<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                          COMMISSION FILE NO. 0-23311

                                RADIOLOGIX, INC.
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                            <C>
                   DELAWARE                                      75-2648089
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                      Identification No.)
</Table>

                           3600 JP MORGAN CHASE TOWER
                                2200 ROSS AVENUE
                              DALLAS, TEXAS 75201
          (Address of principal executive offices, including zip code)

                                 (214) 303-2776
              (Registrant's telephone number, including area code)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<Table>
<Caption>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<S>                                            <C>
       Common Stock, $0.0001 Par Value                    American Stock Exchange
</Table>

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None

     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 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.  [X]

     The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was $232,979,547, based on the closing sales
price of $11.92 of the registrant's Common Stock on the American Stock Exchange
on March 22, 2002.

     As of March 22, 2002, 20,378,974 shares of the registrant's Common Stock
were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the proxy statement for the 2002 Annual Meeting of Stockholders
of the registrant are incorporated by reference in Part III.
--------------------------------------------------------------------------------
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<PAGE>

                                RADIOLOGIX, INC.

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
FORM 10-K ITEM
                                   PART I
Item 1.   Business....................................................    2
Item 2.   Properties..................................................   15
Item 3.   Legal Proceedings...........................................   15
Item 4.   Submission of Matters to a Vote of Security Holders.........   15

                                  PART II
Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................   15
Item 6.   Selected Financial Data.....................................   17
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   18
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk........................................................   41
Item 8.   Financial Statements and Supplementary Data.................   42
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure....................................   73

                                  PART III
Item 10.  Directors and Executive Officers of the Registrant..........   73
Item 11.  Executive Compensation......................................   73
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management and Related Stockholder matters..................   73
Item 13.  Certain Relationships and Related Transactions..............   73

                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
          8-K.........................................................   73
</Table>

                                        1
<PAGE>

                                     PART I

ITEM 1.  BUSINESS.

                    THE DIAGNOSTIC IMAGING SERVICES INDUSTRY

OVERVIEW

     Diagnostic imaging involves the use of less-invasive techniques to generate
representations of internal anatomy that can be recorded on film or digitized
for display on a video monitor. Diagnostic imaging procedures facilitate the
early diagnosis of diseases and disorders, often minimizing the cost and amount
of care required for patients and healthcare providers. Diagnostic imaging
procedures include: magnetic resonance imaging (or MRI), computed tomography (or
CT), positron emission tomography (or PET), nuclear medicine, ultrasound,
mammography, bone densitometry (or DEXA), general radiography (or X-ray) and
fluoroscopy.

     The Centers for Medicare & Medicaid Services estimate that national
healthcare spending in 2000 was approximately $1.3 trillion and expect that
spending will grow, on average, in excess of 7% annually through 2008. The
American College of Radiology estimates that over 300 million diagnostic imaging
procedures were performed in the United States during 1999, the most recent year
for which data are available, generating estimated revenue of over $60 billion,
or 5% of total healthcare spending. Furthermore, the American College of
Radiology estimates that over 60% of this diagnostic imaging revenue was
generated on an outpatient basis.

     We believe that the diagnostic imaging services industry will continue to
grow as a result of:

     The Escalating Demand for Healthcare Services from an Aging
Population.  There has been strong demand for healthcare services due to an
aging population in the United States. According to the United States Census
Bureau, one of the fastest growing segments of the population is the group over
65 years of age, which is expected to increase as much as 16% from 2000 to 2010.
We believe the aging population will help drive the growth for diagnostic
imaging procedures over the coming years because diagnostic imaging utilization
tends to increase as a person ages.

