<PAGE>   1
================================================================================


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

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

                                   FORM 10-QSB
                QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1998

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

                         Commission file number 0-22115

                  --------------------------------------------
                         COMPLETE WELLNESS CENTERS, INC.
        (Exact name of small business issuer as specified in its charter)

<TABLE>
<S>                                                                  <C>
                           DELAWARE                                                52-1910135
                       ---------------                                           ---------------
   (State or jurisdiction of Incorporation or Organization)          (I.R.S. Employer Identification Number)
</TABLE>

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


           666 ELEVENTH STREET, N.W., SUITE 200 WASHINGTON, D.C. 20001
                        --------------------------------
          (Address and telephone number of principal executive offices)



                                 (202) 639-9700
                            -------------------------
                           (Issuer's telephone number)

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

   State the number of shares outstanding of each of the issuer's classes of
                common equity, at September 30, 1998: 2,416,635


================================================================================
<PAGE>   2


                         COMPLETE WELLNESS CENTERS, INC.
                                   FORM 10-QSB
                                      INDEX


PART I.    FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS (UNAUDITED)
           CONDENSED CONSOLIDATED BALANCE SHEETS -
                SEPTEMBER 30, 1998 AND DECEMBER 31, 1997........................
           CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                FOR THREE AND NINE MONTHS ENDED
                SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997 ......................
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
                SEPTEMBER 30, 1997 .............................................
           NOTES TO CONDENSED CONSOLIDATED FINANCIAL
                STATEMENTS .....................................................
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
ITEM 2.         CONDITION AND RESULTS OF OPERATIONS ............................
PART II.   OTHER INFORMATION ...................................................
           SIGNATURES ..........................................................

<PAGE>   3

ITEM 1 -- FINANCIAL STATEMENTS





         COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,        DECEMBER 31,
                                                                        1998                1997
                                                                  ---------------    ------------------
                                                                    (UNAUDITED)            (NOTE)
<S>                                                                  <C>             <C>
                              ASSETS

Current Assets:
     Cash and cash equivalents                                           $860,330             $804,924
     Patient receivables, net of allowance for doubtful
          accounts of $6,634,571 and $3,825,708                         5,327,290            2,758,841
     Inventory                                                            634,689               39,483
     Prepaid expenses                                                     152,399               42,882
     Other assets                                                         142,073              394,854
     Deposits                                                              80,795              150,000
                                                                   ---------------    -----------------
Total current assets                                                    7,197,576            4,190,984
Furniture and equipment, net                                              604,001              504,215
                                                                   ---------------    -----------------
Total assets                                                           $7,801,577           $4,695,199
                                                                   ===============    =================


         LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)

Current liabilities:
     Accounts payable and accrued expenses                             $2,902,534           $1,156,865
     Accrued management fees                                            3,538,379            3,117,135
     Accrued interest                                                       5,668                8,298
     Advances from affiliates                                                   0              154,976
     Notes payable-current                                                 72,512               45,433
                                                                   ---------------    -----------------
Total current liabilities                                               6,519,093            4,482,707
Convertible note payable                                                        0               25,000
Note payable                                                                    0              500,000
Minority interest                                                               0                7,179
Stockholders' equity/(deficit):
     Common Stock, $.0001665 par value per share,
          10,000,000 shares authorized, 2,365,856 shares and
          1,903,833 shares issued and outstanding respectively                393                  363
     Senior Convertable Preferred Stock, $.01 par value per share,
          8% cumulative, 107,011 shares currently issued and
          outstanding, at carrying value                                4,847,020                    0
     Additional capital-Common Stock                                    5,447,066            5,044,365
     Accumulated deficit                                               (9,011,995)          (5,364,415)
                                                                   ---------------    -----------------
Total stockholders' equity/(deficit)                                    1,282,484             (319,687)
                                                                   ---------------    -----------------
Total liabilities and stockholders' equity/(deficit)                   $7,801,577           $4,695,199
                                                                   ===============    =================
</TABLE>

           See notes to condensed consolidated financial statements


<PAGE>   4
                COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   UNAUDITED


<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                             SEPTEMBER 30,                           SEPTEMBER 30,
                                                   ---------------------------------     -----------------------------------
                                                        1998                1997                1998                1997
                                                   ----------------  ---------------     -----------------   ---------------
<S>                                                <C>                 <C>                <C>                <C>
Revenue:
     Integrated medical clinics                       $4,080,925         $2,418,831         $14,099,241         $5,223,533
     Weight management centers                         1,183,259                  0           6,487,210                  0
     Other income                                        108,791             65,535             260,558             65,535
                                                   ----------------  ---------------     -----------------   ---------------
Total operating revenue                                5,372,975          2,484,366          20,847,009          5,289,068
Direct expenses:
     Salary and consulting costs                         808,572            873,488           4,548,467          1,975,420
     Management fees                                   1,871,605          1,329,597           6,869,608          2,571,362
     Cost of Product Sold                                442,544                  0           1,524,223                  0
     Rent                                                679,878             45,771           1,933,592            156,506
     Advertising and marketing                           223,251             21,314             829,104             74,199
     Bad debt expense                                    839,323            305,782           3,008,863            778,926
                                                   ----------------  ---------------     -----------------   ---------------
Total direct expenses                                  4,865,173          2,575,952          18,713,857          5,556,413
Network development cost                                 178,408                  0             606,084                  0
General and administrative                             2,619,432            682,280           4,745,175          1,711,561
Depreciation and amortization                             38,430             18,203             148,338             54,506
                                                   ----------------  ---------------     -----------------   ---------------
Operating loss                                        (2,328,468)          (792,069)         (3,366,445)        (2,033,412)
Interest expense                                               0              3,366               1,523             28,235
Interest income                                            2,144             35,229              28,954             82,599
Minority interest                                              0             17,961               7,179             23,812
                                                   ----------------  ---------------     -----------------   ---------------
Net loss before income taxes                          (2,326,324)          (742,245)         (3,331,835)        (1,955,236)
Income taxes                                                   0             27,103               1,045             31,307
                                                   ----------------  ---------------     -----------------   ---------------
Net loss after income taxes                          ($2,326,324)         ($769,348)        ($3,332,880)       ($1,986,543)
                                                   ================  ===============     =================   ===============


Loss per share - basic                                    ($0.92)            ($0.50)             ($1.31)            ($1.13)
                                                   ================  ===============     =================   ===============


