
lower than planned in the core MestaMed(R),  DME VI and STAT2 products while new
sales of The Smart Clipboard(R) and Tropical products (now discontinued) did not
develop as quickly  as  projected.  The merger  with  Simione  added  additional
products and resources and, importantly, added to the Company's critical mass of
installed sites but the Company's longer term success will depend upon increased
sales of new software systems and successful installation performance, including
its  point-of-care  and MestaMed(R)  systems.  In this  connection,  the Company
recorded a  significant  increase  in  bookings of new systems in several of its
major product lines  through  March,  2002.  Bookings  have  increased  steadily
through the first quarter of 2002 and prospect  opportunities  have been clearly
identified.  The existing pipeline, if realized,  will exceed the Company's 2002
bookings budget and cash flow needs.  Notwithstanding  the financial  conditions
prevailing  in the  home  health  marketplace,  the  Company  continued  to fund
significant  product  development  initiatives during 2001.  Accordingly,  until
revenues  increase   sufficiently  to  cover  these  forward-looking  costs  and
operating  expenses,  the Company remains  dependent on outside funding sources,
including John E. Reed, Mestek, Inc. and Wainwright Bank and Trust Company,  for
its working capital financing.

     On April 8, 2002,  the  Company  secured  two  commitments  for  additional
financing,  from existing  shareholders John Reed and Mestek. See Note 17 to the
Financial  Statements.  Mr. Reed and Mestek have agreed to provide  $871,117 and
$1,092,000 in short-term debt financing,  respectively,  to be refinanced  along
with other debt of the  Company  due such  parties  upon  obtaining  shareholder
approval in June 2002.

     As  of  April  8,  2002,  the  Company  has  untapped  credit  capacity  of
approximately  $0.6 million from the  aforementioned  Reed and  Wainwright  Bank
facilities. The Company believes that a successful completion of its refinancing


                                       35
<PAGE>

commitments  from John Reed and Mestek,  in combination with the funds available
from its cash, cash equivalents and cash to be generated from future operations,
will be  sufficient to meet the Company's  operating  requirements,  assuming no
material  adverse  change in the operation of the Company's  business,  until at
least December 31, 2002. See also Note 17 to Financial Statements.

     The  table  below  summarizes  the  Company's  debt and  other  contractual
obligations:
<TABLE>
<CAPTION>
<S>                                         <C>         <C>          <C>        <C>
                                                        PAYMENTS DUE BY PERIOD
                                                        ----------------------
                                                        LESS THAN
CONTRACTUAL OBLIGATIONS                      TOTAL       1 YEAR      1-3 YEARS    4 - 5 YEARS
                                           -----------  -----------  ----------- ------------
Long-Term Debt                              $5,343,000                $1,243,000  $4,100,000
Capital Lease Obligations                       36,000       36,000           --          --
Operating Leases                             5,635,000    2,359,000    2,114,000   1,162,000
Line of Credit                               5,572,000    5,572,000           --          --
Other Long-Term Obligations                  1,452,000      702,000      750,000          --
                                           -----------  -----------  ----------- ------------
Total Contractual Cash Obligations         $18,038,000   $8,669,000   $4,107,000  $5,262,000
                                           ===========  ===========  -========== ============
</TABLE>

     As of December 31, 2001, the Company had negative  working capital of $15.6
million and cash equivalents of $0.2 million.  The Company's current liabilities
as of December 31, 2001 include  customer  deposits of $2.1 million and unearned
revenues of $4.0 million.

     Net cash  provided by (used in)  operating  activities  for the years ended
December 31, 2001, 2000 and 1999 was ($3.9)  million,  ($7.2) million and ($0.3)
million, respectively. Cash used in 2001 principally funded operating losses and
was also used to pay various  liabilities  reflected on the CareCentric  balance
sheet as of March 7, 2000. The pre-merger  CareCentric  liabilities paid in this
manner  include  severance  pay,  excess  office space,  excess leased  computer
equipment, settlement of litigation and legal fees.

     Cash flows from financing  activities include the Wainwright and Reed lines
of credit borrowings during 2001.

     Inflation  has not had, and is not  expected to have, a material  impact on
the Company's  operations.  If inflation increases,  the Company will attempt to
increase its prices to offset  increased  expenses.  No assurance  can be given,
however,  that the Company  will be able to  adequately  increase  its prices in
response to inflation.

IMPACT OF NEW ACCOUNTING STANDARDS

     In 1998,  the  Financial  Accounting  Standards  Board  issued SFAS No. 133
"Accounting for Derivative  Instruments and Hedging Activities." SFAS No. 133 is
effective for the Company's first quarter of the fiscal year ending December 31,
2001.  The  adoption  of SFAS No.  133 did not  have a  material  impact  on the
Company's financial position or results of operations.

     On December 3, 1999, the SEC released Staff  Accounting  Bulletin 101, (SAB
101) "Revenue  Recognition in Financial  Statements." This bulletin  established
more clearly  defined  revenue  recognition  criteria than  previously  existing
accounting  pronouncements.  On June 26, 2000, the SEC released SAB 101B,  which
delayed the  required  implementation  of SAB 101 until no later than the fourth
quarter of fiscal years ending  December 31, 2000.  The effects of this bulletin
were not material to the Company's financial position,  results of operations or
cash flow.

                                       36
<PAGE>

     In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business  Combinations and SFAS No. 142,  Goodwill and Other Intangible  Assets.
SFAS No. 141  addresses  financial  accounting  and  reporting  for all business
combinations and requires that all business combinations entered into subsequent
to June  2001 be  recorded  under  the  purchase  method.  This  statement  also
addresses  financial  accounting and reporting for goodwill and other intangible
assets acquired in a business combination at acquisition. SFAS No. 142 addresses
financial  accounting and reporting for intangible assets acquired  individually
or with a group of other assets at  acquisition.  This  statement also addresses
financial  accounting  and  reporting for goodwill and other  intangible  assets
subsequent to their acquisition. These statements were adopted by the Company on
January 1, 2002. Under SFAS 142, goodwill is no longer  amortized.  In the place
of amortization, the Company is required to periodically review the valuation of
the  Company's  intangible  assets  using  a  discounted  cash  flow  estimation
approach.  Following the accounting for impairment discussed  immediately below,
which has been made under the rules of SFAS 121, the Company  believes  that the
effect  of  adopting  SFAS  No.  141  and 142  will be  limited  to  changes  in
amortization expense for the periods after December 31, 2001. Additionally,  the
assembled workforce intangible asset will be recharacterized as goodwill,  which
will not be amortized under the rules of SFAS No. 142.

     Accounting for impairment.  For the years ended December 31, 2001, 2000 and
1999, the Company  reported its accounting for intangible  assets under SFAS No.
121,  Accounting  for the  Impairment  of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed Of, and the  accounting  and  reporting  provisions of APB
Opinion  No. 30.  Under the rules of SFAS 121,  the  Company  performs  periodic
analysis to  determine if the  Company's  intangible  assets have been  impaired
using  a  combination  of  discounted  and  undiscounted   estimated  cash  flow
estimations.  In the fourth  quarter of 2001,  the Company  determined  that the
combination of new technologies  being  integrated in the Company's  current and
future products would result in its existing  product  platforms  having smaller
future revenue generation capability.  Additionally, the Company determined that
the continued  support of existing  products  while  migrating to new technology
platforms  would  result  in a lower  estimated  cash  value to the  Company  of
existing  products.  The resulting  impairment to the  intangible  assets of the
Company  was $11.8  million.  As  further  detailed  in Note 7 of the  Financial
Statements,  the intangible assets of the Company,  after the impairment charge,
will be Developed Technologies, Customer Base and Assembled Workforce.

     On  October  3,  2001,  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or Disposal  of  Long-Lived  Assets,"  that  replaced  SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To
Be Disposed  Of." The primary  objectives  of this  project  were to develop one
accounting  model  based  on the  framework  established  in  SFAS  No.  121 for
long-lived  assets  to be  disposed  of by  sales  and  to  address  significant
implementation issues. The accounting model for long-lived assets to be disposed
of by sale applies to all long-lived assets,  including discontinued operations,
and replaces the  provisions  of Account  Principles  Board (APB Opinion No. 30,
Reporting Results of  Operations-Reporting  the Effects of Disposal of a Segment
of a Business, for the disposal of segments of a business. SFAS No. 144 requires
that those long-lived assets be measured at the lower of carrying amount or fair
value  less  cost  to  see  whether  reported  in  continuing  operations  or in
discontinued  operations.  Therefore,  discontinued operations will no longer be
measured at net realizable  value or include  amounts for operating  losses that
have not yet  occurred.  The  provisions  of SFAS No.  144 apply to the  Company
effective  January 1, 2002.  The Company is  currently  reviewing  the impact of
those provisions.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of December 31, 2001, the Company's  obligations  include  variable rate
notes payable and a line of credit bank note with aggregate  principal  balances
of  approximately  $10.9 million which mature at various dates through 2005. The
Company  is  exposed  to the  market  risk of  significant  increases  in future
interest rates. Each incremental point in the prime interest rate would increase
the Company's interest expense by approximately $109,000 per year.

     At December 31, 2001, the Company had accounts  receivable of approximately
$4.2 million (net of an allowance for doubtful accounts of $1.0 million).  These
amounts compare to accounts  receivable of approximately $8.5 million (net of an
allowance  for doubtful  accounts of $0.5  million) at December  31,  2000.  The
Company  is  subject  to a  concentration  of credit  risk  because  most of the
accounts receivable are due from companies in the home health industry.

                                       37
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Financial  Statements  and  Supplementary  Data appear on pages 45 to 75 of
this Annual Report on Form 10-K.


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     Effective June 9, 2000,  the Company  decided to appoint Grant Thornton LLP
as the Company's  independent  certified public  accountants for the fiscal year
ended  December  31, 2000 and  dismissed  Arthur  Andersen  LLP. The decision to
change  accountants  was  recommended by the Audit Committee and approved by the
Board of Directors of the Company.  Grant  Thornton had been the auditor for MCS
prior to the merger.

     None  of  the  "reportable   events"  described  in  Item  304(a)(1)(v)  of
Regulation S-K occurred with respect to the Company during the last three fiscal
years or in the subsequent interim period to June 9, 2000.

     Except as described below,  during the last two fiscal years and subsequent
interim  period to June 9, 2000, the Company did not consult with Grant Thornton
LLP regarding any of the matters or events set forth in Item  (304)(a)(2)(i) and
(ii) of Regulation  S-K.  Grant  Thornton LLP had been the auditor for MCS, Inc.
for several years for the period  preceding the merger.  After the completion of
the MCS merger, the historical  financial statements of MCS, Inc. were deemed to
be the financial  statements of the Company.  The Company  consulted  with Grant
Thornton LLP  regarding  the financial  statements  after the  completion of the
merger.  Simione did not consult with Grant  Thornton LLP  regarding  accounting
matters  pertaining to the financial  statements of the Company prior to the MCS
merger.


PART III

     With the exception of information relating to the executive officers of the
Company which is provided in Part I hereof, all information required by Part III
(Items  10,  11,  12 and  13) is  incorporated  by  reference  to the  Company's
definitive proxy statement relating to the 2002 Annual Meeting of Stockholders.


                                       38
<PAGE>


PART IV

ITEM 14.  EXHIBITS,  FINANCIAL  STATEMENTS,  FINANCIAL  STATEMENT  SCHEDULES AND
REPORTS ON FORM 8-K

     (a)  The following documents are filed as part of this Report:

          1.   Financial Statements.

          2.   Financial Statement Schedule.

               Schedule II--Valuation and Qualifying Accounts

               Certain financial  statement  schedules have been omitted because
               they are not applicable.

          3.   Exhibits Incorporated by Reference or Filed with this Report.

     The following exhibits are filed as part of this Report.  Where such filing
is made by incorporation by reference to a previously filed statement or report,
such statement or report is identified in parentheses.

EXHIBIT
NUMBER            DESCRIPTION
------            -----------

2.1(1,3) --    Agreement  and Plan of Merger dated as of July 12, 1999 among the
               Company,   Simione   Acquisition   Corporation   and  CareCentric
               Solutions, Inc.

2.2(1,2) --    Second  Amended  and  Restated  Agreement  and Plan of Merger and
               Investment  Agreement  dated as of October  25, 1999 by and among
               MCS, Inc.,  Mestek,  Inc., the Company,  John E. Reed, Stewart B.
               Reed and E. Herbert Burk.

2.3(1)   --    Purchase  and Sale  Agreement  dated  September  28,  2001 by and
               between  the  Company,  Simione  Consulting,   Inc.  and  Simione
               Consultants,  L.L.C. (incorporated by reference to Exhibit 2.1 of
               the Company's  Current  Report on Form 8-K dated October 12, 2001
               as filed with the Securities and Exchange Commission).

3.1      --    Amended and Restated Certificate of Incorporation of the Company.

3.2      --    Certificate of Ownership and Merger of Simione Central  Holdings,
               Inc. with and into CareCentric,  Inc.  (Incorporated by reference
               to the  Company's  Annual Report 8-K dated as of January 31, 2001
               (File No. 000-22162)).

3.3      --    Amended  and  Restated  Bylaws of the  Company  (Incorporated  by
               reference to Exhibit 3.3 of the Company's  Registration Statement
               on Form S-1  (Registration  Number  333-25551)  as filed with the
               Securities and Exchange Commission).

3.4*     --    Certificate of  Designations,  Preferences and Rights of Series E
               Preferred Stock of the Company.

4.1(5)   --    Specimen  Stock  Certificate  of  the  Company  (Incorporated  by
               reference to Exhibit 4.1 of the  Company's  Annual Report on Form
               10-K for the fiscal  year ended  December  31, 2000 as filed with
               the Securities and Exchange Commission).

4.2      --    See Exhibits  3.1, 3.2 and 3.3 for  provisions  of the  Company's
               Certificate of  Incorporation  and Bylaws governing the rights of
               holders of securities of the Company.

                                       39
<PAGE>

4.3      --    Registration  Rights Agreement dated October 7, 1996 by and among
               InfoMed  Holdings,  Inc.,  those  stockholders of Simione Central
               Holding, Inc. appearing as signatories to the Registration Rights
               Agreement,  and those  stockholders  of  InfoMed  Holdings,  Inc.
               appearing as signatories  to the  Registration  Rights  Agreement
               (Incorporated  by  reference  to  Exhibit  10.1 of the  Company's
               Current  Report on Form 8-K dated  October  8, 1996 as filed with
               the Securities and Exchange Commission).