     The Increasing Role of Diagnostic Imaging in Healthcare.  Advanced imaging
equipment and modalities are allowing physicians to diagnose a wide variety of
diseases and injuries quickly and accurately without exploratory surgery or
other surgical or invasive procedures, which are usually more expensive, involve
greater risk to patients and result in longer rehabilitation time. We believe
that future technological advances will continue to enhance the ability of
radiologists to diagnose and influence treatment. For example, experimental MRI
techniques, such as magnetic resonance spectroscopic imaging, are used to show
the functions of the brain and to investigate how epilepsy, AIDS, brain tumors,
Alzheimer's disease and other abnormalities affect the brain. In addition,
advanced imaging systems are gaining wider acceptance among payors, as they are
increasingly seen and accepted as a tool for reducing long-term healthcare
costs.

     Greater Consumer Awareness of and Demand for Preventive Diagnostic
Screening.  Diagnostic imaging is increasingly being used as a screening tool
for preventive care. Consumer awareness of and demand for diagnostic imaging as
a less-invasive and preventive screening method has added to the growth in
diagnostic imaging procedures. Consumers are now more aware of the advanced
procedures that are available to them and are requesting them as preventive
procedures from their physicians and healthcare providers. We believe that, with
increased technological advancements, there will be greater consumer awareness
of and demand for diagnostic imaging procedures as preventive and less-invasive
procedures for early diagnosis of diseases and disorders.

     An Increased Number of High-End Procedures That Utilize Advancements in
Technology.  Recent technological advancements include: magnetic resonance
spectroscopic imaging, which can differentiate malignant from benign lesions;
magnetic resonance angiography, which can produce three-dimensional images of
body parts and assess the status of blood vessels; and enhancements in
teleradiology systems,

                                        2
<PAGE>

which permit the digital transmission of radiological images from one location
to another for interpretation. Additional improvements in imaging technologies,
contrast agents and scanning capabilities are leading to new, less invasive
methods of diagnosing diseases. For example, these improvements are aiding in
detecting blockages in the heart's vital arteries, liver metastases, pelvic
diseases and certain vascular abnormalities without exploratory surgery.

DIAGNOSTIC IMAGING MODALITIES

     The principal diagnostic imaging modalities include the following:

     Magnetic Resonance Imaging.  MRI utilizes a strong magnetic field in
conjunction with low energy electromagnetic waves that are processed by a
computer to produce high-resolution, three-dimensional, cross-sectional images
of body tissue, including the brain, spine, abdomen, heart and extremities.
Unlike CT and conventional X-rays, MRI does not utilize ionizing radiation,
which can cause tissue damage in high doses. A typical MRI examination takes
from 20 to 45 minutes. MRI systems are priced in the range of $0.9 million to
$2.5 million.

     Computed Tomography.  CT utilizes a computer to direct the movement of an
X-ray tube to produce multiple cross-sectional images of a particular organ or
area of the body. CT is used to detect tumors and other conditions affecting
bones and internal organs. It is also used to detect the occurrence of strokes,
hemorrhages and infections. CT provides higher resolution images than
conventional X-rays, but generally not as well-defined as those produced by
magnetic resonance. A typical CT examination takes from 15 to 45 minutes. CT
systems are priced in the range of $0.3 million to $1.2 million.

     Positron Emission Tomography.  PET utilizes a scanner to record signals
emitted by compounds with signal-emitting tracers after such compounds are
injected into a patient's body. A scanner records the signals as they travel
through the body and collect in the various organs targeted for examination. A
computer assembles the signals into actual images. PET has proven effective in
the detection and tracking of cancer (including lung, colorectal, breast and
prostate cancers), heart disease and brain disorders, including Alzheimer's
disease, Parkinson's disease and seizure disorders. PET systems are priced in
the range of $1 million to $1.4 million.

     Nuclear Medicine.  Nuclear medicine utilizes short-lived radioactive
isotopes that release small amounts of radiation that can be recorded by a gamma
camera and processed by a computer to produce an image of various anatomical
structures or to assess the function of various organs such as the heart,
kidneys, thyroid and bones. Nuclear medicine is used primarily to study anatomic
and metabolic functions.