Weighted average common shares - basic                 2,539,020          1,540,744           2,536,725          1,765,533
                                                   ================  ===============     =================   ===============
</TABLE>



<PAGE>   5


                COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   UNAUDITED



<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED
                                                                                SEPTEMBER 30,
                                                                 ----------------------------------------
                                                                        1998                  1997
                                                                 ------------------    ------------------
<S>                                                              <C>                   <C>
OPERATING ACTIVITIES
Net loss                                                           ($3,332,880)             ($1,986,543)
Adjustments to reconcile net loss to net
     Cash used in operating activities:
     Minority interest                                                  (7,179)                (41,703)
     Depreciation and amortization                                     148,338                   54,506
     Provision for bad debt                                          3,008,863                  778,926
     Amortization of debt discount                                           0                    2,000
     Recognition of compensatory
          common stock grants                                           58,750                        0
     Recognition of compensatory granting
          non-qualified stock options                                   70,488                        0
     Recognition of the granting of common
          stock warrants                                                38,059                   18,964
     Changes in operating assets and
          liabilities:
          Accounts receivables                                      (5,273,312)              (3,338,859)
          Advances to officers and other
               current assets                                         (382,737)                (281,210)
          Current tax liability                                              0                   35,727
          Deferred taxes                                                     0                  (31,523)
          Accounts payable and other current liabilities             2,036,386                2,222,830
                                                                 ---------------       ------------------
Net cash used in operating activities                               (3,739,224)              (2,566,885)
INVESTING ACTIVITIES
Purchase of equipment                                                  (94,819)                (332,223)
Acquisition costs                                                     (120,805)                       0
Investment in subsidiaries                                                   0                        0
                                                                 ---------------       ------------------
Net cash used in investing activities                                 (215,624)                (332,223)
FINANCING ACTIVITIES
Repayment of notes                                                    (525,000)                       0
Repayment of bridge loan                                                     0               (1,100,000)
Proceeds from sale of preferred stock                                4,532,320                        0
Proceeds from sale of common stock                                       2,934                4,668,625
Investment of minority shareholders in CWIPA                                 0                   50,000
Investment in Smokenders                                                     0                  (50,000)
Proceeds from notes payable                                                  0                   25,198
                                                                 ---------------       ------------------
Net cash provided by financing activities                            4,010,254                3,593,823
                                                                 ---------------       ------------------
Net increase in cash and cash equivalents                               55,406                  694,715
Cash and cash equivalents at beginning
     of period                                                         804,924                  298,509
                                                                 ---------------       ------------------
Cash and cash equivalents at end of period                            $860,330                 $993,224
                                                                 ===============           ==============

</TABLE>
           See notes to condensed consolidated financial statements
<PAGE>   6
               COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMETNS
                                   (UNAUDITED)
                               SEPTEMBER 30, 1998

NOTE A - BASIS OF PRESENTATION

       The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. The financial statement information was derived
from unaudited financial statements unless indicated otherwise. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.

       In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included in the accompanying condensed consolidated financial statements.
Operating results for the nine month period ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.

       The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company's audited financial statements
included in the Company's Form 10-KSB, as amended, dated March 31, 1998, for the
period ended December 31, 1997. Certain prior period amounts have been
reclassified to conform with the current period presentation.



NOTE B - NET LOSS PER SHARE

       The Company's net loss per share calculations are based upon the weighted
average number of shares of Common Stock outstanding. During the first quarter
1997, the Company issued 1,145,800 shares of common stock in connection with the
Company's Initial Public Offering. Pursuant to the requirements of the
Securities and Exchange Commission (SEC) staff accounting bulletin No. 98, the
Company considers all potentially dilutive securities issued for nominal
consideration prior to the Company's initial public offering as outstanding for
all periods presented. Other shares issuable upon the exercise of stock options
or conversion of the 8% Senior Convertible Preferred Stock have been excluded
from the computation because the effect of their inclusion would be
anti-dilutive.

NOTE C - FINANCING

       The Senior Convertible Preferred Stock was issued to two investment
groups (the "Investors") pursuant to the terms of the investment agreement dated
January 23, 1998 and amended July 2, 1998. The offering consisted of a $500,000
13% Bridge Loan (the "Bridge Loan") received by the Company on December 16,
1997, a $1,000,000 Senior Redeemable Preferred Stock purchase by the Investors
on January 17, 1998, of which $500,000 was used to retire the Bridge Loan and a
$4,000,000 Senior Redeemable Preferred Stock purchase by the Investors on
January 23, 1998. On July 2, 1998, the Senior Redeemable Preferred Stock was
exchanged for Senior Convertible Preferred Stock.

       The cost of the offering to the Company, approximately $468,000, was paid
out of the proceeds of the Senior Redeemable Preferred Stock offering. Accretion
of the transaction cost is being recognized over the period from issuance to the
dates of mandatory redemption or conversion into Common Stock.

<PAGE>   7

The significant provisions of the Senior Convertible Preferred Stock issuances
are as follows:

   (I)  The Senior Convertible Preferred Stock accrues dividends at 8% per annum
        if paid in cash and 10% per annum if paid in the form of additional
        Senior Convertible Preferred Stock. Dividends are payable quarterly.
        Dividends, in the form of additional Senior Convertible Preferred Stock,
        were paid as of March 31 and June 30, 1998.

   (II) The Senior Convertible Preferred Stock's liquidation preference is
        calculated as $50 per share plus an amount equal to all dividends
        (whether or not earned or declared) accumulated and unpaid to the date
        of final distribution.

   (III)Conversion of the Senior Convertible Preferred Stock is based on the
        liquidation preference divided by the lower of $1.75 or 75% of the
        current market price per share of the Company's Common Stock on the
        trading day immediately prior to the conversion date, subject to certain
        anti-dilution provisions. Conversion of the Senior Convertible Preferred
        Stock, at the option of the Investors, can occur at any time on or after
        January 3, 1999 or, if the Company is unable to obtain shareholder
        approval to increase its authorized shares of common stock to 50,000,000
        from 10,000,000 shares, at any time on or after August 31, 1998
        (shareholder approval was obtained on August 11, 1998).

   (IV) The Senior Convertible Preferred Stock is redeemable, at the Company's
        option, in whole but not in part, from July 2, 1998 through January 3,
        1999 at the liquidation preference, except that the dividend rate shall
        be 12% per annum.