9.1      --    Form  of  Simione  Central  Holding,   Inc.  Shareholders  Voting
               Agreement and Irrevocable  Proxy dated March 5, 1996 by and among
               Howard B. Krone,  William J.  Simione,  Jr., Gary  Rasmussen,  G.
               Blake Bremer,  Katherine L. Wetherbee,  A. Curtis Eade,  James A.
               Tramonte,  John Isett, Cindy Lumpkin,  Douglas E. Caddell, Robert
               J. Simione,  Kenneth L. Wall, Allen K. Seibert,  III, Jerry Sevy,
               Larry  Clark,  Lori  N.  Siegel,  Gary  M.  Bremer,   Richard  A.
               Parlontieri, and James R. Henderson (Incorporated by reference to
               the  Company's  Annual  Report on Form 10-K for the  fiscal  year
               ended December 31, 1996 as filed with the Securities and Exchange
               Commission).

9.2      --    Agreement  dated  as of  October  7,  1996 by and  among  InfoMed
               Holdings, Inc., EGL Holdings, Inc., Mercury Asset Management plc,
               O'Donnell  Davis,  Inc.,  Barrett  O'Donnell  and  certain  other
               holders  of the Class A  Convertible  Preferred  Stock of InfoMed
               Holdings,  Inc. (Incorporated by reference to Exhibit 10.2 of the
               Company's  Current  Report on Form 8-K dated  October  8, 1996 as
               filed with the Securities and Exchange Commission).

10.1     --    Amended and  Restated  Agreement  and Plan of Merger  dated as of
               September 5, 1996 by and among InfoMed  Holdings,  Inc.,  Simione
               Central  Holding,  Inc.  and  InfoSub,   Inc.   (Incorporated  by
               reference to Exhibit 2.1 of the Company's  Current Report on Form
               8-K dated  September  5, 1996 as filed  with the  Securities  and
               Exchange Commission).

10.2     --    InfoMed Holdings, Inc. Amended and Restated Share Warrant for the
               Purchase of Common Stock of InfoMed Holdings,  Inc. dated October
               5, 1996  between  InfoMed  Holdings,  Inc.  and each of O'Donnell
               Davis,  Inc.,  Rowan  Nominees Ltd.,  David O. Ellis,  Richard V.
               Lawry, Salvatore A. Massaro,  Murali Anantharaman,  Kathleen E.J.
               Ellis,  Jeremy Ellis, Karen Ellis, Gemma Ellis, Thomas M. Rogers,
               Jr., and Arnold Schumacher  (Incorporated by reference to Exhibit
               4.1 of the Company's  Current Report on Form 8-K dated October 8,
               1996 as filed with the Securities and Exchange Commission).

10.3     --    Warrant to  Purchase  100,000  shares of Class A Common  Stock of
               Simione  Central  Holding,  Inc.,  dated April 12,  1996  between
               Simione  Central  Holding,  Inc. and Home Health  First,  a Texas
               not-for-profit  corporation  (Incorporated  by  reference  to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               December  31,  1996 as filed  with the  Securities  and  Exchange
               Commission).

10.4     --    Common Stock Warrant of InfoMed  Holdings,  Inc. dated October 8,
               1996 between Jefferies & Company, Inc. and InfoMed Holdings, Inc.
               (Incorporated by reference to the Company's Annual Report on Form
               10-K for the fiscal  year ended  December  31, 1996 as filed with
               the Securities and Exchange Commission).

10.5+    --    Form of Simione Central Holding, Inc. 1996 Incentive Stock Option
               Agreement  dated September 4, 1996 by and between Simione Central
               Holding, Inc. and each of James R. Henderson, William J. Simione,
               Jr., Robert Simione,  Katherine Wetherbee,  Sheldon Berman, Betty
               Gordon,  William J. Simione, III, J. Blake Bremer, Craig Luigart,
               Kenneth  L.  Wald,  Marty  Cavaiani,  Lori  Ferrero,  Douglas  E.
               Caddell,   Andy  Anello  and  A.  Curtis  Eade  (Incorporated  by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               fiscal year ended  December 31, 1996 as filed with the Securities
               and Exchange Commission).

                                       40
<PAGE>

10.6+    --    1994 Incentive Stock Option and  Non-Qualified  Stock Option Plan
               (Incorporated by reference to the Company's Annual Report on Form
               10-K for the fiscal  year  ended June 30,  1994 as filed with the
               Securities and Exchange Commission).

10.7+    --    CareCentric,  Inc. Profit Sharing Plan dated October 31, 1996, as
               amended (Incorporated by reference to the Company's Annual Report
               on Form 10-K for the fiscal year ended December 31, 1996 as filed
               with the Securities and Exchange Commission).

10.8+    --    CareCentric, Inc. Section 125 Plan effective date January 1, 1997
               sponsored  by  the  Company  (Incorporated  by  reference  to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               December  31,  1996 as filed  with the  Securities  and  Exchange
               Commission).

10.9     --    Headquarters  at Gateway Lake Lease  Agreement  dated  January 1,
               1996 by and  between  Gateway  LLC  and  InfoMed  Holdings,  Inc.
               (Incorporated by reference to the Company's Annual Report on Form
               10-K for the fiscal  year  ended June 30,  1996 as filed with the
               Securities and Exchange Commission).

10.10    --    Sublease  dated  November 22, 1996 between  Environmental  Design
               International,  Ltd. and Simione Central,  Inc.  (Incorporated by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               fiscal year ended  December 31, 1996 as filed with the Securities
               and Exchange Commission.

10.11    --    Lease  Amendment  dated August 7, 1992 by and between  Sugar Land
               Plaza   Building   Corporation   and  Medical   Solutions,   Inc.
               (Incorporated by reference to the Company's Annual Report on Form
               10-K for the fiscal  year ended  December  31, 1997 as filed with
               the Securities and Exchange Commission).

10.12    --    Lease dated August 13, 1992 between Unum Life  Insurance  Company
               of America and Dezine Associates, Inc. (Incorporated by reference
               to the  Company's  Annual Report on Form 10-K for the fiscal year
               ended December 31, 1997 as filed with the Securities and Exchange
               Commission).

10.13    --    Indenture  of Lease  dated  January  1, 1998 by and  between  S&S
               Realty and Simione  Central  Consulting,  Inc.  (Incorporated  by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               fiscal year ended  December 31, 1997 as filed with the Securities
               and Exchange Commission).

10.14    --    Lease dated  December  18, 1996 by and  between  Resurgens  Plaza
               South Associates, L.P. and Simione Central, Inc. (Incorporated by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               fiscal year ended  December 31, 1997 as filed with the Securities
               and Exchange Commission).

10.15+   --    Severance Agreement dated July 22, 1998 between CareCentric, Inc.
               and Gary M. Bremer.  (Incorporated  by reference to the Company's
               Annual Report on Form 10-K for the fiscal year ended December 31,
               1997 as filed with the Securities and Exchange Commission).

10.16+   --    Executive  Employment  Agreement  dated  January 1, 1996  between
               Simione Central,  Inc. and William J. Simione,  Jr. (Incorporated
               by reference to the Company's  Annual Report on Form 10-K for the
               fiscal year ended  December 31, 1996 as filed with the Securities
               and Exchange Commission).

10.16.1(5)+--  Addendum to Executive  Employment  Agreement  dated  December 20,
               2000  between  Simione  Central  Holdings,  Inc.  and  William J.
               Simione, Jr.

                                       41
<PAGE>

10.17    --    Agreement dated October 4, 1996 by and between InfoMed  Holdings,
               Inc. and EGL  Holdings,  Inc.  (Incorporated  by reference to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               December  31,  1996 as filed  with the  Securities  and  Exchange
               Commission).

10.18    --    Information  Systems  Management  Agreement dated January 4, 1996
               between  Integrated  Systems  Solutions  Corporation  and Central
               Health Management  Services,  Inc.  (Incorporated by reference to
               the  Company's  Annual  Report on Form 10-K for the  fiscal  year
               ended December 31, 1996 as filed with the Securities and Exchange
               Commission).

10.19    --    Master Software  License  Agreement  Number 96-2283 dated October
               31, 1996 by and between  Software 2000,  Inc. and Simione Central
               Holding, Inc.  (Incorporated by reference to the Company's Annual
               Report on Form 10-K for the fiscal year ended  December  31, 1996
               as filed with the Securities and Exchange Commission).

10.20    --    Guaranty  Agreement  dated  October 31, 1996 by Simione  Central,
               Inc. in favor of HCA,  Inc.  (Incorporated  by  reference  to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               December  31,  1996 as filed  with the  Securities  and  Exchange
               Commission).

10.21    --    Lease  Agreement dated March 18, 1996 between  National  Leasing,
               Inc. and Simione Central, Inc.  (Incorporated by reference to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               December  31,  1996 as filed  with the  Securities  and  Exchange
               Commission).

10.22    --    Amendment 2 to  Agreement  for  Information  Technology  Services
               between  SC  Holding,   Inc.  and  Integrated  Systems  Solutions
               Corporation  dated July 31, 1997  (Incorporated  by  reference to
               Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated
               August  13,  1997 as  filed  with  the  Securities  and  Exchange
               Commission).

10.23    --    Loan and  Security  Agreement  by and  between  National  Bank of
               Canada  and   CareCentric,   Inc.,  dated  as  of  June  6,  1997
               (Incorporated  by  reference  to Exhibit  10.34 of the  Company's
               Current  Report on Form 8-K dated June 21, 1997 as filed with the
               Securities and Exchange Commission).

10.25    --    Remarketing  Agreement  dated  April  17,  1998  between  Simione
               Central National, Inc. and Eclipsys Corporation.

10.26    --    Stock   Purchase   Agreement   dated  April  17,   1998   between
               CareCentric,  Inc., Eclipsys Corporation and certain stockholders
               of the Company.

10.27(3) --    Form of  Shareholder  Voting  Agreement by and among the Company,
               Daniel J.  Mitchell  as agent  for  shareholders  of  CareCentric
               Solutions,  Inc. and each of Barrett C.  O'Donnell  and O'Donnell
               Davis, Inc.

10.28(3) --    Shareholder   Voting   Agreement   by  and  among  the   Company,
               CareCentric Agent, and Mestek, Inc.

10.29    --    Warrant  to  Purchase  Common  Stock  dated  March 7, 2000 by and
               between the Company and Mestek,  Inc.  (Incorporated by reference
               to Exhibit 10.3 to the  Registrant's  Report on Form 10-Q for the
               quarter ended March 31, 2000, (File No. 000-22162)).

10.30(4) --    Merger  Option  Agreement  by and between the Company and Mestek,
               Inc. dated March 7, 2000.

10.31(4) --    Series D Convertible  Preferred  Stock Purchase  Agreement  dated
               June 12, 2000 between the Company and John E. Reed.

                                       42
<PAGE>

10.32.1* --    First  Amendment  to  Secured  Convertible  Credit  Facility  and
               Security  Agreement  dated as of December 31, 2001 by and between
               the  Company,   CareCentric   National,   LLC,  and   CareCentric
               Consulting, Inc.

10.32.2* --    Promissory  Note dated  December 31, 2001 of the Company in favor
               of John E. Reed.

10.32.3* --    Promissory  Note dated  December 31, 2001 of the Company in favor
               of Mestek, Inc.

10.32(4) --    Secured  Convertible Credit Facility and Security Agreement dated
               June 12, 2000 between the Company,  Simione Central National, LLC
               and Simione Central Consulting, Inc. and John E. Reed.

10.33(4) --    Warrant  dated  June 12,  2000 by and  between  the  Company  and
               Mestek, Inc.

10.34    --    Warrant  dated  July 12,  2000 by and  between  the  Company  and
               Mestek,  Inc.  (Incorporated  by reference to Exhibit 10.1 to the
               Registrant's  Quarterly Report on Form 10-Q for the quarter ended
               September 30, 2000).

10.35    --    Loan and Security  Agreement by and between the Company,  Simione
               Central  National,  LLC,  Simione  Central  Consulting,  Inc. and
               Wainwright   Bank  and  Trust   Company,   dated  July  10,  2000
               (Incorporated  by reference  to Exhibit 10.1 to the  Registrant's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               2000 (File No. 000-22162)).

10.36(5) --    Lease   Agreement   dated  January  16,  2001  between   Prentiss
               Properties   Acquisition  Partners,   L.P.  and  Simione  Central
               Holdings, Inc.

10.37(5) --    Sublease  dated  June 17,  1999  between  Healthfield,  Inc.  and
               Simione Central Holdings, Inc., and consented to by Environmental
               Design International, Ltd.

10.38(5) --    Sublease  dated  December 20, 2000 between  International  Paper,
               Inc. and Simione Central Holdings, Inc.

10.39(5) --    Sublease  Agreement  dated  January 15,  2000  between The Profit
               Recovery  Group  International  USA,  Inc.  and  Simione  Central
               Holdings, Inc.

10.39*   --    Lease   Agreement   dated   December  31,  2001  between   Coneca
               Properties, L.C. and the Company.

10.40    --    First Amendment to Voting Agreement  Regarding  Simione Directors
               dated as of July 12, 2000 by and among the Company, Mestek, Inc.,
               John E.  Reed,  Stewart  B.  Reed,  E.  Herbert  Burk,  Daniel J.
               Mitchell and Jesse I. Treu  (Incorporated by reference to Exhibit
               10.1 of the  Company's  Quarterly  Report  on Form  10-Q  for the
               quarter ended March 31, 2001).

10.41    --    Settlement  Agreement and Mutual Release dated as of May 16, 2001
               by and between the  Registrant  and the former  shareholders  and
               noteholders of CareCentric Solutions,  Inc. by and through Daniel
               J. Mitchell as their  representative  and agent  (Incorporated by
               reference to Exhibit 10.1 of the  Company's  Quarterly  Report on
               Form 10-Q for the quarter ended June 30, 2001).