     Ultrasound.  Ultrasound imaging utilizes high-frequency sound waves to
develop images of internal organs, fetuses and the vascular system. Ultrasound
has widespread applications, particularly for procedures in obstetrics,
gynecology and cardiology.

     Mammography.  Mammography is a specialized form of radiology utilizing low
dosage X-rays to visualize breast tissue and is the primary screening tool for
breast cancer. Mammography procedures and related services assist in the
diagnosis and treatment planning for breast cancer.

     Bone Densitometry.  Bone densitometry uses an advanced technology called
dual-energy X-ray absorptiometry, or DEXA, which safely, accurately and
painlessly measures bone density and the mineral content of bone for the
diagnosis of osteoporosis and other bone diseases.

     General Radiography (or X-ray) and Fluoroscopy.  X-rays utilize roentgen
rays to penetrate the body and record images of organs and structures on film.
Fluoroscopy utilizes ionizing radiation combined with a video viewing system for
real time monitoring of organs. X-ray and fluoroscopy are the most frequently
used imaging modalities. Digital X-ray systems add computer image processing
capability to traditional X-ray images.

                                        3
<PAGE>

                                  OUR COMPANY

     We are a leading national provider of diagnostic imaging services through
our ownership and operation of free-standing, outpatient diagnostic imaging
centers. We utilize sophisticated technology and technical expertise to perform
a broad range of imaging procedures, such as MRI, CT, PET, nuclear medicine,
ultrasound, mammography, DEXA, X-ray and fluoroscopy. We operate 120 diagnostic
imaging centers located in 18 states, with a concentration of diagnostic imaging
centers in markets located in California, Florida, Kansas, Maryland, New York,
Texas and Virginia. We offer multi-modality imaging services at 70 of our
diagnostic imaging centers, which provide patients and referring physicians
access to advanced diagnostic imaging services in one convenient location.

     We also provide administrative, management and information services to
certain radiology practices that provide professional services in connection
with our diagnostic imaging centers and to hospitals and radiology practices
with which we operate joint ventures. The services we provide leverage our
existing infrastructure and improve radiology practice or joint venture
profitability, efficiency and effectiveness.

     For the year ended December 31, 2001, we performed over 1.9 million
diagnostic imaging procedures and generated service fee revenue of $276.7
million. In addition, we generated cash flow from operations of $41 million for
the year ended December 31, 2001. We have achieved substantial growth, having
increased service fee revenue and EBITDA at compounded annual growth rates of
23% and 16%, respectively, from the year ended December 31, 1998 through the
year ended December 31, 2001. Over the same period, we achieved average annual
same center revenue growth of 12.2%.

COMPETITIVE STRENGTHS

     We believe that we are well-positioned to take advantage of favorable
demographic and diagnostic imaging services industry trends by capitalizing on
the following strengths:

     Our Leading Market Position in Our Core Markets.  We have a concentrated
presence in our core markets, which enables us to offer patients, referring
physicians and payors a higher degree of responsiveness and convenience than
independent operators or hospitals. We provide flexible scheduling, convenient
locations and expanded hours of operation, as well as the expeditious delivery
of radiology reports to referring physicians. The 89 centers in our core markets
generated 87% of our service fee revenue for the year ended December 31, 2001.
We believe that payors contract with us because of our strong market presence,
the high quality of our services and our ability to provide a single point of
contact and centralized administration. In addition, our leading position
enables us to increase our procedure volume, optimize equipment utilization,
benefit from economies of scale in purchasing and negotiation of payor contracts
and leverage our administrative and information technology infrastructure in our
core markets.