   (V)  The Investors are entitled to maintain one representative on the
        Company's board of directors so long as the Senior Convertible Preferred
        Stock is outstanding.

   (VI) Warrants issued to the Investors in connection with the Senior
        Redeemable Preferred Stock issuance were returned to the Company and
        canceled.

   (VII)The Company issued 100,000 fully paid for and non-assessable shares of
        the Company's common stock to the Investors. All common stock issued or
        issuable to the Investors upon conversion of the Senior Convertible
        Preferred Stock contain certain demand registration rights, the Company
        will bear all costs associated with such registrations, if any.


NOTE D - AMENDMENT OF SMOKENDERS SHAREHOLDERS' AGREEMENT

       On June 1, 1998, the Company amended certain agreements with its Complete
Wellness Smoking Cessation, Inc. ("Smokenders") subsidiary. On or before
September 30, 1998 the Company shall contribute to Smokenders $23,000 as
additional capital and $75,000 in return for a secured note bearing interest at
12%, payable on or before September 30, 1999. Additionally, the Company
eliminated the $22,000 of promissory notes due from Mr. Mrazek, CEO of
Smokenders, as part of the original shareholder agreement. On September 15,
1998, Mr. Mrazek resigned his position as CEO of Smokenders; however, he remains
a Board Member of the Company. The Company also agreed to grant the managers of
Smokenders up to an additional 3,000 shares of Smokenders stock 1,500 of which
vested at the grant date and 1,500 of which are subject to time vesting
schedules through August 1, 1999. All options are exercisable for 5 year
periods, contain anti-dilution provisions, and are not exercisable until January
1, 2000, except under certain circumstances. The exercise of these options will
result in the managers having 35% of the outstanding shares of Common Stock and
the Company having 65% of the outstanding shares of Common Stock of Smokenders.
All shares of Common Stock of Smokenders to be issued pursuant to this agreement
are non-public restricted securities exempt from regulation requirements of the
Securities Act of 1933 as amended. The shareholders of Smokenders have certain
put and call options as well as non-mandatory repurchase options and liquidation
requirements in the event selling shareholders are not able to obtain buyers for
their stock.

<PAGE>   8

NOTE E - ACQUISITIONS

       In January 1998 the Company, through its wholly owned subsidiary Complete
Wellness Weight Management ("CWWM"), completed its acquisition of 56 weight
management centers from Nutri/Systems, L.P. and a continual license to use the
Nutri/System brand name for $150,000 and the assumption and assignment of the
outstanding obligations of the centers of approximately $380,000. The Company
has included the results of operations of these centers in its accompanying
condensed consolidated financial statements from February 1, 1998 (date
acquisition was fully consummated) through the end of each subsequent period
presented. The Company recognized revenues and losses from operations of
$6,487,210 and $878,769 respectively, during the period from February 1, 1998
(acquisition date) to September 30, 1998. As a result of the Company's decision
to sell and/or otherwise divest of the operations of CWWM on November 13, 1998
(see note F, below), the 56 weight management centers are expected to cease
operations in the next two to six months.

       On May 29, 1998 the Company, by unanimous consent of the Board of
Directors, offered to purchase all of the outstanding units of Complete Wellness
Centers, LLC ("CWC,LLC"), a Delaware limited liability company, of which the
Company had a 1% equity interest and irrevocable proxies from a majority of
interest holders in the LLC. The acquisition was accomplished by the issuance of
77,821 shares of Common Stock valued at $200,000, based upon the average closing
bid price of the Company's Common Stock for the thirty (30) trading days prior
to June 1, 1998. Such shares are subject to SEC Rule 144, but have piggyback
registration rights. Former and current employees, directors, and immediate
relatives of management, owning 37.6% of the LLC's equity received a 26.32%
discount off the $200,000 valuation of the LLC; the remaining investors received
the balance of the valuation on a pro rata basis in accordance with their
respective investments.

       In July 1998, the Company purchased Accident and Industrial Injury
Associates ("AIIA"), a chiropractic preferred provider network of approximately
2,700 providers located throughout the United States in exchange for warrants to
purchase 20,000 shares of its common stock at $3.31 per share which expire 5
years after the acquisition date and contain certain piggyback registration
rights. The Company accounted for this transaction under the purchase method.
The primary assets acquired were members of the network, databases related to
the operations thereof and two alternative care preferred provider contracts.
The Company contemporaneously sold 30% of its interest in AIIA to its 86.67%
owned subsidiary, Optimum Health Services, Inc. ("OHS") in exchange for a
$12,000 note bearing interest at 6.1% per annum, due January 31, 2000. OHS will
manage the network on behalf of the Company and receive an additional 20%
interest in AIIA over three years as compensation for such services. The Company
has committed to fund the initial working capital requirements of AIIA, up to
approximately $10,000, after which, the Company and OHS will fund all future
working capital requirements equally.

       As a result of a revised spin off plan with OHS, as amended on November
3,1998 (See Note F below), the Company agreed to sell OHS an additional 25% of
AIIA for an additional $6,000 note bearing interest at 6.1% per annum due
January 31, 2000. The amended agreement establishes the new company, Optimum
Preferred Provider Organization ("OPPO"), which is owned 55% by OHS and 45% by
the Company. OHS will manage the network and will receive an additional 20%
interest in OPPO over three years as compensation for its management services,
at which time OHS will own 75% of OPPO.



NOTE F - DISCONTINUANCE OF CERTAIN LINES OF BUSINESS

       The Company's formal plan to divest of its 86.67% interest in OHS, as
amended on November 3, 1998, spins-off the Company's interest in OHS to
management of OHS. Under the plan, the Company will convert its investment in
OHS, totaling approximately $1,000,000 at October 31, 1998, into 266,736 OHS
ten-year warrants at an exercise price of $0.01 per share. If the warrants were
to be exercised at this time, the Company would own 90.2% of the current and
outstanding shares of OHS (71% on a fully diluted basis). However, the warrants
can not be exercised prior to one year nor in an amount at any time such that
the Company's ownership of OHS's common stock would represent greater than 49%
of the total OHS common stock outstanding.

<PAGE>   9

       OHS initiated operations in May 1997. During the year ended December 31,
1997, OHS had losses from operations of $317,682 with no revenues. For the nine
months ended September 30, 1998, OHS had losses from operations of $606,084 with
$18,309 in revenues.