10.42    --    Purchase  and Sale  Agreement  dated  September  28,  2001 by and
               between the Registrant,  Simione Central  Consulting,  Inc. n/k/a
               CareCentric  Consulting,  Inc., and Simione  Consultants,  L.L.C.
               (Incorporated   by   reference   to  Exhibit   2.1,   filed  with
               Registrant's  Current  Report  on Form  8-K  (Filed  October  12,
               2001)).

10.43*   --    Employment  Offer  letter  between  John R. Festa and the Company
               dated October 22, 2001.

                                       43
<PAGE>

10.44*   --    Stock Grant Agreement between John R. Festa and the Company dated
               January 23, 2002.

10.45*   --    Indemnification  Agreement  between John R. Festa and the Company
               dated January 23, 2002.

16.1     --    Letter  re  change  in  Certifying  Accountant  (Incorporated  by
               reference to Exhibit 4.1 of the Company's  Current Report on Form
               8-K dated  February  8,  1999 as filed  with the  Securities  and
               Exchange Commission).

16.2     --    Letter  re  change  in  Certifying  Accountant  (Incorporated  by
               reference to Exhibit 4.1 of the Company's  Current Report on Form
               8-K dated June 14, 2000 as filed with the Securities and Exchange
               Commission).

21.1*    --    Subsidiaries of the Company.

23.1*    --    Consent of Grant Thornton LLP.

-----------------------
*  Filed herewith
+ Identifies each exhibit that is a "management contract of compensatory plan or
arrangement"  required to be filed as an exhibit to this  Annual  Report on Form
10-K pursuant to Item 14 of Form 10-K
(1)  In accordance  with Item  601(b)(2) of Regulation  S-K, the schedules  have
     been  omitted.  There  is a list of  schedules  at the end of the  Exhibit,
     briefly describing them. The Company will  supplementally  copy any omitted
     schedule to the Commission upon request.
(2)  Incorporated herein by reference to Exhibit 2.1 to the Form 10 of MCS, Inc.
     (File No. 000-27829) filed on October 26, 1999.
(3)  Incorporated by reference to the Company's Current Report on Form 8-K dated
     as of August 12, 1999 (File No. 000-22162).
(4)  Incorporated  by reference to the Company's Form 10-Q for the quarter ended
     June 30, 2000 (File No. 000-22162).
(5)  Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 2000 (File No. 000-22162).

(b)  Reports on Form 8-K.

     On  October  12,  2001,  the  Company  filed a  Current  Report on Form 8-K
     reporting the sale of certain assets of its subsidiary, Simione Consulting,
     Inc.

     On  February  6,  2002,  the  Company  filed a  Current  Report on Form 8-K
     reporting its plan to realign its business.

     On March 29, 2002 the Company filed a Current  Report on Form 8-K reporting
     the $11.8 million impairment adjustment on its intangible assets.


                                       44
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                  CARECENTRIC, INC.

Date:  April 15, 2002             /s/ JOHN R. FESTA
                                  -------------------------------------------
                                  By:  John R. Festa
                                       President and Chief Executive Officer



     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S>                                      <C>                                    <C>
SIGNATURE                                TITLE                                  DATE
---------                                -----                                  ----

/s/ JOHN R. FESTA                        President, Chief Executive Officer     April 15, 2002
--------------------------------         and Director (principal executive
John R. Festa                            officer)

/s/ H. FOREST RALPH                      Principal Financial and Accounting     April 15, 2002
--------------------------------         Officer
H. Forest Ralph

/s/ WILLIAM J. SIMIONE, JR.              Director                               April 15, 2002
--------------------------------
William J. Simione, Jr.

/s/ DAVID O. ELLIS                       Director                               April 15, 2002
--------------------------------
David O. Ellis

/s/ WINSTON R. HINDLE, JR.               Director                               April 15, 2002
--------------------------------
Winston R. Hindle, Jr.

                                         Director                               April 15, 2002
--------------------------------
Barrett C. O'Donnell

/s/ JOHN E. REED                         Chairman and Director                  April 15, 2002
--------------------------------
John E. Reed

/s/ EDWARD K. WISSING                    Director                               April 15, 2002
--------------------------------
Edward K. Wissing

/s/ R. BRUCE DEWEY                       Vice Chairman and Director             April 15, 2002
--------------------------------
R. Bruce Dewey

</TABLE>


                                       45
<PAGE>


                                CARECENTRIC, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
<S>                                                                                                             <C>
                                                                                                               PAGE
Report of Independent Certified Public Accountants - Grant Thornton LLP..........................................47

Consolidated Balance Sheets......................................................................................48

Consolidated Statements of Operations............................................................................49

Consolidated  Statements of Shareholders'  Equity (Deficit) for the years ended  December 31,  2001,
     2000, and 1999..............................................................................................50

Consolidated Statements of Cash Flow for the years ended December 31, 2001, 2000, and 1999.......................51

Notes to Consolidated Financial Statements.......................................................................52
</TABLE>



                                       46
<PAGE>


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and the Board of Directors of CareCentric, Inc.:

We have audited the  accompanying  consolidated  balance sheets of  CARECENTRIC,
INC. (a Delaware  corporation) and subsidiaries as of December 31, 2001 and 2000
and the related  consolidated  statements of  operations,  shareholders'  equity
(deficit),  and cash flows for each of the years in the three year period  ended
December 31, 2001. These financial statements and the schedule referred to below
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion  on these  financial  statements  and  schedule  based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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 financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of  CareCentric,   Inc.  and
subsidiaries  as of  December  31,  2001  and  2000  and the  results  of  their
operations  and their cash flows for each of the years in the three year  period
ended  December 31, 2001 in  conformity  with  accounting  principles  generally
accepted in the United States of America.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole.  Schedule II included herein is presented
for purposes of complying with the Securities  and Exchange  Commission's  rules
and is not  part of the  basic  financial  statements.  This  schedule  has been
subjected  to the  auditing  procedures  applied  in  the  audits  of the  basic
financial  statements  and,  in our  opinion,  fairly  states,  in all  material
respects, the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.


                                             /s/ GRANT THORNTON LLP

Boston, Massachusetts
April 12, 2002



                                       47
<PAGE>

                                         CARECENTRIC, INC.
                                    CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S>                                                           <C>                   <C>
                                                                          DECEMBER 31,
                                                              --------------------------------------
                                                                   2001                   2000
                                                              ----------------       ---------------
                                   ASSETS
Current assets:
     Cash and cash equivalents                                    $   201,000           $   362,000
     Accounts receivable, net of allowance for
       doubtful accounts of $1,042,000 and $551,000,
       respectively                                                 4,185,000             8,484,000
     Prepaid expenses and other current assets                        608,000               701,000
     Notes receivable                                                 413,000                     -
                                                              ----------------       ---------------
       Total current assets                                         5,407,000             9,547,000

Purchased software, furniture and equipment, net                    1,533,000             1,957,000
Intangible assets, net                                              5,437,000            23,405,000
Other assets                                                          431,000               211,000
                                                              ----------------       ---------------
       Total assets                                             $  12,808,000          $ 35,120,000
                                                              ================       ===============

        LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)
Current liabilities:
     Line of credit                                              $  5,572,000          $  5,996,000
     Notes Payable                                                          -               600,000
     Accounts payable                                               2,185,000             1,156,000
     Accrued compensation expense                                     593,000               616,000
     Accrued liabilities                                            6,574,000             7,447,000
     Customer deposits                                              2,120,000             2,496,000
     Unearned revenues                                              3,981,000             5,001,000
                                                              ----------------       ---------------
       Total current liabilities                                   21,025,000            23,312,000


Accrued liabilities, less current portion                             750,000               128,000

Notes payable long-term                                             5,343,000               600,000

Commitments and contingencies

Shareholders' equity (Deficit):
     Preferred Stock ; 10,000,000 shares authorized
     Series B Preferred, $.001 par value;
       5,600,000  issued and outstanding; liquidation
       value $1.27                                                      6,000                 6,000
     Series C Preferred, $.001 par value;
       850,000  issued and outstanding; liquidation
       value $1.35                                                      1,000                 1,000
     Series D Preferred, $.001 par value;
       398,000  issued and outstanding; liquidation
       value $2.92                                                          -                     -
     Series E Preferred, $.001 par value;
       210,000 issued and outstanding; liquidation
       value $1.00                                                          -                     -
     Common stock, $.001 par value; 20,000,000 shares
       authorized;
       4,371,350 shares issued and outstanding at
          December 31, 2001
       3,849,816 shares issued and outstanding at                       4,000                 4,000
          December 31, 2000

     Additional paid-in capital                                    21,070,000            21,070,000
     Stock warrants                                                 1,000,000             1,000,000
     Accumulated deficit                                         (36,391,000)          (11,001,000)
                                                              ----------------       ---------------
       Total shareholders' equity (Deficit)                      (14,310,000)            11,080,000
                                                              ----------------       ---------------
       Total liabilities and shareholders' equity (Deficit)      $ 12,808,000          $ 35,120,000
                                                              ================       ===============
</TABLE>

See notes to consolidated financial statements



                                       48
<PAGE>

                                                CARECENTRIC, INC.
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S>                                                      <C>                  <C>                   <C>
                                                                         YEARS ENDED DECEMBER 31,
                                                         ---------------------------------------------------------
                                                             2001                  2000                 1999
                                                         --------------       ---------------       --------------
Net revenues                                              $ 20,446,000          $ 19,574,000          $16,648,000

Costs and expenses:
    Cost of revenues                                         8,217,000             8,478,000           10,563,000
    Selling, general and administrative                     10,715,000            10,756,000            4,077,000
    Research and development                                 6,158,000             6,174,000            1,051,000
    Amortization and depreciation                            3,865,000             3,481,000              230,000
    Write down of intangibles                               11,799,000                     -                    -
    Restructuring charge                                       675,000                     -                    -
                                                         --------------       ---------------       --------------
    Total costs and expenses                                41,429,000            28,889,000           15,921,000
                                                         --------------       ---------------       --------------

    Loss from operations                                   (20,983,000)           (9,315,000)             727,000

Other income (expense):
    Other income (expense)                                           -               (6,000)                    -
    Interest expense                                       (1,314,000)             (710,000)                    -
    Interest and other income                                   37,000                74,000               45,000
                                                         --------------       ---------------       --------------
Income (loss) before taxes                               $(22,260,000)         $ (9,957,000)            $ 772,000
                                                         ==============       ===============       ==============

    Income tax benefit (expense)                              (15,000)               154,000            (306,000)
                                                         --------------       ---------------       --------------
Income (loss) from continuing operations                 $(22,275,000)          $(9,803,000)            $ 466,000

Discontinued operations
    Loss on disposal of discontinued operations            (2,632,000)                     -                    -

    Income (loss) from operations of
        discontinued segment before taxes                    (483,000)             (442,000)              251,000

    Applicable tax expense                                           -                     -              100,000
                                                         --------------       ---------------       --------------
Net (loss) income from discontinued operations             (3,115,000)             (442,000)              151,000
                                                         --------------       ---------------       --------------

Net  (loss) income                                       $(25,390,000)         $(10,245,000)            $ 617,000
                                                         ==============       ===============       ==============

Cumulative preferred dividends                               (722,000)             (569,000)                    -

Net (loss) income available to common shareholders       $(26,112,000)         $(10,814,000)            $ 617,000
                                                         ==============       ===============       ==============

(Loss) income per share - basic and diluted
    From continuing operations                              $   (5.21)            $   (2.87)             $   0.31
Weighted average common shares -
    basic and diluted                                        4,272,000             3,418,000            1,490,000
                                                         ==============       ===============       ==============
Net (loss) income per share - basic and diluted
   From discontinued operations                            $   (0.73)            $   (0.13)             $   0.10
Weighted average common shares -
    basic and diluted                                        4,272,000             3,418,000            1,490,000
                                                         ==============       ===============       ==============
Net (loss) income per share - basic and diluted             $   (5.94)            $   (3.00)             $   0.41
Weighted average common shares -
    basic and diluted                                        4,272,000             3,418,000            1,490,000
                                                         ==============       ===============       ==============

Net loss (income) per share - basic and diluted available
    to common shareholders                                  $   (6.11)            $   (3.16)             $   0.41

Weighted average common shares -
    basic and diluted                                        4,272,000             3,418,000            1,490,000
                                                         ==============       ===============       ==============

</TABLE>
                 See notes to consolidated financial statements



                                       49
<PAGE>



            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<TABLE>
<CAPTION>
<S>                          <C>         <C>         <C>         <C>        <C>         <C>        <C>           <C>
                                     COMMON                PREFERRED        ADDITIONAL                              TOTAL
                             ----------------------- ----------------------  PAID-IN               ACCUMULATED   SHAREHOLDERS'
                               SHARES      STOCK      SHARES      STOCK      CAPITAL    WARRANTS     DEFICIT        EQUITY
                             ----------- ----------- ---------- ----------- ----------- ---------- ------------  -------------

Balance at December 31, 1998      1,000     $ 1,000          -     $     -   $ 230,000      $   - $(1,212,000)   $ (981,000)
                             ----------- ----------- ---------- ----------- ----------- ---------- ------------  -------------

Net income                                                                                             617,000       617,000

Distribution of ProfitWorks
  Division                                                                      80,000                                80,000
Contribution to Paid in
  Capital                                                                      950,000                               950,000
Dividend paid                                                                                        (161,000)     (161,000)
                             ----------- ----------- ---------- ----------- ----------- ---------- ------------  -------------
Balance at December 31, 1999      1,000      $1,000          -     $     -  $1,260,000      $   -   $(756,000)    $  505,000
                             ----------- ----------- ---------- ----------- ----------- ---------- ------------  -------------

MCS, Inc. shares eliminated
  in merger                     (1,000)     (1,000)                                                                  (1,000)

CareCentric, Inc.
  Shares post merger, $.001
  par value                   3,850,000      4,000           -           -  19,810,000  1,000,000                 20,814,000

Issuance of $.001 par value
  preferred stock in
  connection with merger              -           -  6,848,000       7,000                                   -         7,000
Series B, 5,600,000 shares
Series C,  850,000 shares
Series D,  398,000 shares                                                -

Net loss                                                                                           (10,245,000)  (10,245,000)
                             ----------- ----------- ---------- ----------- ----------- ---------- ------------  -------------
Balance at December 31, 2000  3,850,000      $4,000  6,848,000     $ 7,000  21,070,000  1,000,000  (11,001,000)    11,080,000
                             ----------- ----------- ---------- ----------- ----------- ---------- ------------  -------------