     Comprehensive, Leading-Edge Diagnostic Imaging Services.  We provide a
broad range of diagnostic imaging services within our core markets. Our 70
multi-modality centers enable us to offer one-stop shopping to patients,
referring physicians and payors. In our experience, referring physicians and
payors prefer to enter into relationships with diagnostic imaging providers that
offer a broad spectrum of services at convenient locations, benefiting referring
physicians and patients who require more than one type of diagnostic imaging
procedure. From January 1, 1999 to December 31, 2001, we added over $70 million
of equipment and leasehold improvements through purchase or lease to enhance our
diagnostic imaging centers and increase the number of modalities offered per
center to provide services demanded by patients, referring physicians and
payors. Our multi-modality offerings, coupled with the introduction of
technologically advanced imaging equipment, have contributed to an increase in
our volume of procedures and an increase in the average revenue per technical
procedure from $87.61 in 1998 to $112.65 for the year ended December 31, 2001.

     Diversified Payor Mix and Multi-Modality Service Offerings.  Our revenue
base comprises a diverse mix of payors, including managed care organizations,
traditional indemnity providers, Medicare, Medicaid and private and other
payors. For the year ended December 31, 2001, revenue generated at our
diagnostic

                                        4
<PAGE>

imaging centers consisted of 62% from commercial third-party payors, 28% from
Medicare and Medicaid and 10% from private and other payors. In addition, we
have experienced relatively stable pricing, with modest increases in most
markets and across most modalities. We believe our payor diversity and multi-
modality service offerings mitigate our exposure to possible unfavorable
reimbursement trends within any one payor class and to modality-specific rate
changes.

     Strong Relationships with Leading Radiology Practices.  In each of our core
markets, we contract with leading radiology practices to provide professional
radiology services in connection with our diagnostic imaging centers. We believe
that our affiliation with these leading radiology practices enhances our
reputation with referring physicians and their patients. We also provide
administrative, management and information services to certain radiology
practices. In light of a recent shortage of radiologists, we believe that our
contractual relationships with large, established radiology practices are
important to maintaining our high quality service.

     Experienced Management Team.  We have a highly experienced management team
with an average of approximately 20 years of healthcare services experience.
Management has successfully generated growth by increasing same center revenue
and executing a disciplined expansion strategy.

BUSINESS STRATEGY

     Our strategy is to enhance our strong market presence and to increase
revenue and cash flow by continuing to pursue the following business strategy:

     Increase Procedure Volume and Maximize Revenue at Existing Centers.  We
intend to enhance our operations and increase procedure volume and revenue at
our existing centers by:

     - expanding referring physician, hospital and payor relationships;

     - increasing patient referrals through targeted marketing efforts; and

     - leveraging our multi-modality offerings to increase the number of
       high-end procedures performed.

     Maintain Market Leadership in Our Core Markets.  We intend to maintain our
leading market position in our core markets by pursuing strategic "tuck-in"
acquisitions and developing de novo centers. In addition, we believe that we
will have opportunities to increase the use of our diagnostic imaging services
through additional joint venture or outsourcing arrangements with hospitals, in
part due to recent federal healthcare regulatory changes that favor outpatient
centers that are managed or owned in joint venture or outsourcing arrangements
with third parties.

     Maximize Equipment Utilization and Enhance Service Offerings.  Seventy of
our centers provide multi-modality imaging services, including various
combinations of MRI, CT, PET, nuclear medicine, ultrasound, mammography, DEXA,
X-ray and fluoroscopy. We intend to maximize our equipment utilization by
adding, upgrading and re-deploying equipment where we experience excess demand
and by consolidating, divesting or closing unprofitable centers or markets. In
addition, we intend to enhance our service offerings by adding, upgrading and
replacing our diagnostic imaging equipment to meet referring physician and
patient demands.

OPERATION OF CENTERS

     At December 31, 2001, we operated 120 diagnostic imaging centers located in
18 states. We utilize sophisticated technology and technical expertise to
perform a broad range of imaging procedures such as MRI, CT, PET, nuclear
medicine, ultrasound, mammography, DEXA, X-ray and fluoroscopy. As part of
operating our diagnostic imaging centers, we purchase and maintain diagnostic
imaging equipment, hire and train employees, schedule patient appointments,
perform patient procedures, process bills, keep records and obtain and maintain
permits, licenses and insurance.