       On July 7, 1998, the Company committed to a formal plan to discontinue
the operations of Compete Billing, Inc. ("CBI"), one of its wholly owned
subsidiaries. The Company ceased CBI's operations on August 15, 1998 and
converted all billing performed by CBI back to the respective medical clinics
that were CBI's clients. The Company does not expect to incur any further
expenses as a result of closing CBI.

       CBI initiated operation in May 1997. During the year ended December 31,
1997, CBI had losses from operations of $9,597 on revenues of $84,071. For the
nine months ended September 30, 1998, CBI had losses from operations of $35,274
on revenues of $91,099.

       The combined losses from the discontinuance of the three businesses
through September 30, 1998 was $1,520,127 on revenues of $6,596,618.

       On November 13, 1998, the Company's Board of Directors voted to sell
and/or otherwise divest of the operations of Complete Wellness Weight
Management, Inc., ("CWWM"), one of its majority owned subsidiaries. The Company
does anticipate continuing to offer the Nutri/Systems weight loss program
through its Integrated Medical Centers and Internet web site. CWWM commenced
operations on February 1, 1998 and realized losses from operations of $878,769
on revenues of $6,487,210 for the period ended September 30, 1998. The estimated
costs to exit the CWWM clinics has not yet been determined.

NOTE G - OTHER TRANSACTIONS

       On October 1, the Company filed a registration statement with the SEC to
comply with the demand registration rights of its Common Stock exercised by the
Senior Convertible Preferred Stock holders. Subsequent to the filing, the
Company arranged for a private sale of the Common Stock to twelve purchasers.
The Company is currently amending the registration statement to respond to the
SEC comments on the first filing. Additional shares of Common Stock are to be
added to the amended registration statement. The Senior Convertible Preferred
Stock holders and certain other Common Stock holders will be the selling
shareholders. This registration statement is expected to increase the number of
fully tradable shares, if certain warrants are exercised, by approximately 
583,820 shares when declared effective.

<PAGE>   10


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL 

       Statements included in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" Section, and in other sections of
this Report and in prior and future filings by the Company with the Securities
and Exchange Commission, in the Company's prior and future press releases and in
oral statements made with the approval of an authorized executive which are not
historical or current facts are "forward-looking statements" made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and are subject to certain risks and uncertainties that could cause actual
results to differ materially from those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. There are
important risk factors that in some cases have affected and in the future could
affect the Company's actual results and could cause the Company's actual
financial and operating performance to differ materially from that expressed in
any forward-looking statement. The following discussion and analysis should be
read in conjunction with the Condensed Consolidated Financial Statements and
notes appearing elsewhere in this report. 

       The Company was established in November 1994. From its inception until
March 1995, the Company raised funds privately and developed the corporate
infrastructure, protocols, policies and procedures required to commence its plan
to develop multi-disciplinary medical clinics. In March 1995, the Company began
implementing the initial stages of its business plan. The Company formed
Complete Wellness Centers, L.L.C. ("CWC, LLC"), a Delaware limited liability
company, as a vehicle for raising capital needed to open Integrated Medical
Centers. At formation, the Company was the managing member of CWC, LLC and had a
1% equity interest. The Company also held irrevocable and permanent voting
proxies from the holders of a majority of ownership interests in CWC, LLC. In
May 1998, the Company offered to purchase all of the outstanding units of CWC,
LLC in exchange for 77,821 shares of the Company's Common Stock in an exchange
valued at $200,000. Such shares shall be subject to SEC Rule 144, but shall have
piggyback registration rights. Former and current employees, directors, and
immediate relatives of management, owning 37.6% of CWC, LLC's equity prior to
the exchange offer received a discount to 26.32% of the $200,000 valuation of
the CWC, LLC; the remaining investors received the balance of the valuation on a
pro rata basis in accordance with their respective investments, as a premium to
the exchange offer. As of September 30, 1998, the Company owns a total of 92.5%
of the outstanding CWC, LLC units. The Company consolidates the financial
statements of CWC, LLC in its financial statements. Throughout 1996 and 1997
CWC, LLC established and terminated affiliations with 7 chiropractic practices.
During the nine months ended September 30, 1998, CWC, LLC incurred losses of
$166,704. At September 30, 1998 CWC, LLC had no operations. The Company has no
intention of establishing any new affiliations or operations through CWC, LLC.

       The Company began pursuing its primary development strategy in early
1996. This strategy involves entering into an agreement with one or more
chiropractors ("Affiliated Chiropractors") and their existing chiropractic
practices and newly formed management companies ("Admincorps"). The chiropractor
or the existing chiropractic practice leases the office space and equipment
utilized by the existing chiropractic practice to the Company. The chiropractor
then incorporates the Admincorp, with which task the Company assists, and causes
the Admincorp to ratify the agreement. In general, the Admincorp assumes
responsibility for the daily management functions of the Integrated Medical
Centers. The Company agrees to furnish the Admincorp certain services, such as
assistance with advertising and other practice development activities, as well
as medical doctor recruitment and to help the Admincorp perform daily management
functions. The Company then forms the medical company ("Medcorp") and enters
into a long-term management agreement with the Medcorp to provide certain
administrative and management services. In addition, the Company subleases the
existing chiropractic practice's office space and equipment to the Medcorp. The
Medcorp employs the Affiliated Chiropractor(s) and one or more medical doctors.
Depending on the needs of the patient base, the Medcorp may also employ one or
more other traditional or alternative health care providers. 

       Through September 30, 1998 the Company has directly formed 65 medical
corporations with similar affiliation contracts representing 89 clinics. The
operations of all the medical corporations are included in the 

<PAGE>   11

consolidated financial statements of the Company. At September 30, 1998, the
Company, as a result of its medical operations, had revenues of $14,099,241 and
income from operations of $1,206,788 including the losses of CWC, LLC of
$166,704 for the period ended September 30, 1998, without regard to certain
corporate overhead allocations.

       During May 1997, the Company incorporated three new wholly owned
subsidiaries. Complete Wellness Research Institute, Inc. ("CWRI") and Complete
Wellness Education, Inc. ("CWEI"), are Delaware corporations; and Complete
Billing, Inc. ("CBI"), is a Florida corporation. CWRI plans to provide clinic
research and studies to pharmaceutical, vitamin, natural product and medical
device manufactures within the Company's network of clinics. CWEI, through its
consortium of nationally recognized doctors and authors, will provide education
and wellness articles and periodicals to national publications and publishers.
CBI was a healthcare billing company, which provided services to medical and
chiropractic clinics, both inside the Company's clinic network and to
unaffiliated doctors. The Company ceased operations of CBI on August 15, 1998.
CWRI and CWEI did not have any revenues or results from operations for the nine
months ended September 30, 1998. CBI had revenues of $91,099 and a loss from
operations of $35,274 for the nine months ended September 30, 1998. 