Issuance of $.001 par value
  common stock                  593,000                                                                                    -

Cancellation of $.001 par
  value common stock           (72,000)                                                                                    -

Issuance of $.001 par value
  Series E preferred stock,
  210,000 shares                                             -           -                                                 -

Net loss                                                                                           (25,390,000)  (25,390,000)
                             ----------- ----------- ---------- ---------- ----------- ---------- ------------ --------------
Balance at December 31, 2001  4,371,000      $4,000  6,848,000     $ 7,000 $21,070,000 $1,000,000 $(36,391,000) $(14,310,000)
                             =========== =========== ========== ========== =========== ========== ============ ==============
</TABLE>
                 See notes to Consolidated Financial Statements


                                       50
<PAGE>


                                               CARECENTRIC, INC.
                                     CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
<S>                                                    <C>                <C>                 <C>
                                                                       YEARS ENDED DECEMBER 31,
                                                       ---------------------------------------------------------
                                                            2001                2000                1999
                                                       ----------------   -----------------   ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                                         $(25,390,000)     $  (10,245,000)        $     617,000


ADJUSTMENTS  TO  RECONCILE  NET (LOSS)  INCOME TO NET
  CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
    Provision for doubtful accounts                             500,000             538,000                    -
    Amortization and depreciation                             4,252,000           3,960,000              240,000
    Loss on discontinued operations                           2,632,000                   -                    -
    Write down of intangibles                                11,799,000                   -                    -

CHANGES IN ASSETS AND LIABILITIES, NET OF
  ACQUISITIONS:
    Accounts receivable                                       2,101,000           (929,000)            (205,000)
    Prepaid expenses and other current assets                    90,000             159,000              115,000
    Other assets                                                138,000           1,122,000            (983,000)
    Accounts payable                                          1,447,000         (2,684,000)              281,000
    Accrued compensation                                       (23,000)            (88,000)            (395,000)
    Accrued liabilities                                        (26,000)           (730,000)              557,000
    Customer deposits                                         (376,000)             949,000            (270,000)
    Unearned revenues                                       (1,020,000)             726,000            (242,000)
                                                       ----------------   -----------------   ------------------
         Net cash used in operating activities              (3,876,000)         (7,222,000)            (285,000)
                                                       ----------------   -----------------   ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Assets and liabilities disposed of                             (16,000)                   -                    -
Purchase of software, furniture and equipment                 (327,000)           (658,000)            (597,000)
                                                       ----------------   -----------------   ------------------
         Net cash used in investing activities                (343,000)           (658,000)            (597,000)
                                                       ----------------   -----------------   ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received in connection with MCS merger                           -           3,547,000                    -
Capital contribution from former parent Mestek to MCS                 -                   -            1,030,000
Payment on notes payable                                              -           (150,000)                    -
Proceeds from notes payable                                           -             600,000                    -
Increase (decrease) in line of credit                         4,058,000           4,198,000                    -
Dividends paid (to Mestek by MCS)                                     -                   -            (161,000)
                                                       ----------------   -----------------   ------------------
         Net cash provided by  financing
           activities                                         4,058,000           8,195,000              869,000
                                                       ----------------   -----------------   ------------------

         Net change in cash and cash equivalents              (161,000)             315,000             (13,000)

Cash and cash equivalents, beginning of period                  362,000              47,000               60,000
                                                       ----------------   -----------------   ------------------

Cash and cash equivalents, end of period                   $    201,000        $    362,000         $     47,000
                                                       ================   =================   ==================
</TABLE>

                 See notes to consolidated financial statements




                                       51
<PAGE>


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

MCS AS DEEMED ACQUIRER OF CARECENTRIC, INC.

     On March 7, 2000,  CareCentric,  Inc.  (formerly  known as Simione  Central
Holdings  Inc.)  ("CareCentric")  and MCS, Inc.  ("MCS") merged in a transaction
("the  CareCentric/MCS  merger",  also  described as "the  MCS/Simione  merger")
accounted for as a reverse  acquisition  for financial  reporting  purposes.  In
connection with the  acquisition,  CareCentric  issued  1,489,853  shares of its
common  stock in  exchange  for all the  outstanding  common  stock of MCS,  and
thereby,  the former  shareholders of MCS acquired control of CareCentric.  As a
result,  for  financial  reporting  purposes  MCS is  considered  the  acquiring
company; hence, the historical financial statements of MCS became the historical
financial  statements  of  CareCentric  and include the results of operations of
CareCentric only from the effective acquisition date.

     The weighted average common shares for the year ended December 31, 2000 are
recast in the accompanying  Consolidated Statements of Operations to give effect
to the 1,489,853 shares of CareCentric  common stock that were issued to the MCS
shareholders in connection with the  CareCentric/MCS  merger on March 7, 2000 as
though such shares had been  outstanding  for the entire period.  For the period
from  January 1, 2000  through  March 6, 2000,  therefore,  1,489,853  shares of
issued and  outstanding  CareCentric  common stock are deemed to be owned by the
MCS  shareholders.  For the period from March 7, 2000 through December 31, 2000,
there were 3,849,816 total shares of issued and outstanding Company common stock
(after giving effect to the CareCentric/MCS merger). The weighted average shares
for the year  ended  December  31,  1999 are also  recast to give  effect to the
1,489,853  shares  of  CareCentric  common  stock  that  were  issued to the MCS
shareholders  pursuant to the  CareCentric/MCS  merger as though such shares had
been outstanding for the entire period.

BASIS OF PRESENTATION

     The consolidated  financial  statements prepared by the Company include the
results of operations of the parent  company and its wholly owned  subsidiaries.
All inter-company balances and transactions have been eliminated.

     These financial  statements do not include any adjustments  relating to the
recoverability and classification of recorded asset amounts or classification of
liabilities  that might be necessary should the Company be unable to continue to
operate  in the  normal  course  of  business.  See Note 17 to the  accompanying
Consolidated Financial Statements.

     Certain prior period amounts have been  reclassified to conform to the 2001
financial statement presentation of discontinued operations.

DESCRIPTION OF BUSINESS

     The Company is a provider  of  information  technology  systems and related
services and consulting  services  designed to enable home health care providers
to more  effectively  operate their  businesses  and compete in the  prospective
payment system (PPS) and managed care  environments.  The Company's  focus is to
help home health care  providers  streamline  their  operations and better serve
their patients.  CareCentric offers several  comprehensive  software  solutions.
Each of these software solutions is designed to enable customers to generate and
utilize  comprehensive  financial,  operational  and  clinical  information.  In
addition to its software  solutions and related software support  services,  the
Company's home health care consulting  services  assist  providers in addressing
the challenges of reducing costs,  maintaining quality,  streamlining operations
and  re-engineering   organizational  structures,  as  well  as  assisting  with
regulatory compliance and merger and acquisition due diligence.

                                       52
<PAGE>

MANAGEMENT ESTIMATES

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally accepted in the United States requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  as well as the  reported  amounts  of  revenues  and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

REVENUE RECOGNITION

     The Company  recognizes  revenue  under SOP 97-2.  The  Company  recognizes
software  license revenue when the following  criteria are met: (1) a signed and
executed contract is obtained; (2) delivery has occurred; (3) the license fee is
fixed  and  determinable;   (4)  collection  is  probable;   and  (5)  remaining
obligations  under the license  agreement are immaterial.  The Company sells and
invoices software  licenses and maintenance fees as separate contract  elements,
except  with  respect to first year  maintenance  which is sold in the form of a
bundled turnkey system.  The Company has established  vendor specific  objective
evidence related to the value of maintenance fees. Where applicable, the Company
uses the residual value method to allocate software revenue between licenses and
first year maintenance.

     Revenues are derived from the licensing and sub-licensing of software,  the
sale of computer hardware, accessories and supplies, implementation and training
products  and  services,  forms and case plans,  and  software  maintenance  and
support  services.  For the year ended December 31, 2001,  the Company  recorded
total revenues of $20.4  million.  The Company's core product lines of STAT2 and
MestaMed  accounted  for 28.0% and 38.3%  respectively  of the $20.4  million in
revenues.

     To the extent that  software and  services  revenues  result from  software
support,  implementation,  training  and  technical  consulting  services,  such
revenues  are  recognized  monthly as the related  services are rendered or, for
software support revenues, over the term of the related agreement. To the extent
that  software and services  revenues  result from software  licenses,  computer
hardware and third-party  software  revenues,  such revenues are recognized when
the related products are delivered and  collectability  of fees is determined to
be probable, provided that no significant obligation remains under the contract.
Limited amounts of revenues derived from the sale of software licenses requiring
significant modification or customization are recorded based upon the percentage
of completion method using labor hours or contract milestones.  Software support
or  maintenance  allows  customers  to  receive  unspecified   enhancements  and
regulatory data updates in addition to telephone support.

     Third-party software and computer hardware revenues are recognized when the
related  products  are  shipped.   Software  support  agreements  are  generally
renewable  for one-year  periods,  and revenue  derived from such  agreements is
recognized  ratably  over  the  period  of  the  agreements.   The  Company  has
historically  maintained high renewal rates with respect to its software support
agreements. The Company generally charges for software implementation,  training
and technical  consulting services as well as management  consulting services on
an hourly or daily  basis.  The Company is now  offering  "tiered  pricing"  for
implementation  of new  systems  whereby  the  customer  pays a fixed  fee for a
certain  level of  packaged  services  and daily  fees for  services  beyond the
package.

     Revenues for post-contract customer support are recognized ratably over the
term of the support period,  which is typically one year. Post contract customer
support  fees  typically  cover  incremental  product  enhancements,  regulatory
updates  and  correction  of  software  errors.  Separate  fees are  charged for
significant product  enhancements,  new software modules,  additional users, and
migrations to different operating system platforms.

     Subsequent to delivery, the Company frequently delivers a variety of add-on
software and hardware components.  Revenues from these sales are recognized upon
shipment.

     In addition to software  licenses,  software  maintenance and support,  and
related hardware, the Company also provides computer-based training, CD-ROMs and
a number of ancillary  services  including on site  implementation and training,
classroom training,  consulting and "premium" and after-hours support.  Revenues
from such  products  and services are  recognized  monthly as such  products are
delivered and such services are performed.

                                       53
<PAGE>

     Unbilled  receivables  typically represent revenues from ancillary services
performed  and earned in the  current  period but not  billed  until  subsequent
periods,  usually within one month.  Unearned revenues  represent amounts billed
for which revenue recognition has not yet occurred.


PURCHASED SOFTWARE, FURNITURE AND EQUIPMENT

     Purchased   software,   furniture   and  equipment  are  carried  at  cost.
Depreciation and amortization are computed using the  straight-line  method over
the estimated  useful lives of the assets.  When assets are retired or otherwise
disposed of, the cost and related accumulated  depreciation are removed from the
accounts and any resulting gain or loss is reflected in income for the period.


SOFTWARE DEVELOPMENT EXPENSES

     Costs  incurred to  establish  the  technological  feasibility  of computer
software  products  are  expensed  as  incurred.  The  Company's  policy  is  to
capitalize  costs  incurred  between  the  point of  establishing  technological
feasibility and general release only when such costs are material. For the years
ended December 31, 2001,  2000,  1999,  the Company had no capitalized  computer
software and development costs.

CASH EQUIVALENTS

     All highly liquid investments  purchased with an original maturity of three
months or less are considered to be cash equivalents.


INTANGIBLE ASSETS AND LONG-LIVED ASSETS

     Statement of Financial  Accounting  Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of"  requires  impairment  losses to be  recorded on  long-lived  assets used in
operations when indicators of impairment are present and the  undiscounted  cash
flows  estimated  to be  generated  by those  assets  are less than the  asset's
carrying amount.  The application of SFAS No. 121 resulted in an impairment loss
of $11.8 million  recorded in the fourth  quarter of 2001,  see Note 7. Prior to
the   impairment   adjustment,   the   intangible   assets   arising   from  the
CareCentric/MCS  merger were amortized using the  straight-line  method over the
estimated  useful lives of the related assets as more fully disclosed in Notes 6
and 7. The  measurement of the recorded  impairment was based upon comparing the
projected  undiscounted  future cash flow from the use of the assets against the
unamortized carrying value of the assets in the financial statements.

     Effective  July 1,  2001,  the  Company  adopted  SFAS No.  141,  "Business
Combinations"  and SFAS No. 142,  "Goodwill  and  Intangible  Assets in 2001" is
effective  January 1, 2002 and SFAS No. 144,  "Accounting  for the Impairment or
Disposal  of  Long-Lived  Assets,"  is  effective  January  1,  2002.  These new
standards  supersedes the Company's  current  accounting  for Intangible  Assets
under  SFAS  No.  121 as  discussed  below  in  the  section  Recent  Accounting
Pronouncements.


INCOME TAXES

     The Company  accounts  for income  taxes using the  asset/liability  method
which  requires  recognition  of  deferred  tax  liabilities  and assets for the
expected future tax consequences of temporary  differences between the financial
statement carrying amount and the tax bases of assets and liabilities.

                                       54
<PAGE>

NET (LOSS) EARNINGS PER SHARE

     The Company calculates earnings per share under SFAS No. 128, "Earnings Per
Share."  Basic  earnings  per share  exclude  any  dilutive  effects of options,
warrants and convertible  securities.  Diluted  earnings per share for the years
2001 and 2000 exclude the effects of options,  warrants and conversion rights as
they would be anti-dilutive, and as a result, basic and diluted earnings are the
same for the years 2001 and 2000.  For the year 1999,  there were no potentially
dilutive instruments outstanding.