     Referrals for diagnostic imaging services at our centers come from
referring physicians, including primary care physicians and specialists. In our
experience, these referrals are influenced by individual

                                        5
<PAGE>

patients acting as consumers as well as by health systems, managed care
organizations, insurers and other entities representing large groups of
patients. Offering a wide spectrum of modalities at a diagnostic imaging center
enables us to offer "one-stop shopping" to referring physicians and patients.
For example, a physician may refer a patient for an X-ray. If the X-ray, when
interpreted by a radiologist who is providing professional services at the
diagnostic imaging center, reveals that further diagnostic imaging (for example,
a CT procedure) is necessary, the radiologist can confer with the referring
physician and the patient can undergo the CT procedure at the same center. Thus,
by offering both X-ray and CT modalities at the diagnostic imaging center, the
patient can avoid multiple visits, thereby decreasing costs and time delays.

     Managed care organizations, insurers and other entities often represent
large groups of patients who are dispersed throughout a wide geographic area.
These entities influence referring physicians' decisions by entering into
provider agreements with, or otherwise selecting or approving, healthcare
service providers, including diagnostic imaging service providers. Our
experience is that entities representing large groups of patients often prefer
to enter into managed care contracts with providers who offer a broad array of
diagnostic imaging services throughout a corresponding geographic area. We have
developed our diagnostic imaging networks, in part, to be selected as a
preferred provider for these entities more frequently, which may increase
physician referrals to our centers.

     To increase the convenience of our diagnostic imaging centers to patients,
we implement market-wide scheduling systems where practical. In these instances,
each diagnostic imaging center in a market area can access the patient
appointment calendar of other centers in the market area. Each center also can
schedule patient appointments at every other center within the network. This
system permits each of our centers within a market area to efficiently allocate
time available at our diagnostic imaging centers within that market area and to
meet a patient's appointment time, date or location preferences.

     We focus on providing quality patient care and service to ensure patient
and referring physician satisfaction. Our development of comprehensive radiology
networks permits us to invest in technologically advanced imaging equipment,
including MRI, open MRI, spiral CT and PET. Our consolidation of diagnostic
imaging centers into coordinated networks improves response time, increases
overall patient accessibility, permits us to standardize certain customer
relations procedures and permits us to develop "best practices" for our
diagnostic imaging centers. We seek the input and participation of the
contracted radiology practices to which we provide administrative, management
and information services to develop best practices and to improve productivity
and the quality of services. By focusing on further improving and, where
appropriate, standardizing the operations of our diagnostic imaging centers, we
believe that we can increase patient and referring physician satisfaction, which
should lead to increased referrals and increased utilization of our diagnostic
imaging centers.

     Payment for diagnostic imaging services comes primarily from commercial
third-party payors, governmental payors (including Medicare and Medicaid) and
private and other payors. Our centers are principally dependent on our ability
to attract referrals from primary care physicians, specialists and other
healthcare providers. The referral often depends on the existence of a
contractual arrangement with the referred patient's health benefit plan. For the
year ended December 31, 2001, approximately 9% of our revenue generated at our
diagnostic imaging centers was generated from capitated arrangements. The
following table illustrates our approximate payor mix, based on revenue
generated at our diagnostic imaging centers, for the year ended December 31,
2001:

<Table>
<Caption>
                                                               PERCENT OF
PAYOR                                                         TOTAL REVENUE
-----                                                         -------------
<S>                                                           <C>
Commercial..................................................       62%
Medicare and Medicaid.......................................       28%
Private and Other...........................................       10%
</Table>

                                        6
<PAGE>

CONTRACTED RADIOLOGY PRACTICES

     We contract with radiology practices to provide professional services,
including supervision and interpretation of diagnostic imaging procedures
performed in our diagnostic imaging centers. We believe that we do not engage in
the practice of medicine nor do we employ physicians. The radiology practices
maintain full control over the provision of professional radiological services.
The contracted radiology practices generally have outstanding physician and
practice credentials and reputations; strong competitive market positions; a
broad sub-specialty mix of physicians; a history of growth and potential for
continued growth; and a willingness to embrace our strategy for the delivery of
diagnostic imaging services.