       Also, during May 1997 the Company entered into an agreement to become the
majority shareholder of a new company, Optimum Health Services, Inc. ("OHS"), a
Delaware company. The Company holds an 86.67% equity interest in OHS, with
13.33% ownership held by the management of OHS. OHS plans to build a network of
primary, specialty, hospital and ancillary healthcare providers, including the
Company's network of clinics, to attract managed care contracts, Medicare,
Medicaid and federal and state government contracts and self funded corporate
contracts. OHS began developing its provider network in June 1997. OHS entered
into two contracts to provide access to its network to unrelated third party
insurers in the first quarter of 1998 and is expected to continue the expansion
of its network and execute additional access contracts throughout 1998. During
the year ended December 31, 1997, OHS had losses from operations of $317,682
with no revenues. For the period ended September 30, 1998, OHS had losses from
operations of $606,084 with $18,309 in revenues.

       On May 13, 1998, the Company's Board of Directors approved the
divestiture of OHS. The plan, as amended on November 3, 1998, spins-off the
Company's interest in OHS to management. Under the plan, the Company will
convert its investment in OHS, totaling approximately $1,000,000 at October 31,
1998, into 266,736 OHS ten-year warrants at an exercise price of $0.01 per 
share. If the warrants were to be exercised at this time, the Company would own
90.2% of the current and outstanding shares of OHS (71% on a fully diluted
basis). However, the warrants cannot be exercised prior to one year nor in an
amount at any time such that the Company's ownership of OHS's common stock
would represent greater than 49% of the total OHS common stock outstanding.

       During July 1997 a subsidiary of the Company acquired all of the
operating assets and business of Oxford Health Plan's Smokenders program for
$50,000. The subsidiary, Complete Wellness Smoking Cessation, Inc.
("Smokenders") also agreed to pay Oxford Health Plan a royalty of 5% on gross
revenues for a 10 year period. In forming Smokenders, the Company contributed
$50,000 cash and a commitment to provide working capital as needed in an amount
not to exceed $198,000 in return for 88.23% of the common stock. Robert J.
Mrazek, the CEO of Smokenders and a director of the Company was to contribute
$22,000 in promissory notes in return for 11.77% of the common stock. The
promissory notes from Mr. Mrazek would accrue interest at 8%. Unpaid interest
and principle on the promissory notes was payable no later than September 30,
2000. Smokenders plans to market its smoking cessation behavioral modification
program to corporations, federal and state government agencies and individuals
as well as seek strategic alliances with pharmaceutical companies to develop an
adjunct product for nicotine replacement therapies. Additionally, the Smokenders
program is being offered in the Company's medical clinics. Smokenders started
operations in August 1997.

       On June 1, 1998, the Company and Mr. Mrazek, CEO of Smokenders, amended
the original agreement. The Company contributed to Smokenders $23,000 as
additional capital and $75,000 in cash in return for a secured note bearing
interest at 12%, payable on or before September 30, 1999. Additionally, the
Company eliminated the $22,000 promissory notes due from Mr. Mrazek as part of
the original shareholder agreement. On September 30, 1998, Mr. Mrazek resigned
his position as CEO of Smokenders; however, he remains a Board Member of the
Company. The Company also agreed to grant the managers of Smokenders up to an

<PAGE>   12

additional 3,000 shares of Smokenders stock, 1,500 of which vested at the grant
date and 1,500 of which are subject to time vesting schedules through August 1,
1999. All options are exercisable for 5 year periods, contain anti-dilution
provisions, and are not exercisable until January 1, 2000, except under certain
circumstances. The exercise of these options will result in the managers having
35% of the outstanding shares of Common Stock and the Company having 65% of the
outstanding shares of Common Stock of Smokenders. All shares of Common Stock of
Smokenders to be issued pursuant to this agreement are non-public restricted
securities exempt from regulation requirements of the Securities and Exchange
Act of 1933 as amended. In addition, the shareholders of Smokenders have certain
put and call options as well as non-mandatory repurchase options and liquidation
requirements in the event selling shareholders are not able to obtain buyers for
their stock.

       Included in the Company's September 30, 1998 consolidated financial
statements are the results of operations of this company. For the nine months
ended September 30, 1998, Smokenders had revenue of $161,532 and losses from
operations of $241,939. 

       In January 1998, the Company, through its wholly owned subsidiary
Complete Wellness Weight Management ("CWWM"), acquired 56 weight management
centers from Nutri/Systems, L.P. and a continual license to use the Nutri/System
brand name for $150,000 and the assumption of and assignment of the outstanding
obligations of the centers of approximately $380,000. Included in the Company's
September 30, 1998 consolidated financial statements are the results of
operations of CWWM from February 1, 1998 (date acquisition was completed). For
the nine months ended September 30, 1998, CWWM had revenues of $6,487,210 and
losses from operations of $878,769. As a result of the Company's decision to
sell and/or otherwise divest of the operations of CWWM on November 13, 1998, the
56 weight management centers are expected to cease operations in the next two to
six months.

       On November 13, 1998, the Company's Board of Directors authorized the
Company to sell and/or otherwise divest CWWM, a wholly owned subsidiary, of the
remaining 38 of the original 56 weight loss centers owned and operated by CWWM.
This divestiture, along with previous divestitures, is expected to allow
management to focus on the Company's core business, integrating traditional and
complementary/alternative medical centers, and significantly improve the
Company's operating results in future periods. The Company anticipates that the
weight loss programs offered by CWWM will continue to be offered by its
Integrated Medical Centers after the divestiture. Management is in the process
of developing a plan to implement the Board's action and is not able, at this
time, to estimate the financial impact attributable to the CWWM divestiture.
However, management believes the ultimate impact will have a material adverse
effect on the Company's consolidated financial position and results of
operations. The estimates thereof are expected to be determinable by December
31, 1998.