<TABLE>
<CAPTION>
<S>                                             <C>                    <C>                    <C>
                                                               FOR YEAR ENDED DECEMBER 31,
                                                ----------------------------------------------------------
                                                     2001                   2000                 1999
                                                ---------------        ---------------        ------------
     Numerator:
        Net (loss) income after cumulative
          deferred dividends                     $(26,112,000)          $(10,814,000)           $ 617,000
                                                ===============        ===============        ============

     Denominator:
        Denominator for basic and diluted
           earnings per share- weighted -
           average shares                            4,272,000              3,418,000           1,490,000
                                                ===============        ===============        ============

     Net (loss) income per share - basic
        and diluted for common shareholders        $   (6.11)             $   (3.16)            $   0.41
                                                ===============        ===============        ============
</TABLE>


STOCK BASED COMPENSATION

     Employee  stock  options  are  accounted  for under  SFAS No.  123 (and its
related  interpretations)  which allows the use of Accounting  Principles  Board
Opinion  No.  25,  "Accounting  for Stock  Issued  to  Employees"  which  allows
providing  disclosure  of  compensation  cost - see Note 12 to the  Consolidated
Financial Statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  following  methods  and  assumptions  were  used  by  the  Company  in
estimating its fair value disclosures for financial instruments:

     Cash and cash  equivalents:  The carrying  amounts  reported in the balance
sheet for cash and cash equivalents approximate their fair value.

     Notes  receivable and payable:  The carrying amounts of the Company's notes
receivable and payable approximates their fair value.

RECENT ACCOUNTING PRONOUNCEMENTS

     In 1998,  the  Financial  Accounting  Standards  Board  issued SFAS No. 133
"Accounting for Derivative  Instruments and Hedging Activities." SFAS No. 133 is
effective for the Company's first quarter of the fiscal year ending December 31,
2001.  The  adoption  of SFAS No.  133 did not  have a  material  impact  on the
Company's financial position or results of operations.

     On December 3, 1999, the SEC released Staff  Accounting  Bulletin 101, (SAB
101) "Revenue  Recognition in Financial  Statements".  This bulletin established
more clearly  defined  revenue  recognition  criteria than  previously  existing
accounting  pronouncements.  On June 26, 2000, the SEC released SAB 101B,  which
delayed the  required  implementation  of SAB 101 until no later than the fourth
quarter of fiscal years ending  December 31, 2000.  The effects of this bulletin
were not material to its financial position, results of operations or cash flow.

                                       55
<PAGE>

     The  Financial  Accounting  Standards  Board  (FASB)  issued  SFAS No. 141,
Business  Combinations and SFAS No. 142, Goodwill and Intangible Assets in 2001.
SFAS No. 141 is effective for all business combinations completed after June 30,
2001.  SFAS No. 142 is effective for fiscal years  beginning  after December 15,
2001; however,  certain provisions of this Statement apply to goodwill and other
intangible  assets acquired  between July 1, 2001 and the effective date of SFAS
No. 142. Major  provisions of these Statements and their effective dates for the
Company are as follows: (i) all business  combinations  initiated after June 30,
2001 must use the purchase method of accounting.  The pooling of interest method
of accounting is prohibited  except for  transactions  initiated  before July 1,
2001, (ii) intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal rights or
are separable from the acquired entity and can be sold,  transferred,  licensed,
rented or exchanged, either individually or as part of a related contract, asset
or  liability,  (iii)  goodwill  and  intangible  assets with  indefinite  lives
acquired after June 30, 2001, will not be amortized  (effective January 1, 2002,
all previously  recognized  goodwill and intangible assets with indefinite lives
will no longer be  subject to  amortization),  (iv)  effective  January 1, 2002,
goodwill  and  intangible  assets  with  indefinite  lives  will be  tested  for
impairment  annually and whenever  there is an impairment  indicator and (v) all
acquired goodwill must be assigned to reporting units for purposes of impairment
testing and segment reporting. Following the accounting for impairment discussed
below,  which has been made under the rules of SFAS 121,  the  Company  believes
that the effect of  adopting  SFAS No. 141 and 142 will be limited to changes in
amortization  expense for periods  after  December 31, 2001.  Additionally,  the
assembled workforce intangible asset will be recharacterized as goodwill,  which
will not be amortized under the rules of SFAS No. 142.

     On  October  3,  2001,  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or Disposal  of  Long-Lived  Assets,"  that  replaced  SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To
Be Disposed  Of." The primary  objectives  of this  project  were to develop one
accounting  model  based  on the  framework  established  in  SFAS  No.  121 for
long-lived  assets  to be  disposed  of by  sales  and  to  address  significant
implementation issues. The accounting model for long-lived assets to be disposed
of by sale applies to all long-lived assets,  including discontinued operations,
and replaces the  provisions of Account  Principles  Board (APB) Opinion no. 30,
Reporting Results of  Operations-Reporting  the Effects of Disposal of a Segment
of a Business, for the disposal of segments of a business. SFAS No. 144 requires
that those long-lived assets be measured at the lower of carrying amount or fair
value  less  cost to sell,  whether  reported  in  continuing  operations  or in
discontinued  operations.  Therefore,  discontinued operations will no longer be
measured at net realizable  value or include  amounts for operating  losses that
have not yet occurred.  The provisions of SFAS No. 144 will apply to the Company
effective  January 1, 2002.  The Company is  currently  reviewing  the impact of
these provisions.


NOTE 2 -- DISCONTINUED OPERATIONS

     The discontinued operations reported in the Company's results of operations
for the year ending December 31, 2001 relate to the Company's Simione Consulting
segment which was sold on September 28, 2001. The Consulting business,  previous
to its sale, was the Company's  only  separately  reported  segment of business.
Accordingly,  the Company no longer reports segment information.  The Consulting
business  segment was discontinued  through a transaction  which sold certain of
the assets of the Company's wholly-owned subsidiary,  Simione Consulting,  Inc.,
to Simione  Consultants,  L.L.C.  ("Simione"),  which is owned and controlled by
William  Simione,  Jr., a director  of the  Company.  The total  sales price was
approximately  $2.0  million  plus the  assumption  of  certain  liabilities  by
Simione.  The Company's net pre-tax loss on the disposal was approximately  $2.6
million and resulted from a write-off of the intangible  assets  associated with
the  Consulting  segment as  identified at the merger date of March 7, 2000 with
MCS.

     Summarized financial information for the discontinued Consulting segment is
as follows:

                                       56
<PAGE>

                                                               000'S
                                                       ----------------------
                                                          2001       2000
                                                       ----------- ----------
Operating Revenue                                          $3,417     $5,393

(Loss) before Provision for Income Taxes                    (484)      (442)

(Loss) from Discontinued Operations
   Net of Income Tax                                        (484)      (442)

Current Assets                                                 --      1,033
Total Assets                                                   --      4,472

Net Assets of Discontinued Operations                       $  --     $1,643

     The discontinued operations reported in the Company's results of operations
for the year ending December 31, 1999 relate to MCS's Profitworks  segment which
was  distributed  to MCS's former parent  company,  Mestek Inc., on September 1,
1999.


NOTE 3 -  RESTRUCTURING CHARGE

     A  restructuring  charge  of  $675,000  (including  terminated  leases  and
contracts of $244,000 and severance of $431,000,  respectively)  was incurred in
April 2001 as the  result of the  Company  approving  a plan to close one remote
support office and to downsize the workforce at its remaining facilities.  As of
December 31, 2001,  that plan was fully completed and the  restructuring  charge
was completely expended.


NOTE 4 - CARECENTRIC/MCS MERGER

     On March 7, 2000, MCS completed the merger with CareCentric, Inc. (formerly
known as Simione  Central  Holdings Inc.)  ("CareCentric").  CareCentric  issued
1,489,853  shares of common stock to MCS stockholders in exchange for all of the
outstanding  shares of MCS common stock. This number of shares has been adjusted
to reflect a one-for-five  reverse stock split that was completed by CareCentric
immediately  prior to the merger.  In connection with the closing of the merger,
Mestek  invested $6.0 million in  CareCentric in exchange for 5.6 million shares
of Series B preferred stock and warrants to purchase  400,000 shares (on a split
adjusted  basis) of  CareCentric  common stock and $0.87 million in exchange for
170,000 shares of Series C Preferred Stock.

     As required by Generally Accepted Accounting Principles (GAAP), the effects
of the merger on the Company's  assets and  liabilities  have been excluded from
the operating section of the cash flow statement for reporting purposes.

     Pro-forma unaudited results assuming the merger took place as of January 1,
1999, and further assuming that the acquisition of CareCentric  Solutions,  Inc.
by CareCentric on August 12, 1999 took place on January 1, 1999, are as follows:

                                       57
<PAGE>

<TABLE>
<CAPTION>
<S>                                                         <C>                     <C>
                                                                   FOR YEAR ENDED DECEMBER 31,
                                                                  2000                    1999
                                                            -----------------       ------------------
Revenue                                                       $   23,586,000           $   35,221,000
(loss) continuing operations                                  $ (11,654,000)           $ (12,066,000)
(loss) discontinued operations                                $            -           $       15,100
(loss) per share -continuing basic and diluted                $       (3.41)           $       (8.10)
(loss) per share -discontinuing basic and diluted             $         0.00           $         0.64
Net (loss) per share - basic and diluted                      $       (3.41)           $       (7.45)
</TABLE>


NOTE 5 - NOTES RECEIVABLE

     The Company has certain Notes  Receivable of varying  maturities which have
resulted from the sale of the assets of the Consulting  segment,  financing to a
customer for purchase of a new software system,  and the employment  contract of
Mr. Jack Arthur,  former Senior Vice  President of Information  Technology.  The
Consulting  segment  Note  Receivable  is due  from  Mr.  William  Simione  Jr.,
currently a Director  of the  Company,  and the  President  and Chief  Executive
Officer of the acquirer of the Consulting business, Simione Consulting, LLC, and
past Chief Executive  Officer of the Consulting  segment when it was part of the
Company.  The Customer note occurred in the normal course of business.  The Note
receivable  from Mr. Jack Arthur was the final balance  resulting from a term in
Mr. Arthur's employment  agreement with the Company. Mr. Arthur's employment was
terminated  during 2001 and the balance of the note was  forgiven as part of the
restructuring charge discussed in Note 3 above.

     The amounts and term of each note is summarized in the table below.

                                           NOTES RECEIVABLE
                           -------------------------------------------------
                                                       CUSTOMER
                           CONSULTING   MR. ARTHUR       NOTE       TOTAL
                           -----------  ------------   ---------  ----------
Balance 12-31-00                    -      $157,000           -    $157,000
                           ===========  ============   =========  ==========
Balance 12-31-01             $707,000             -    $137,000    $844,000
                           ===========  ============   =========  ==========

Interest Rate                   8.50%         7.00%       5.65%

Obligation Term

Principal amounts due
        2002                 $298,000             -    $115,000    $413,000
        2003                 $215,000             -     $22,000    $237,000
        2004                 $194,000             -           -    $194,000
                           -----------  ------------   ---------  ----------
                             $707,000       $    --    $137,000    $844,000
                           ===========  ============   =========  ==========


NOTE 6 - PURCHASED SOFTWARE, FURNITURE AND EQUIPMENT

     Purchased software, furniture and equipment consisted of the following:

                                       58
<PAGE>
                                                              DEPRECIATION
                                DECEMBER        DECEMBER       ESTIMATED
                                31, 2001        31, 2000      USEFUL LIVES
                               ------------    ------------   -------------

Furniture and Fixtures         $ 1,428,000      $1,551,000      10 years
Computer equipment and
  purchased software             6,237,000       6,050,000      5 years
                               ------------    ------------
                                 7,665,000       7,601,000

Accumulated depreciation       (6,132,000)     (5,644,000)
                               ------------    ------------

                               $ 1,533,000     $ 1,957,000
                               ============    ============


NOTE 7 - INTANGIBLE ASSETS

     As a  result  of the  merger  with  MCS  on  March  7,  2000,  the  Company
capitalized  $26.5 million of  intangible  assets.  Those assets were  amortized
according to various lives ranging from five to nine years.  In accordance  with
Financial  Accounting  Standard No. 121, the Company is required to periodically
review the value of its  intangible  assets.  During the fourth quarter of 2001,
the Company's  analysis and review,  utilizing the  methodology of SFAS No. 121,
resulted in an $11.8 million  impairment  loss of the  intangible  assets of the
Company.  The major  reasons  for the  impairment  were new  technologies  being
integrated in the  Company's  current and future  products  causing its existing
product platforms to have reduced future revenue generation  capability,  and an
expectation that immediate  opportunities  for new software sales are lower than
were forecasted at the time of the merger with MCS.

     The following table  summarizes the Company's  changes in account  balances
for its Intangible Assets during the year ended December 31, 2001.

<TABLE>
<CAPTION>
<S>                        <C>            <C>            <C>            <C>            <C>            <C>
                                                                                        12/31/01
                             ORIGINAL       ASSETS        IMPAIRMENT    ACCUMULATED     NET BOOK      AMORTIZATION
                               COST        DISPOSED       WRITE-DOWN    AMORTIZATION      VALUE          PERIOD
                           -------------  ------------   -------------  -------------  -------------  --------------
Developed technology        $10,650,000       $     -    $(4,220,000)   $(2,441,000)    $ 3,989,000      8 years
Customer base                 1,700,000     (510,000)               -      (242,000)       $948,000      9 years
Assembled workforce           2,300,000     (422,000)       (941,000)      (437,000)        500,000      5 years
Goodwill                     11,851,000   (2,484,000)     (6,639,000)    (2,728,000)              -            -
                           -------------  ------------   -------------  -------------  -------------
                            $26,501,000   $(3,416,000)   $(11,800,000)  $(5,848,000)     $5,437,000
                           =============  ============   =============  =============  =============

</TABLE>

                                       59
<PAGE>

NOTE 8 - NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
<S>                                                        <C>                <C>
                                                           DECEMBER 31,         DECEMBER
                                                               2001             31, 2000
                                                           --------------     -------------
SHORT TERM:
Line of Credit                                                $5,572,000        $5,996,000
Note Payable  - Mestek                                                 -           600,000
                                                           --------------     -------------
                                                              $5,572,000        $6,596,000
                                                           ==============     =============
LONG TERM:
Convertible Note Payable - B.C. O'Donnell                      $ 600,000         $ 600,000
Convertible Note Payable - J.E. Reed (1)                       3,500,000                 -
Note Payable  - Mestek                                         1,019,000                 -
Note Payable  - Mestek Capitalized Interest                       40,000                 -
Note Payable  - J.E. Reed Capitalized interest                   184,000                 -
                                                           --------------     -------------
                                                              $5,343,000         $ 600,000
                                                           ==============     =============
</TABLE>

(1)  Includes Mestek's participation in the J.E. Reed Facility

Line of Credit:

     On July 12, 2000, the Company entered into a $6.0 million Loan and Security
Agreement  facility  with  Wainwright  Bank and Trust  Company  (the  Wainwright
Facility),  a commercial  bank, under which the Company granted a first priority
position on substantially all of its assets as security. The Wainwright Facility
was  used to pay off the  line of  credit  with  Silicon  Valley  Bank,  certain
short-term  loans from Mestek,  Inc. (a related party,  See Note 14), and a loan
from David O. Ellis.  Borrowings under the Wainwright  Facility accrue interest,
at the bank's  prime rate per annum,  require  monthly  payments of interest and
mature on July 12, 2002. The Company's obligations under the Wainwright Facility
are  guaranteed  by Mestek in  consideration  of which the  Company has issued a
warrant to Mestek to purchase  104,712  shares of the Company's  common stock as
more fully explained in Note 12 to these Financial Statements.