     We have two models by which we contract with radiology practices: a
comprehensive services model and a technical services model. Under our
comprehensive services model, we enter into a long-term agreement with a
radiology practice group (typically 40 years). Under this arrangement, in
addition to obtaining technical fees for the use of our diagnostic imaging
equipment and the provision of technical services, we provide management
services and receive a fee based on the practice group's professional revenue,
including revenue derived outside of our diagnostic imaging centers. Under our
technical services model, we enter into a shorter-term agreement with a
radiology practice group (typically 10 to 15 years) and pay them a fee based on
cash collections from reimbursements for imaging procedures. In both the
comprehensive services and technical services models, we own the diagnostic
imaging assets, and, therefore, receive 100% of the technical reimbursements
associated with imaging procedures. Additionally, in most instances, both the
comprehensive services and the technical services models contemplate an
incentive technical bonus for the radiology group if the net technical income
exceeds specified thresholds.

     The agreements with the radiology practices under our comprehensive
services model contain provisions whereby both parties have agreed to certain
restrictions on accepting or pursuing radiology opportunities within a five to
15-mile radius of any of our owned, operated or managed diagnostic imaging
centers at which the radiology practice provides professional radiology services
or any hospital at which the radiology practice provides on-site professional
radiology services. Each of these agreements also restricts the applicable
radiology practice from competing with us and our other contracted radiology
practices within a specified geographic area during the term of the agreement.
In addition, the agreements require the radiology practices to enter into and
enforce agreements with their physician shareholders at each radiology practice
(subject to certain exceptions) that include covenants not to compete with us
for a period of two years after termination of employment or ownership, as
applicable.

     Under our comprehensive services model, we have the right to terminate each
agreement if the radiology practice or a physician employee of the contracted
radiology practice engages in conduct, or is formally accused of conduct, for
which the physician employee's license to practice medicine reasonably would be
expected to be subject to revocation or suspension or is otherwise disciplined
by any licensing, regulatory or professional entity or institution, the result
of any of which (in the absence of termination of this physician or other action
to monitor or cure this act or conduct) adversely affects or would reasonably be
expected to adversely affect the radiology practice. In addition, we may
terminate each of these agreements if, during the first five years of the
agreement, more than one-third of the total number of physicians employed or
retained by the practice are no longer employed or retained by such practice
other than because of certain events, including death, permanent disability,
pre-qualified retirement or involuntary loss of hospital contracts or
privileges.

     Under our comprehensive services model, upon termination of an agreement
with a radiology practice, depending upon the termination event, we may have the
right to require the radiology practice to purchase and assume, or the radiology
practice may have the right to require us to sell, assign and transfer to it,
the assets and related liabilities and obligations associated with the
professional and technical radiology services provided by the radiology practice
immediately prior to the termination. The purchase price for the assets,
liabilities and obligations would be the lesser of their fair market value or
the return of the consideration received in the acquisition. However, the
purchase price may not be less than the net book value of the assets being
purchased.

                                        7
<PAGE>

     The agreements with most of the radiology practices under our technical
services model contain noncompete provisions that are generally less restrictive
than those provisions under our comprehensive services model. The geographic
scope of and types of services covered by the non-compete provisions vary from
practice to practice. Under our technical services model, we generally have the
right to terminate the agreement if a contracted radiology practice loses the
licenses required to perform the service obligations under the agreement,
violates noncompete provisions relating to the modalities offered or if certain
net income thresholds are not met.