       In July 1998, the Company purchased Accident and Industrial Injury
Associates ("AIIA"), a chiropractic preferred provider network of approximately
2,700 providers located throughout the United States in exchange for warrants
to purchase 20,000 shares of its common stock at $3.31 per share which expire
after 5 years and contain certain piggyback registration rights. The Company 
accounted for this transaction under the purchase method. The primary assets
acquired were members of the network, databases related to the operations
thereof, and two alternative care preferred provider contracts. The Company
contemporaneously sold 30% of its interest in AIIA to OHS in exchange for a
$12,000 note bearing interest at 6.1% per annum, due January 31, 2000. OHS will
manage the network on behalf of the Company and receive an additional 20%
interest in AIIA over three years as compensation for such services. The
Company has committed to fund the initial working capital requirements of AIIA,
up to approximately $10,000, after which, the Company and OHS will fund all
future working capital requirements equally.

       As a result of the revised spin off plan with OHS, as amended on November
3,1998, as discussed above, the Company agreed to sell OHS an additional 25% of
AIIA for an additional $6,000 note bearing interest at 6.1% pre annum. The
amended agreement establishes the new company, Optimum Preferred Provider
Organization ("OPPO"), which is initially 55% owned by OHS and 45% owned by the
Company. OHS will manage the network and will receive an additional 20% interest
in OPPO over three years as compensation for such services at which time OHS
will own 75% of OPPO.

<PAGE>   13

       The Company is seeking additional financing in the form of senior
cumulative convertible preferred stock, the net proceeds of which are expected
to be used to redeem the Company's Senior Convertible Preferred Stock, repay
current debt, fund the development of additional Integrated Medical Centers, and
to fund general corporate working capital requirements. Although no binding
agreements have been entered into as of November 15, 1998, the Company
anticipates utilizing the services of on or more investment advisor/banker to
assist the Company in consummating this financing, which is expected to be
exempt from the Securities and Exchange Act of 1993, as amended, under the
provisions of Rule 144.



<PAGE>   14
RESULTS FROM OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO 
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997

       Revenue. During the three and nine months ended September 30, 1998 the
Company had revenues of $5,372,975 and $20,847,009 respectively, as compared to
$2,484,366 and $5,289,068 for the three and nine months ended September 30,
1997. The increase of $2,888,609, or 116.3%, for the three month period was due
primarily to the net addition of 24 Integrated Medical Centers after September
1997, which contributed $1,662,094 of the increase, the addition of the weight
loss subsidiary, which contributed $1,183,258 of the increase and other
subsidiaries which contributed $17,038 of the increases. The increase of
$15,557,941, or 294.2% for the nine month period was due primarily to the net
addition of 24 Integrated Medical Centers after September 1997, which
contributed $8,875,187 of the increase, the addition of the weight management
subsidiary which contributed $6,487,210 of the increase and other subsidiaries
which contributed 195,544 of the increase.

       Salary and Consulting Costs. During the three and nine months ended
September 30, 1998 the Company incurred salary and consulting costs of $808,572
and $4,548,467 respectively, as compared to $873,488 and $1,975,420 for the
three and nine months ended September 30, 1997. The decrease of $64,916 for the
three month period was due to decreased utilization of consultants in the period
and an increase of $2,573,047 for the nine month period was due to an increase
in costs resulting from the hiring of additional employees in the
administrative capacity at the corporate headquarters and the medical capacity
at the clinics, the addition of 24 Integrated Medical Centers after September
1997, the additional employees associated with the new subsidiaries, primarily
the weight management centers, and stock grants totaling 58,750.

       Management Fees. During the three and nine months ended September 30,
1998 the Company incurred management fees of $1,871,605 and $6,869,608
respectively, as compared to $1,329,597 and $2,571,362 for the three and nine
months ended September 30, 1997. These are fees that are paid to the affiliated
chiropractors' Admincorps for managing the day to day operations of the
Integrated Medical Centers. The increase of $542,008 for the three month period
and the increase of $4,298,246 for the nine month period was due primarily to
the net addition of 24 Integrated Medical Centers after September 1997.

       Rent. During the three and nine months ended September 30, 1998 the
Company incurred rent expenses of $679,878 and $1,933,592 respectively, as
compared to $45,771 and $156,506 for the three and nine months ended September
30, 1997. Rent consists of amounts incurred for administrative, medical office
space, weight management center office space and certain equipment leased by the
Company at corporate headquarters, the medical clinics, and the weight
management centers. Rent for space and equipment for the medical clinics is paid
when the accounts receivable of the medical clinic are collected by the medical
clinic. The increase of $634,107 for the three month period and the increase of
$1,777,086 for the nine month period was due primarily to the net addition of 24
Integrated Medical Centers after September 1997, the move to new corporate
headquarters and office space and clinic rents for new subsidiaries, primarily
the weight management centers, which initiated operations after September 1997.

       Advertising and Marketing. During the three and nine months ended
September 30, 1998 the Company incurred advertising and marketing expenses of
$223,251 and $829,104 respectively, as compared to $21,314 and $74,199 for the
three and nine months ended September 30, 1997. The increase of $201,937 for the
three month period and the increase of $754,905 for the nine month period was
attributed to additional national advertising for clinic recruitment and
national advertising for the weight management and smoking cessation
subsidiaries.

       Bad Debt Expense. During the three and nine months ended September 30,
1998 the Company bad debt expenses of $533,541 and $3,008,863 respectively, as
compared to $305,782 and $778,926 for the three and nine months ended September
30, 1997. The increase of $227,759 for the three month period and the increase
of $2,229,937 for the nine month period was due to the increase in revenue for
the periods and continued aging of the Company's accounts receivables.

<PAGE>   15

       Network Development Costs. All network development costs relate to the
activities of Optimum Health Services, Inc. OHS is developing a network of
health care providers with the intention of entering into contracts with managed
care entities for the provision of medical services. During the three and nine
months ended September 30, 1998, the Company's OHS subsidiary experienced
network development costs of $178,408 and $606,084 respectively.

       General and Administrative. During the three and nine month periods ended
September 30, 1998, the Company incurred general and administrative expenses of
$2,619,432 and $4,745,175 respectively, as compared to $682,280 and $1,711,561
for the three and nine months ended September 30, 1997. The increase of
$1,937,152 for the three month period was due primarily to the net addition of
24 Integrated Medical Centers after September 1997 and two new subsidiaries,
primarily the weight management centers, and consists of increases of (i)
$110,780 in insurance costs, (ii) $176,540 in legal and accounting costs, (iii)
$123,810 in travel and entertainment costs and (iv) $1,526,022 in various other
corporate costs such as automobile, telephone, postage and printing and
reproduction, equipment rental, supplies, professional development, recruiting
and repairs. The increase of $3,033,614 for the nine month period was due
primarily to the net addition of 24 Integrated Medical Centers after September
1997 and two new subsidiaries, primarily the weight management centers, and
consists of increases of (i) 174,438 in insurance costs, (ii) $732,000 in legal
and accounting costs, (iii) $326,432 in travel and entertainment costs, and (iv)
$1,800,468 in various other corporate costs such as automotive, telephone,
postage, printing and reproduction, equipment rental, supplies, professional
development, recruiting and repairs.