Convertible Note Payable - Barrett C. O'Donnell:

     On November 11, 1999,  Simione borrowed  $500,000 from Barrett C. O'Donnell
and  $250,000  from David O. Ellis,  both on an  unsecured  basis,  and executed
promissory  notes in  connection  therewith.  Dr.  Ellis and Mr.  O'Donnell  are
directors of the Company. When the CareCentric/MCS merger was completed on March
7, 2000, the Company succeeded to both of these obligations. The note payable to
Dr. Ellis,  which accrued interest at 9% per annum, was paid in full on July 12,
2000 in  advance  of its  August  15,  2000  maturity.  The note  payable to Mr.
O'Donnell  included interest at 9% per annum, was scheduled to mature on May 11,
2002, and required  quarterly  payments of accrued interest.  On August 8, 2000,
the $500,000 note payable to Mr.  O'Donnell,  together with $100,000 of deferred
salary, was cancelled in exchange for a $600,000 subordinated note,  convertible
into  CareCentric  common  stock at a strike  price of  $2.51  per  share,  with
interest at 9% per annum and a five-year  maturity.  In January 2002,  this loan
was amended to change the interest  rate to prime plus two percent and to change
the terms of  payment  of  interest  for 2002 to require  that  one-half  of the
accrued  interest  be timely  paid each  quarter  and the  balance to be paid on
December 31, 2003 or to be converted into an additional convertible note.

Note Payable - Mestek:

     The Company is obligated under an eighteen month unsecured  promissory note
in the  principal  amount of  $1,019,000  payable  to Mestek  Inc.  which  bears
interest at prime plus one and one half percent  (1.5%),  with interest  payable
semiannually and which matures on June 30, 2003. This note covers funds advanced
by Mestek to  CareCentric  to cover  payroll and  accounts  payable  obligations
incurred by the Company  during the period of its  transition of senior  lenders
from  Silicon  Valley Bank to  Wainwright  Bank and Trust  Company,  accrued and


                                       60
<PAGE>

unpaid interest thereon and the unreimbursed portion of Mr. Bruce Dewey's salary
for the  periods  from  November  9, 1999 to October  31, 2001 when he was Chief
Executive Officer of the Company.

J.E. Reed Facility:

     On June 22, 2000, the Company entered into a new financing facility (the J.
E. Reed  Facility)  provided by John E. Reed,  Chairman of  CareCentric  and the
Chairman and Chief  Executive  Officer of Mestek,  Inc. The J. E. Reed  Facility
consists of a $6.0 million subordinated line of credit,  convertible into common
stock of the Company at a strike price of $2.51 per share,  with  interest at 9%
per annum and a five-year maturity. The J. E. Reed Facility can be drawn down by
the Company as needed in $500,000 increments and is secured by a second position
on  substantially  all of the Company's  assets.  No borrowings were outstanding
under the J. E. Reed  Facility as of December 31, 2000;  however,  borrowings at
December 31, 2001 stand at $3,500,000,  $1,000,000 of which was  participated to
Mestek, Inc. effective December 31, 2001 and $2,500,000 of which remains held by
Mr. Reed. On December 31, 2001,  the facility was amended to change the interest
rate to prime plus two  percent,  to change  the  payment  term for unpaid  2001
interest to require  payment at December 31, 2003, or to convert the outstanding
unpaid  interest to additional  convertible  notes, in the amount of $184,438 at
the  option of Mr.  Reed,  and in the amount of $40,463 at the option of Mestek,
and to change the terms of payment of interest for 2002 to require that one-half
be timely paid each  quarter and the balance be paid on December  31, 2003 or be
converted to additional convertible notes.

     The  Company  is  obligated  under a number of  capital  lease  obligations
originally  entered into by CareCentric  related to computer  equipment formerly
used in CareCentric's business.

     Cash paid  interest  was  $491,000,  $510,000 and $0 during the years ended
December 31, 2001, 2000 and 1999, respectively.

     Maturities of long-term  debt in each of the next five years are as follows
in thousands:

                2002                    $   -
                2003                    1,243
                2004                        -
                2005                    4,100
                2006
                                   -----------
                      Total            $5,343
                                   ===========

     The fair value of the Company's  long-term  debt is estimated  based on the
current  interest  rates  offered  to the  Company  for debt  offered  under the
liquidity conditions and credit profile of the Company.  Management believes the
carrying value of debt and the contractual values of the outstanding  letters of
credit approximate their fair values as of December 31, 2001.


NOTE 9 - COMMITMENTS AND CONTINGENCIES

     CONTINGENCIES

     The Company is engaged in various legal and regulatory  proceedings arising
in the normal  course of  business  which  management  believes  will not have a
material adverse effect on its financial position or results of operations.

     Simione Central Holding,  Inc., a subsidiary of CareCentric now known as SC
Holding,  Inc.  ("SC  Holding")  was  one  of  several  defendants  named  in  a
"whistleblower"  lawsuit related to alleged Medicare fraud filed under the False
Claims  Act in the  Northern  District  of  Georgia  (U.S.  ex re.  McLendon  v.
Columbia/HCA  Healthcare  Corp., et al., No. 97-VC-0890 (N.D. Ga.)). The lawsuit
involves alleged claims that SC Holding  allegedly  participated in a conspiracy


                                       61
<PAGE>

with Columbia/HCA and other third parties to bill inflated and fraudulent claims
to Medicare.  On July 21, 1999, the Justice Department issued notice that it had
elected  not to join  in the  claims  asserted  against  SC  Holding  by  Donald
McLendon,  who  is a  former  employee  of  an  unrelated  service  provider  to
Columbia/HCA.  Although  the Justice  Department  joined the suit with regard to
other  defendants,  it  specifically  declined  to  intervene  with regard to SC
Holding.  In late 2000,  CareCentric was advised by Mr. McLendon's attorney that
notwithstanding the declination by the Justice Department,  Mr. McLendon intends
to pursue "whistleblower" claims against SC Holding directly.  Through March 22,
2002,  no such  action has been taken and  nothing  further  has been heard from
McLendon's attorney over one year.  Management believes that this claim has been
abandoned. In the event a claim is asserted, however, CareCentric and SC Holding
intend to vigorously defend against it.

     COMMITMENTS

     The  Company  leases its office  facilities  and  certain  equipment  under
various  operating  lease  agreements.  These leases  require the Company to pay
taxes,  insurance,  and maintenance  expenses and provide for renewal options at
the then fair market rental value of the property.

     Aggregate annual rental payments for operating  leases with  non-cancelable
lease  terms in excess  of one year,  net of  non-cancelable  subleases,  are as
follows:

                                     LEASE OBLIGATIONS
                              --------------------------------
                                                   Net of
          Years Ending            Gross           Sublease
          December 31,         Obligations       Agreements
        ------------------    --------------    --------------
        2002                    $ 2,359,000       $ 1,160,000
        2003                      1,154,000         1,145,000
        2004                        960,000           960,000
        2005                        719,000           719,000
        2006                        443,000           443,000
        Thereafter                  110,000           110,000
                              --------------    --------------
                    Total       $ 5,745,000       $ 4,537,000
                              ==============    ==============

     Aggregate  annual rental payments for operating  leases with  noncancelable
     lease terms in excess of one year.

     Rent expense approximated $1.1 million,  $1.2 million, and $0.3 million for
the years ended December 31, 2001, 2000 and 1999, respectively.


                                       62
<PAGE>



NOTE 10 - INCOME TAXES

     Deferred  income  taxes  reflect  the net effect of  temporary  differences
between the financial  reporting  carrying amounts of assets and liabilities and
income tax carrying  amounts of assets and  liabilities.  The  components of the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
<S>                                                   <C>                 <C>
                                                            YEARS ENDED DECEMBER 31,
                                                       -----------------------------------
                                                          2001                 2000
                                                      --------------      ---------------
Deferred tax assets:
     Net operating loss                               $  13,946,000       $ 10,900,000
     Severance and other restructuring charges              837,000            837,000
     Allowance for doubtful accounts                        396,000            929,000
     Deferred revenue                                     2,264,000          2,864,000
     Depreciation                                            33,000            226,000
     Other                                                  333,000            575,000
                                                      --------------     ---------------
Total deferred tax assets                                17,809,000         16,331,000
Valuation allowance                                    (17,809,000)       (16,331,000)
                                                      --------------     ---------------
                                                      $           -      $           -
                                                      ==============     ===============
</TABLE>

     The Company has  approximately  $36.7 million of net  operating  losses for
income tax purposes,  including  approximately $22.0 million incurred by Simione
Central Holdings, Inc. prior to the merger on March 7, 2000, available to offset
future taxable income.  Such losses begin expiring in 2006. The Company's use of
the net operating  losses  incurred by Simione prior to the merger is subject to
limitations  in the Internal  Revenue Code relating to changes in  ownership.  A
valuation  allowance  reducing the total net deferred tax assets set forth above
to zero has been  recorded  based on  management's  assessment  that it is "more
likely than not" that this net asset is not realizable as of December 31, 2001.

     Actual income tax expense differs from the "expected"  amount  (computed by
applying the U.S.  Federal  corporate  income tax rate of 34% to the loss before
income taxes) as follows:

<TABLE>
<CAPTION>
<S>                                                  <C>                <C>                    <C>
                                                                     YEARS ENDED DECEMBER 31,
                                                         2001               2000                    1999
                                                     --------------    ----------------        ---------------

Federal tax benefit computed at statutory rates      $  (7,853,000)       $(3,483,000)           $     262,000
State income taxes, net of federal effect               (1,351,000)          (615,000)                  44,000
Other, net                                                5,217,000            463,000                       -
Change in valuation allowance                             4,002,000          3,481,000                       -
                                                     --------------    ----------------        ---------------
Income tax expense (Benefit)                         $       15,000        $ (154,000)           $     306,000
                                                     ==============    ================        ===============

</TABLE>


NOTE 11 - EMPLOYEE BENEFIT PLANS

     The  Company  has  adopted  401(k)  plans  that  cover   substantially  all
employees.  The Company contributes to the plans based upon the dollar amount of
each participant's  contribution.  The Company made contributions to these plans
of  approximately  $140,000,  $189,000  and  $76,000  in 2001,  2000  and  1999,
respectively.  These contributions relate to the MCS 401(k) Plan for 1999 and to
the  CareCentric,  Inc.  401(k) Plan (formerly  Simione Central  Holdings,  Inc.
Plan), which survived the merger, for 2001 and 2000.


                                       63
<PAGE>

NOTE 12 - SHAREHOLDERS' EQUITY

     Subsequent to the  CareCentric/MCS  Merger on March 7, 2000,  the Company's
Shareholders'  Equity  (all  on a  split-adjusted  basis)  is  comprised  of the
following:

     Common Shares - 20,000,000 shares  authorized,  $.001 par value,  4,371,350
shares issued and outstanding as of December 31, 2001.  1,489,853 of such shares
were issued on March 7, 2000 to the former MCS common  shareholders.  606,904 of
such shares were  issued on March 7, 2000 to the former  preferred  shareholders
and noteholders of CareCentric Solutions, Inc., which shares were converted from
Series A Preferred  Stock into  CareCentric  (formerly  known as Simione Central
Holdings Inc.) common shares in connection with the merger.

     Pursuant  to the  terms of the  July 12,  1999  Merger  Agreement  by which
Simione  acquired  the stock of  CareCentric  Solutions,  Inc.,  the Company was
required  to issue up to an  additional  606,904  shares of common  stock to the
former preferred  shareholders  and noteholders of CareCentric  Solutions if the
average  closing  price of the  Company's  stock for the period  October 1, 2000
through  December  31,  2000 is not equal to or greater  than  $15.00 per share.
Since the Company's  average  closing stock price for the fourth quarter of 2000
was less than $15.00 per share,  on March 19, 2001,  the Company  issued 593,688
shares of its common stock to the former preferred  shareholders and noteholders
of  CareCentric   Solutions.   As  required  by  generally  accepted  accounting
principles, no value was assigned to these shares as it was deemed not to impact
total consideration paid. The Company asserted that it was not required to issue
13,216 additional shares of its common stock as well as 150,740 shares of common
stock that were being  held by it in escrow  under the terms of the  CareCentric
Solutions  Merger  Agreement  based upon  various  indemnification  and  expense
overages  claims it believes it had  against  the former  CareCentric  Solutions
preferred shareholders and noteholders. On May 16, 2001, the Company finalized a
settlement  of these claims with the  representative  of the former  CareCentric
Solutions  parties pursuant to which 88,586 shares of common stock were released
from  escrow and  distributed  to the  former  CareCentric  Solutions  preferred
shareholders and noteholders, the remaining 62,154 escrow shares were cancelled,
no additional shares of common stock will be issued,  and the parties executed a
comprehensive settlement agreement.

     Pursuant to a comprehensive  settlement agreement on June 28, 2001, between
Sterling  Star,  Inc.,  Mr.  Wade  (President  of Sterling  Star,  Inc.) and the
Company, certain disputes related to the acquisition of a product named Tropical
software,  were  settled.  Under the terms of the  settlement,  10,000 shares of
stock  originally  issued to Sterling Star were returned to the Company and were
cancelled.