       Depreciation and Amortization. During the three and nine months ended
September 30, 1998, the Company incurred depreciation and amortization expense
of $38,430 and $148,338, respectively, as compared to $18,203 and $54,506 for
the three and nine months ended September 30, 1997. The increase of $20,227 for
the three month period and $93,832 for the nine month period resulted from the
addition of fixed assets, primarily computer equipment, which tend to have
depreciable lives of five years or less, the addition of three new subsidiaries,
and the acceleration of depreciation on assets formerly used in CWC, LLC.

       Operating Loss. The consolidated operating loss of the Company increased
from $792,069 and $2,033,412 for the three and nine months ended September 30,
1997 to $2,328,468 and $3,300,240 for the three and nine months ended September
30, 1998. The loss, excluding the operations of OHS and CBI, would have been
$655,487 and $1,852,579 three and nine months ended September 30, 1997 and
$2,127,160 and $2,658,882 for the three and nine months ended September 30,
1998. The net decline in operating results relates mostly to the weight loss
subsidiary, which lost $1,142,226 and $878,769 for the three and nine months
ended September 30, 1998, the smoking cessation subsidiary, which lost $70,426
and $241,939 for the three and nine months ended September 30, 1998, and
unabsorbed corporate overhead of $862,966 and $152,284 for the three and nine
months ended September 30, 1998.

       Interest Expense. During the three and nine months ended September 30,
1998 the Company had interest expense of $0 and $1,523, respectively, as
compared to $3,366 and $28,235 for the three and nine months ended September 30,
1997. The decrease of $3,366 for the three month period resulted from the
retirement of notes repaid and the decrease if $26,712 for the nine month period
resulted from the retirement of the bridge financing loan repaid in February
1997.

       Interest Income. During the three and nine months ended September 30,
1998 , the Company had interest income of $2,144 and $28,954, respectively as
compared to $35,229 and $82,599 for the three and nine month periods ended
September 30, 1997. The decrease of $33,085 for the three month period and the
decrease of $53,645 for the nine month period resulted from a lower amount of
invested funds in 1998 as compared to the same periods in 1997.

       Minority Interest. During 1996, the losses incurred by CWC, LLC allocable
to the minority interest owners of CWC, LLC eliminated all net equity of the
minority interest owners. Accordingly, the Company has reflected 100% of the
operations of the CWC, LLC in its results of operations, which approximates a
loss of $65,404 and a loss of $166,704 for the three and nine months ended
September 30, 1998, respectively, as compared to a loss of $73,925 and $150,643
for the three and nine month periods ended September 30, 1997. In 

<PAGE>   16
addition, the Company's investments in Complete Wellness Smoking Cessation, Inc.
represents 100% of the equity funding of that entity. The Company has reflected
100% of the operations, assets and liabilities of the subsidiary due to the lack
of minority interest investment into the Company, which approximates $(241,939),
$85,442 and $406,366, respectively, for the nine months ended September 30, 1998
and as of that date. The Company's investment in OHS was made in conjunction
with an investment by the minority interest owners. The Company has included the
effects of an allocation of approximately $178,409 and $606,084 of the net
losses incurred by OHS for the three and nine months ended September 30, 1998
based on the minority interest owners investment in and percentage ownership of
OHS and limitations due to the limited net equity of the minority interest
owners.

Inventory. The Company's inventory has increased from $39,483 to $634,689
during 1998, primarily due to the operations of CWWM.

LIQUIDITY AND CAPITAL RESOURCES 

       The Company has experienced net losses, negative cash flow from
operations and an accumulated deficit each month since its inception. For the
three and nine months ended September 30, 1998, the Company had incurred a net
loss of $2,276,706 and $3,274,130, respectively, as compared to $769,348 and
$1,986,543 for the three and nine months ended September 30, 1997. At September
30, 1998, the Company had working capital of $645,763 and an accumulated deficit
of $8,638,765. Net cash used in operations for the nine months ended September
30, 1998 was $3,955,743, as compared to $2,566,885 for the nine months ended
September 30, 1997. Net cash used in operations exclusive of OHS and CBI was
$3,314,385 for the nine months ended September 30, 1998 as compared to
$2,386,552for the nine months ended September 30, 1997. Negative cash flow for
each period was attributable primarily to net losses in each of the periods and
increases in cash flow for each period was attributable primarily to increases
in accounts receivable net of accounts payable and other current liabilities.
For the nine months ended September 30, 1998 the Company used $114,255, as
compared to $332,223 for the nine months ended September 30,1997, for the
purchase of equipment.

       The Company intends to develop no fewer than 10 additional medical
clinics by December 31, 1998. The average cost to the Company to develop a
medical clinic is approximately $15,000.

       Since the formation of OHS in May 1997, the Company has invested
approximately $782,145 to finance the costs of developing a provider network. On
November 3, 1998, the Company's Board of Directors revised the plan to spin-off
this subsidiary. Under the amended plan, the Company will exchange its OHS
common stock and advances to OHS, totaling approximately $1,000,000 at October
31, 1998, for 266,736 ten-year warrants at an exercise price of $0.01 per share,
which can not be exercised prior to November 3, 1999, or to the extent the
Company would hold more than 49% of the total outstanding common stock of OHS.

       Recovery of amounts funded to OHS is dependent upon OHS's successful
implementation of its business plan and ultimate liquidity event either through
a private sale of the placement of equity securities in a public or private
transaction whereby the Company could become a selling shareholder.

       The Company has committed to fund future working capital requirements of
Smokenders and AIIA totaling $98,000 and $25,000, respectively, of which a total
of $43,251 has been funded through September 30, 1998 and is reflected in the
accompanying condensed consolidated financial statements. In addition, the
Company is obligated to pay royalty fees of 5% of total revenues to Oxford
Health Plan and the $26,000 per annum to the founders of Smokenders as a result
of its acquisitions of Smokenders. This obligation is payable in annual
installments over a 10 year period.

       The Company has entered into employment agreements with certain key
employees which, generally, provide for continued employment though August 31,
2001 at an aggregate annual compensation level of $150,000. In the event the
employees subject to such agreements were terminated by the Company for reasons
other than "with cause", the employees would receive 6 to 12 months compensation
and benefits upon separation. The Company has not obtained key man life
insurance for employees subject to employment agreements. 
<PAGE>   17
       In addition, the Company has entered into various consulting agreements
which, generally, provide form payment of "finders fees" of $1,500 to $4,000 for
each chiropractic clinic identified by the consultant and integrated by the
Company subject to certain maximum amounts ranging from up to $1,000,000 per
consultant. Certain consulting agreements also provide for the company to pay
royalties ranging from 1% to 10% of gross collections at Integrated Medical
Centers identified by the consultant for periods ranging from 5 to 25 years
after integration. One consulting contract also provides for the payment of 1%
of any increases in gross cash collections over the preceding 12 month period,
at any Integrated Medical Center which the consultant provides specific services
to.

       The Company is in the process of developing a financial plan to sell
and/or otherwise divest CWWM, a wholly owned subsidiary, of 38 weight management
centers owned and operated by CWWM in addition to the 18 CWWM weight loss
centers closed prior to September 30, 1998. Management is not able to estimate
the financial impact of this action at this time, as the ultimate form of
divestiture, costs to exit, and proceeds form the sale of the assets if any, is
neither known nor estimable. However, Management believes the ultimate impact
will have a material adverse impact on the Company's financial position, results
of operations, and liquidity.

The Company or its affiliates currently have seven (7) legal proceedings in
various stages of litigation. Five of these actions involve suits brought by
former employees or vendors of various Integrated Medical Centers of Affiliated
Chiropractor's Admincorps, seeking recovery of moneys allegedly owned for goods
or services rendered to the Integrated Medical Center of Affiliated
Chiropractor's Admincorps. The damages claimed in these actions range from
$2,800 to approximately $26,000. The Company is defending all such actions and
believes none is meritorious, as all such actions are based upon employment or
vendor relationships with the Integrated Medical Center of Admincorps, and not
directly with the Company. In addition, judgments have been rendered in actions
against several of the Company's weight management subsidiary.

       Another case currently in litigation is an action brought by an attorney
seeking damages against the Company for unpaid legal fees in an amount of
$13,500. The Company contests the validity and reasonableness of the fees
incurred and intends to defend the action. The final action currently in
litigation is a subrogation action related to a fire loss in California. In that
matter, an Affiliated Chiropractor's Admincorp entered a lease for certain
property that was later destroyed by fire. The Landlord's property insurer has
brought an action against the Company and a repairman hired by the Admincorp,
seeking subrogated recovery for losses related to the fire. The Company has
retained counsel and intends to vigorously defend the action.

       The Company has initiated legal action against two Florida doctors for
breach of their agreement with the Company. Though its Compliance Program, the
Company has initiated legal action to acquire the patient records from four (4)
Administrators of Integrated Medical Centers which were operated under contracts
that have been terminated for cause.

       As of November 16, 1998, the Company, does not have an external source of
liquidity. The Company believes its existing working capital and operations will
provide sufficient funds to meet its short term liquidity requirements until
such time as the proceeds from the private placement are available. 
       The Company is currently under a federal investigation whose ultimate
outcome can not be reasonably predicated at this time. If the Company is found
to be in violation of federal or state laws, the Company could be subject to
substantial monetary fines, civil and criminal penalties, and exclusion from
federal and state reimbursement programs. The ultimate cost to the Company to
defend itself and any settlement, fine, or penalty imposed could have a material
adverse effect on the Company's financial position, results of operations and
liquidity.

The Company is seeking additional financing in the form of senior cumulative
convertible preferred stock, the net proceeds of which are expected to be used
to redeem the Company's Senior Convertible Preferred Stock, repay current debt,
fund the development of additional Integrated Medical Centers, and to fund
general corporate working capital requirements. Although no binding agreements
have been entered into as of November 16, 1998, the Company anticipates
utilizing the services of on or more investment advisor/banker to assist the
Company in consummating this financing, which is expected to be exempt from the
Securities and Exchange Act of 1993, as amended, under the provisions of Rule
144.

<PAGE>   18

Net Operating Loss

       At December 31, 1997, the Company and CWC, LLC's wholly owned
subsidiaries had combined net operating loss carryforwards for income tax
purposes of approximately $2,571,922, which expire $192,000 in 2010, $921,000 in
2011, and $1,458,922 in 2012. The Company files a consolidated federal tax
return with its wholly owned subsidiaries. CWC, LLC is not included in this tax
return. CWC, LLC is treated as a partnership for tax purposes and its gains and
losses are reflected on each member's individual federal and state income tax
returns. Further, CWC, LLC does not file a consolidated tax return with its
subsidiaries. Accordingly, the use of substantially all of the combined net
operating loss carryforwards will be limited to use to offset future taxable
income of each separate subsidiary in proportion to its share of the tax losses
generated to date. In addition, these carryforwards may be significantly limited
under the Internal Revenue Code of 1986, as amended, as a result of ownership
changes resulting from the Company's Preferred Stock financing and other equity
offerings. A valuation allowance of approximately $457,592 has been established
at December 31, 1997 to offset any benefit from the net operating loss
carryforwards, as it cannot be determined when or if the Company will be able to
utilize the net operating losses.

       Seasonality The Company believes that the patient volumes at its
Integrated Medical Centers are not significantly affected by Seasonality.
However, the weight loss subsidiary does experience significant decreases in
patient volumes of up to 50% during the summer months of June through September.



<PAGE>   19


PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS                   
            Not Applicable
ITEM 2.     CHANGES IN SECURITIES
            Not Applicable
ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
            Not applicable
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            Not Applicable
ITEM 5.     OTHER INFORMATION
            Not applicable
ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K
            9/21/98 Item 5 Other Events - Approval of New Board Seats 
            8/21/98 Item 5 Other Events - Board Meeting 
            7/10/98 Item 5 Other Events - Issuance of Common Stock


<PAGE>   20

SIGNATURES

       Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized. Date: August 10, 1998

                                                Complete Wellness Centers,
                                                Inc.

                                                By  /s/ Michael T. Brigante
                                                ---------------------------
                                                     Michael T. Brigante-
                                                    Chief Financial Officer