     Preferred Stock-10,000,000 shares authorized

     Series B Preferred  Stock -$.001 par value,  5,600,000  shares issued.  The
shares of Series B Preferred  Stock are held by Mestek,  Inc.  (Mestek) and were
issued in  consideration  of $6,000,000  paid to  CareCentric,  Inc. on March 7,
2000, in the form of cash and debt  forgiveness.  The Series B Preferred shares,
as originally issued,  carried 2,240,000 common share votes (on a split-adjusted
basis) and were entitled to a 9%  cumulative  dividend,  among other rights.  In
connection  with the Company's  application  for listing on the Nasdaq  SmallCap
Market,  the Company  reached an agreement  with Mestek on June 12, 2000,  under
which Mestek agreed to allow the aforementioned  number of common share votes to
be reduced to  1,120,000  in  consideration  for the  issuance by the Company to
Mestek of a warrant to acquire up to 490,396 shares of CareCentric common stock,
as more fully described below.

     Series C Preferred  Stock - $.001 par value,  850,000  shares  issued.  The
shares of Series C Preferred Stock are held by Mestek,  Inc. and result from the
conversion at the March 7, 2000 merger of a  pre-existing  $850,000  convertible
note payable to Mestek,  Inc. The Series C Preferred shares carry 170,000 common
share votes (on a split  adjusted  basis) and are entitled to an 11%  cumulative
dividend, among other rights.

     Series D Preferred  Stock - $.001 par value,  398,406  shares  issued.  The
shares of Series D  Preferred  Stock are held by John E. Reed and were issued on
June 12, 2000 in  consideration of $1.0 million paid to the Company in cash. The
Series D Preferred shares have a 9% annual cumulative dividend,  are convertible


                                       64
<PAGE>

into common stock at an initial  conversion price of $2.51 per share,  limit the
ability to issue dilutive stock options and have voting rights equal to those of
the common stock, among other rights.

     Series E Preferred  Stock - $.001 par value,  210,000 shares issued under a
restricted  stock award. The shares of Series E Preferred Stock are held by John
R. Festa and the rights to those shares were  granted on November 10, 2001.  The
Series E Preferred shares are entitled to certain voting, dividend,  liquidation
and conversion rights.

     Common  Stock  Warrants - In  connection  with the issuance of the Series B
Preferred Stock described above,  Mestek,  Inc. received a warrant to acquire up
to 400,000  shares of the Company's  common stock at a per share  exercise price
equal to  $10.875.  In  connection  with the waiver by Mestek,  Inc.  of certain
voting  rights  previously  granted to it,  Mestek  received on June 12, 2000, a
warrant to acquire up to 490,396 shares of the Company's common stock for a term
of 3 years at a per share  exercise  price equal to $3.21.  In  connection  with
Mestek's  guarantee of the Company's  obligations  under the line of credit from
Wainwright  Bank and Trust Company,  as more fully  explained in Note 5 to these
Financial Statements,  Mestek received on July 12, 2000, a warrant to acquire up
to 104,712  shares of the Company's  common stock for a term of 3 years at a per
share exercise price equal to $2.51. The aforementioned number of shares and per
share prices are all on a split-adjusted basis. Other warrants existing prior to
the merger  transaction  to acquire up to 25,000  shares of common  stock remain
outstanding.

     STOCK OPTIONS - Options  totaling 1,000 shares were  outstanding and vested
under the now discontinued 1997 SCHI NQ (Directors) Plan at an exercise price of
$60.00.   Non-plan  options  totaling  107,453  shares,   of  which  90,787  are
exercisable,  were  outstanding at exercise prices ranging from $2.51 to $45.00.
The Simione Central Holding Inc. 1997 Omnibus  Equity-Based Plan (the "Plan") is
the only  continuing  stock  option  plan of the  Company.  The Plan offers both
incentive  stock  options  and  non-qualified  stock  options.  The  Company  is
authorized  to grant options of up to 900,000  shares of common  stock.  Options
totaling  464,206  shares  were   outstanding,   of  which  176,045  shares  are
exercisable,  at exercise prices ranging from $1.25 to $73.55. In 2001,  options
totaling  152,500 shares of common stock were granted to directors and employees
of the Company, (127,500 incentive options to employees and 25,000 non-qualified
options to  directors),  pursuant to the Plan at exercise  prices  ranging  from
$1.25 to $3.25 per share.  The foregoing  information is provided as of April 8,
2002.


     A summary of the Company's  stock option activity from December 31, 1999 is
as follows:

                                                           WEIGHTED
                                                           AVERAGE
                                             NUMBER OF     EXERCISE
                                              OPTIONS        PRICE
                                            ------------   -----------
Outstanding at December 31, 1999                      -             -
                                            ------------   -----------
Options Assumed                                 398,452       $ 24.10
Granted                                         274,800       $  3.70
Exercised                                             -       $     -
Forfeited and Cancelled                       (101,593)       $ 33.65
                                            ------------   -----------
Outstanding at December 31, 2000                571,659       $ 12.45
                                            ------------   -----------
Granted                                         152,500       $  2.15
Exercised                                             -       $     -
Forfeited and Cancelled                       (145,870)       $ 16.11
                                            ------------   -----------
Outstanding at December 31, 2001                578,289       $  8.11
                                            ============   ===========



                                       65
<PAGE>
<TABLE>
<CAPTION>
<S>                             <C>               <C>             <C>                 <C>             <C>
                                                             AS OF DECEMBER 31, 2001
                                -----------------------------------------------------------------------------------
                                              OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
                                -------------------------------------------------    ------------------------------
                                                     WEIGHTED
                                                     AVERAGE         WEIGHTED                           WEIGHTED
                                                    REMAINING         AVERAGE                           AVERAGE
                                    NUMBER         CONTRACTUAL       EXERCISE           NUMBER          EXERCISE
RANGE OF EXERCISE PRICES          OUTSTANDING     LIFE IN YEARS        PRICE          EXERCISABLE        PRICE
-----------------------------   ----------------  ---------------  --------------    ---------------  -------------
$  2.50            $    7.36            385,500        9.10            $    3.09             77,672       $   3.71
$  7.36            $   14.71            122,288        6.20            $    9.96            111,288       $  10.07
$ 14.71            $   22.07             13,000        4.20            $   15.96             13,000       $  15.96
$ 29.42            $   36.78             40,965        5.30            $   32.22             40,965       $  32.22
$ 36.78            $   44.13              5,000        4.70            $   42.50              5,000       $  42.50
$ 44.13            $   51.49              8,000        6.00            $   45.00              8,000       $  45.00
$ 51.49            $   58.84              2,080        5.00            $   55.63              2,080       $  55.63
$ 58.84            $   66.20              1,000        5.40            $   60.00              1,000       $  60.00
$ 66.20            $   73.55                456        2.40            $   73.55                456       $  73.55
                                ----------------  ---------------  --------------    ---------------  -------------
                                        578,289        8.00            $    8.11            259,461       $  14.33
                                ================                                     ===============
</TABLE>


     In  connection  with the  Simione/MCS  merger on March 7, 2000,  Mestek was
granted a series of options to purchase a total of approximately  378,295 shares
of the Company's  common stock (on a  split-adjusted  basis).  These options are
exercisable only to the extent that outstanding CareCentric options, warrants or
other  conversion  rights are exercised.  These options were designed to prevent
dilution of Mestek's  ownership  interest  in the Company  after the merger.  As
options,  warrants and other common rights are forfeited or cancelled,  Mestek's
option rights are correspondingly reduced. Due to the contingent nature of these
options,  they have been  excluded  from the above table.  At December 31, 2001,
159,573  shares of such  options  were  available  under the  original  terms of
issuance.

     For the purposes of pro forma disclosures,  the estimated fair value of the
stock  options  is  amortized  to expense  over the  options'  vesting  periods.
Risk-free  interest rates of 4.31% and 5.34%; no dividends;  a volatility factor
of the  expected  market  price of the  Company's  common  stock of 1.40685  and
1.40685;  and a weighted-average  expected life of the options of 3.97 years and
7.10 years for 2001 and 2000,  respectively.  The  weighted  average  fair value
assigned to options granted in 2001 and 2000 was $1.35 and $3.86,  respectively.
For 2001 and 2000 respectively the Company's pro forma net loss and net loss per
share (basic and diluted) are  $25,390,000  and  $10,941,000 and $5.94 and $3.20
for 2001 and 2000 respectively.


STOCK PURCHASE WARRANTS

     At December  31,  2001,  the Company had  outstanding  warrants to purchase
shares of the Company's common stock as follows:


                                       66
<PAGE>
                            EXERCISE
        COMMON SHARES        PRICE         EXPIRATION DATE
        ---------------  --------------   -------------------
                25,000         $  5.00    February 24, 2005
               104,712         $  2.51    July 12, 2003
               490,396         $  3.21    June 30, 2003
               400,000         $ 10.88    March 7, 2003
        ---------------
             1,020,108
        ===============


NOTE  13  -- SELECTED QUARTERLY INFORMATION (UNAUDITED)

     The table below sets forth  selected  quarterly  information  for each full
quarter of 2001 and 2000.
<TABLE>
<CAPTION>
<S>                                      <C>            <C>           <C>             <C>
                                                             FISCAL YEAR 2001
                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                         ---------------------------------------------------------
                                            MAR. 31,       JUNE 30,      SEPT. 30,      DEC. 31,
                                         -------------  ------------- -------------- -------------
Net revenues:                                 $ 5,679         $5,302        $ 4,769        $4,696

Costs and expenses:
    Cost of revenues                            2,108          2,004          1,646         2,459
    Selling, general and administrative         2,825          2,711          2,550         2,629
    Research and development                    1,767          1,609          1,413         1,369
    Write down of intangibles                       -              -              -        11,799
    Amortization and depreciation                 951            950          1,011           952
    Restructuring Charges                           -            675              -             -
                                         -------------  ------------- -------------- -------------
    Total costs and expenses                    7,651          7,949          6,620        19,209
                                         -------------  ------------- -------------- -------------

(Loss) from operations                        (1,972)        (2,647)        (1,851)      (14,513)

Other (expense) income:
    Interest expense                            (300)          (327)          (219)         (466)
    Interest and other income                     126             68             29         (187)
                                         -------------  ------------- -------------- -------------
(Loss) before taxes                           (2,146)        (2,906)        (2,041)      (15,166)
                                         -------------  ------------- -------------- -------------

    Income tax benefit (expense)                    -              -              -          (15)
                                         -------------  ------------- -------------- -------------
Net (loss) income from continuing
   operations                                 (2,146)        (2,906)        (2,041)      (15,181)
                                         -------------  ------------- -------------- -------------

Discontinued operation
    Loss on disposal of discontinued
      operations                                    -              -        (2,632)             -

    Income from operations of
    discontinued segment before taxes           (185)           (73)          (226)             -

    Applicable tax expense                          -              -              -             -

Net (loss) from operations and disposal
   of discontinued segment                      (185)           (73)        (2,858)             -
                                         -------------  ------------- -------------- -------------
Net  (loss) income                          $ (2,331)      $ (2,979)      $ (4,899)    $ (15,181)
                                         =============  ============= ============== =============

Cumulative preferred dividends                  (176)          (178)          (180)         (186)

Net (loss) available to
    common shareholders                     $ (2,507)      $ (3,157)      $ (5,079)    $ (15,367)
                                         =============  ============= ============== =============

</TABLE>

                                       67
<PAGE>
<TABLE>
<CAPTION>
<S>                                      <C>            <C>           <C>             <C>

(Loss) per share - basic and
   diluted from continuing operations       $  (0.55)       $ (0.66)       $ (0.47)     $  (3.47)
Weighted average common shares -
   basic and diluted                            3,922          4,418          4,371         4,371
                                         =============  =============== ============= =============
Net (loss) per share - basic and diluted
   From discontinued operations             $  (0.05)       $ (0.02)       $ (0.65)       $     -
Weighted average common shares -
   basic and diluted                            3,922          4,418          4,371         4,371
                                         =============  =============== ============ =============
Net (loss) per share - basic and diluted     $ (0.59)       $ (0.67)       $ (1.12)      $ (3.47)
Weighted average common shares -
   basic and diluted                            3,922          4,418          4,371         4,371
                                         =============  ============== ============== =============

Net (loss) per share - basic and diluted
   available to common shareholders          $ (0.64)       $ (0.71)       $ (1.16)      $ (3.52)

Weighted average common shares -
   basic and diluted                            3,922          4,418          4,371         4,371
                                         =============  ============= ============== =============


                                                                FISCAL YEAR 2000
                                                     (in thousands, except per share data)
                                         ---------------------------------------------------------
                                           MAR. 31,       JUNE 30,      SEPT. 30,      DEC. 31,
                                         -------------  -------------  -------------  ------------

Net revenues:                                 $ 4,000        $ 6,257        $ 7,177        $2,140

Costs and expenses:
       Cost of revenues                         2,547          3,954          2,621         (644)
       Selling, general and
         administrative                         1,453          1,624          3,253         4,426
       Research and development                   711          1,780          1,897         1,786
       Amortization and depreciation              426          1,183          1,027           845
                                         -------------  -------------  -------------  ------------
       Total costs and expenses                 5,137          8,541          8,798         6,413
                                         -------------  -------------  -------------  ------------

(Loss) from operations                        (1,137)        (2,284)        (1,621)       (4,273)

Other (expense) income:
       Other (expense) income                     (6)              -              -             -
       Interest expense                          (76)          (189)          (265)         (180)
       Interest and other income                   12             28             68          (34)
                                         -------------  -------------  -------------  ------------
(Loss)  income before taxes                   (1,207)        (2,445)        (1,818)       (4,487)
                                         -------------  -------------  -------------  ------------

       Income tax benefit (expense)               157              -            (6)             3
                                         -------------  -------------  -------------  ------------
(Loss) income from continuing
   operations                                 (1,050)        (2,445)        (1,824)       (4,484)
                                         -------------  -------------  -------------  ------------

Discontinued operation
       Loss on disposal of
         discontinued operations                    -              -              -             -

       Income from operations of
         discontinued segment before
         taxes                                      -          (303)           (21)          (118)

       Applicable tax expense                       -              -              -             -

</TABLE>

                                       68
<PAGE>
<TABLE>
<CAPTION>
<S>                                      <C>            <C>           <C>             <C>


Net (loss) from operations and disposal
   of discontinued segment                           -          (303)           (21)         (118)
                                         -------------  -------------  -------------  ------------
Net  (loss) income                           $(1,050)       $(2,748)       $(1,845)      $(4,602)
                                         =============  =============  =============  ============

Cumulative preferred dividends                   (42)          (161)          (185)         (181)

Net (loss) available to common
   shareholders                              $(1,092)       $(2,909)       $(2,030)      $(4,783)
                                         =============  =============  =============  ============

(Loss) per share - basic and diluted
   From continuing operations                 $(0.50)        $(0.64)        $(0.47)      $ (1.16)
Weighted average common shares -
   basic and diluted                            2,113          3,850          3,850         3,850
                                         =============  ============================  ============
Net (loss) per share - basic and diluted
   From discontinued operations                 $   -        $(0.08)        $(0.01)      $ (0.03)
Weighted average common shares -
   basic and diluted                            2,113          3,850          3,850         3,850
                                         =============  ============================  ============

Net (loss) per share - basic and diluted      $ (0.50)       $ (0.71)       $ (0.48)       $(1.20)

Weighted average common shares
   - basic and diluted                          2,113          3,850          3,850         3,850
                                         =============  ============================  ============

Net (loss) per share - basic and diluted
    available to common shareholders         $ (0.52)       $ (0.76)       $ (0.53)       $(1.24)

Weighted average common shares -
       basic and diluted                        2,113          3,850          3,850         3,850
                                         =============  ============================  ============

</TABLE>

     Quarterly  earnings per share figures do not arithmetically add to the full
years  2001 and 2000  earnings  per share due to  interim  changes  in  weighted
average shares outstanding during 2001 and 2000 and due to rounding. The numbers
below  reflect  the effect of a one for five  reverse  stock  split  effected in
connection  with the  MCS/Simione  merger on March 7,  2000.  The basic loss per
share for the year 2000 has been  changed to conform  with the 2001  calculation
which includes the dividends associated with each Series of cumulative Preferred
Stock.


NOTE 14 - RELATED PARTY TRANSACTIONS

     The Company has subleased  certain space to  Healthfield,  Inc.  which is a
Mestamed  customer and has a significant  shareholder who was a former member of
the board of directors of the Company.  The original lease and related  sublease
expires on December 31, 2002 and requires annual sublease  payments equal to the
original lease payments of approximately $730,000.

     R. Bruce Dewey is President and Chief Operating Office of Mestek,  Inc. and
Winston R. Hindle, Jr., a director of the Company, is a director of Mestek, Inc.
Mestek has certain investments in the Company in the form of notes,  convertible
notes,  warrants,  stock options and preferred  stock as described in Note 8 and
Note 12 to these Financial Statements.

     The Company has a note receivable from Simione Consultants, LLC of $707,000
at December  31, 2001.  On September  28,  2001,  the Company  discontinued  its
Consulting  business segment by closing the sale of certain of the assets of its
wholly-owned  subsidiary,  Simione  Consulting,  Inc.  ("Consulting") to Simione
Consultants,  LLC, which is owned and  controlled by William J. Simione,  Jr., a
director  and  former  officer  of  CareCentric.   The  total  sales  price  was
approximately $2.0 million plus the assumption of certain liabilities.  The sale
was made  pursuant to an asset  purchase  agreement.  William  Simione,  Jr. has
resigned as an officer of CareCentric,  however,  William Simione, Jr. remains a
director  of  CareCentric.  The assets  sold under the  agreement  included  the
Consulting accounts receivable,  computer equipment,  and miscellaneous  prepaid
expenses. Consideration received consisted of approximately $1.0 million in cash
and $1.0  million in notes,  $770,000  with a 36-month  term and  $230,000  with
5-month  term.  The cash proceeds  were used to pay down  CareCentric's  line of
credit.

     As of December 31, 2001, the Company had a promissory  note  outstanding to
Barrett C. O'Donnell, a director of the Company, as described in Note 8 to these
Financial Statements.

     John  E.  Reed  is a  director  and a  significant,  but  not  controlling,
shareholder  of the  Wainwright  Bank and Trust  Company  which has provided the
Company with a $6.0 million line of credit, as more fully explained in Note 8 to
the Financial Statements.

                                       69
<PAGE>

     John E. Reed,  Chairman  of the Company and  Chairman  and Chief  Executive
Officer of Mestek,  Inc.,  has  provided the Company with a $6.0 million line of
credit  (unrelated to the Wainwright  Bank and Trust $6.0 million line of credit
described  above) as more fully described in Note 8 to the Financial  Statements
and has also purchased $1.0 million of the Company's Series D Preferred Stock on
June 12, 2000, as more fully described in Note 12 to these Financial Statements.
An  independent  committee of the Company's  Board of  Directors,  consisting of
Barrett C. O'Donnell and David O. Ellis, negotiated the terms of Mr. Reed's debt
and equity investments in the Company.  The issuance of 398,406 shares of Series
D Preferred  Stock to Mr. Reed for his $1.0 million equity  investment was based
on a per share  price of $2.51,  which was the 5-day  average  closing  price of
CareCentric common stock as of the date of the final negotiation of the terms of
Mr.  Reed's  purchase.  The  conversion  price for Mr. Reed's $6.0 million loan,
which converts into CareCentric common stock as described in more detail in Note
8 to these Financial Statements,  is also $2.51 per share. On December 31, 2001,
$3.5 million was outstanding under this credit facility, $2.5 million payable to
Mr.  Reed,  and $1.0  million  payable  to Mestek  pursuant  to a  participation
agreement.

     Warrants  were granted in June 2000 and July 2000 by the Company to Mestek,
Inc. in connection with its waiver of certain voting rights  previously  granted
to it and in connection  with its guarantee of the loan from Wainwright Bank and
Trust  Company to the Company.  The terms of the warrants (as  described in more
detail in Note 12 to these Financial  Statements)  were based on negotiations by
independent committees of the Boards of Directors of the Company and Mestek.


 NOTE 15 -  LICENSE AGREEMENTS

     The Company  licenses  certain  software  products  from third  parties for
incorporation  in, or other use  with,  its  products  and is  obligated  to pay
license fees in connection  with such  products.  The Company  sublicenses  such
products  to  its  customers   and  collects   fees  in  connection   with  such
sublicensees.


NOTE 16 -  EXECUTIVE COMPENSATION

     The Company has entered into an employment agreement with its President and
Chief Executive  Officer,  Mr. John Festa.  Among other specific  contents,  Mr.
Festa i) has been granted 210,000 shares of Series E preferred  stock,  one half
of which vest evenly over the course of three years from his hire date dependent
upon his  continued  employment  as President  and CEO and one half of which are
forfeitable  pro rata over a three year period if certain  financial  milestones
are not met,  ii) payment of an annual  bonus of up to 50% of his annual  salary
based on completion of annual  performance  objectives,  iii) the possibility of
receiving a special  bonus which varies in dollar amount in the event there is a
sale of the Company  while Mr.  Festa is  President  and CEO and for nine months
thereafter.


NOTE 17 - LIQUIDITY

     As disclosed in the financial  statements,  the Company's  operations  used
significant  amounts of cash in 2001. The Company has a working  capital deficit
of $15.6 million at December 31, 2001.  During the fourth  quarter of 2001,  the
Company  continued  to use its  Wainwright  Bank Credit Line and the Reed Credit
Line in order to meet its working capital needs.

     The merger with  Simione  added  additional  products  and  resources  and,
importantly,  added to the Company's  critical  mass of installed  sites but the
Company's  longer term success will depend upon increased  sales of new software
systems and successful  installation  performance.  Additionally,  the Company's
continuing  efforts to  develop  new  products  using the  latest  software  and
hardware platforms will be most important to its long-term success.

     As  of  April  8,  2002,  the  Company  has  untapped  credit  capacity  of
approximately  $0.6  million  from  combined  Wainwright  Bank and  Reed  credit
facilities.  As discussed in Note 18 below, and pending shareholder and board of
director  approval,  which are  expected to be  obtained,  certain  terms of the


                                       70
<PAGE>

Wainwright and Reed credit facilities will be changed. The Company believes that
a successful completion and closing of the refinancing and recapitalization plan
(described in more detail in Note 18), in combination  with the funds  available
from cash to be generated from future operations, will be sufficient to meet the
Company's  operating  requirements  through at least June 30, 2003,  assuming no
material   adverse   change  in  the  operation  of  the   Company's   business.
Notwithstanding  the  financial   conditions   prevailing  in  the  home  health
marketplace,  the Company  continued  to fund  significant  product  development
initiatives  during 2001 and intends to do so throughout  2002,  reinvesting the
moneys  saved in its  re-engineering  undertaken  beginning  February  5,  2002.
Notwithstanding,  until revenues increase  sufficiently to cover fluctuations in
forward-looking  costs and operating expenses,  the Company remains dependent on
its  majority  shareholder  for its working  capital  financing.  The  Company's
majority shareholder has stated his intention and ability to continue to advance
cash to the Company in accordance with the terms of his credit facility.


 NOTE 18 - SUBSEQUENT EVENTS

     In  January  of  2002,  Dennis   Brauckman,   Chief  Financial  Officer  of
CareCentric  resigned as an officer and  employee of the Company to pursue other
personal interests.  In the absence of an employed Chief Financial Officer,  the
Company has  designated H. Forest Ralph, a financial  consultant  engaged by the
Company since January 2002, as the Company's  principal financial and accounting
officer for purposes of signing this Form 10-K.

     In February 2002,  CareCentric  reorganized its management structure.  This
reorganization  was designed to i) streamline  management  and shorten  decision
processes,  ii) reallocate  funds to the  development of new generation  product
platforms,  iii) create single line functional responsibility and accountability
in the management staff, and iv) reduce  unnecessary  overhead  operating costs.
The  reorganization  reduced  management  and cut  head  count  by  nearly  25%.
Management  believes  that this  reduction  of costs  will  free up  substantial
resources  to be  reallocated  to the  development  of new  systems and the next
generation platforms.

     On April 8, 2002,  the  Company  secured  two  commitments  for  additional
financing,  both from  existing  shareholders.  John E. Reed,  a director of the
Company,  agreed to provide $871,117 in short-term funds, to be refinanced along
with other debt of the Company due Mr. Reed upon the  obtaining  of  shareholder
approval in June,  2002.  The  refinancing  would be  evidenced  by a $3,555,555
subordinated,  secured convertible term note, with principal payable in a single
balloon payment in 60 months and with interest at a fixed rate of 6.25% deferred
and capitalized  for 24 months.  Interest would then be payable  quarterly.  The
note would be  convertible  at any time for common stock at a price of $1.00 per
share. The conversion  rights of Mr. Reed's 398,406 shares of Series D Preferred
Stock would also be amended to increase the  conversion  exchange  rate from one
share of common  stock for one share of  Series D  Preferred  to 2.51  shares of
common stock for one share of Series D Preferred Stock.

     Mestek,  Inc., a preferred  shareholder  of the Company,  agreed to provide
$1,092,000 in short-term  funds,  to be refinanced  along with other debt of the
Company due Mestek upon the obtaining of shareholder approval in June, 2002. The
refinancing would be evidenced by a $4,000,000 subordinated, secured convertible
term note,  with principal  payable in a single balloon payment in 60 months and
with interest at a fixed rate of 6.25% deferred and  capitalized  for 24 months.
Interest would then be payable  quarterly.  The note would be convertible at any
time for common  stock of the Company at a price of $1.00 per share.  The rights
of Mestek's  5,600,000  shares of Series B Preferred Stock would also be amended
to provide for a conversion  exchange  rate of 1.0714 shares of common stock for
one  share of  Series B  Preferred  Stock.  Mestek  will  also give up its stock
options  and a warrant it holds for the  purchase  of  104,712  shares of common
stock and will exchange a warrant it holds for 400,000 shares of common stock at
$10.875 per share,  expiring  March 7, 2003, for a Warrant for 400,000 shares of
common stock at $1.00 per share, expiring June 15, 2004. It will also exchange a
warrant it holds for 490,396 shares of common stock at $3.21 per share, expiring
March 7, 2003,  for a Warrant  for 490,396  shares of common  stock at $1.00 per
share, expiring June 15, 2004.

     A condition to the refinancing of the Company's debt to Mestek and Mr. Reed
is that the present $6.0 million Wainwright Bank line of credit facility be paid
down by the  Company  to $5.9  million  or less on or before  July 31,  2002 and


                                       71
<PAGE>

continue to be reduced by no less than $100,000 each month  thereafter until all
amounts  have been  repaid  to  Wainwright  or the  Wainwright  Facility  or any
replacement thereof is obtained by CareCentric without a guarantee of Mestek.

     The refinancing and  recapitalization  transactions between the Company and
each of Mestek and Reed are subject to the  satisfaction of various  conditions,
including approval by the Company's  shareholders at its annual meeting expected
to be held in June 2002 and  approvals by Mestek's  board of  directors  and the
Company's  senior  lender.  The  transactions  contemplated  by  the  commitment
letters,  if approved,  would i) reduce the total  financing  facilities  of the
Company by approximately $0.3 million,  ii) extend the guaranty by Mestek of the
Company's  senior line of credit with  Wainwright  Bank  through the end of June
2003,  iii)  refinance  existing  debt owed by the Company to Mestek and Reed to
provide a deferral of both  interest and principal for a period of two (2) years
following  the  date  that  the  commitment  letters  are  approved,   and  (iv)
restructure  certain of the Company's  existing  voting  securities and warrants
held by Mestek and Reed.

     Management believes the required shareholder approvals will be obtained.


                                       72
<PAGE>


                                CARECENTRIC, INC.

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
<S>                                      <C>              <C>             <C>                <C>
                                                            ADDITIONS
                                           BALANCE AT      CHARGES TO
                                          BEGINNING OF      COST AND                          BALANCE AT
                                             PERIOD          EXPENSE       DEDUCTIONS (1)    END OF PERIOD
                                         ---------------  --------------  ----------------   --------------
Year ended December 31, 2001
Allowance for Doubtful Accounts              $  551,000       $ 500,000          $  9,000       $1,042,000
                                         ===============  ==============  ================   ==============

Year ended December 31, 2000
Allowance for Doubtful Accounts               $ 166,000       $ 538,000         $ 153,000        $ 551,000
                                         ===============  ==============  ================   ==============

Year ended December 31, 1999
Allowance for Doubtful Accounts               $ 166,000         $     -            $    -        $ 166,000
                                         ===============  ==============  ================   ==============
</TABLE>


(1) Write-offs of uncollectible accounts





                                       73

1462236