DIAGNOSTIC IMAGING CENTERS

     We operate 120 diagnostic imaging centers consisting of 86 owned and
operated free-standing diagnostic imaging centers; 21 diagnostic imaging centers
operated by us and owned through 15 joint venture relationships with hospitals,
health systems or radiology practices; and 13 diagnostic imaging centers to
which we provide management, administrative and information services or
diagnostic imaging equipment. Of our 120 centers, 70 offer multiple modalities
of diagnostic imaging services. The number and type of modalities offered are
determined primarily by the demand for such services within their respective
market areas.

     Information related to these diagnostic imaging centers is set forth below:

<Table>
<Caption>
                                                                DIAGNOSTIC IMAGING CENTERS
                                                               ----------------------------
                                                                           JOINT
                                                                OWNED     VENTURE
MARKET NAME                   GEOGRAPHIC LOCATION              CENTERS    CENTERS    OTHER
-----------                   -------------------              --------   --------   ------
<S>                 <C>                                        <C>        <C>        <C>
Mid-Atlantic        Baltimore, MD/Washington Metro-Area.....      26         10         0
Finger Lakes        Rochester, NY...........................       6          0         3
Bay Area            an Francisco/Oakland/San Jose, CA.......      18          0         0
South Texas         San Antonio, TX.........................       1          5         0
Northeast Kansas    Topeka, KS and Northeast KS.............       1          1         0
Hudson Valley       Rockland County, NY.....................       7          0         6
Treasure Coast      St. Lucie County, FL....................       3          0         0
Questar             Multiple locations(1)...................      24          5         4
                                                                  --         --        --
  TOTAL.....................................................      86         21        13
                                                                  ==         ==        ==
</Table>

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

(1) Includes diagnostic imaging centers in Arizona, California, Colorado,
    Delaware, Florida, Georgia, Illinois, Kansas, Minnesota, Missouri, Nebraska,
    Nevada, Ohio and Pennsylvania that were acquired as part of the Questar
    acquisition and are not integrated into our core market areas.

     Many of the 21 joint venture diagnostic imaging centers are located on, or
adjacent to, the participating hospital or health center's campus. We are the
general partner or managing member of 13 of our 15 joint ventures, comprising 19
of the 21 joint venture diagnostic imaging centers.

     The 13 diagnostic imaging centers to which we provide management,
administrative and information services include 11 locations where we own the
diagnostic imaging equipment. Examples of these 11 locations include hospitals
where we have installed equipment that we operate under an agreement with the
hospital or health center. These relationships permit us to provide services to
hospitals and health centers without directly competing against a radiology
department that is equipped and operated by the hospital or health center. In
the remaining two centers, we do not have an ownership interest in the
equipment, but provide management services and employees.

DIAGNOSTIC IMAGING EQUIPMENT

     We currently operate 487 diagnostic imaging units at our 120 centers, of
which 83 are MRI units, 43 are CT units, 6 are PET units, 26 are nuclear
medicine units, 95 are ultrasound units, 71 are

                                        8
<PAGE>

mammography units, 27 are DEXA units, 79 are X-ray units and 57 are fluoroscopy
units. The average age of our MRI units is 3.8 years, our CT units is 4.4 years
and our PET units is 1.5 years.

     We continue to evaluate the mix of our diagnostic imaging equipment in
response to changes in technology and to maximize utilization of our equipment.
The overall technological competitiveness of our equipment continually improves
through upgrades, disposal and/or trade-in of older equipment and the purchase
or execution of leases for new equipment. Several substantial companies
presently manufacture MRI (including open MRI), CT, PET and other diagnostic
imaging equipment, including GE Medical Systems, Hitachi Medical Systems,
Siemens Medical Systems and Phillips Medical Systems. We maintain good working
relationships with many of the major manufacturers to better ensure an adequate
supply as well as access to the most appropriate types of diagnostic imaging
equipment for the specific imaging center to be established.

     Timely, effective maintenance is essential for achieving high utilization
rates of our imaging equipment. Most of our equipment is covered by a one year
warranty from the original equipment manufacturers. We also contract with the
original equipment manufacturers for comprehensive maintenance programs to
minimize the period of time our equipment is unavailable.

SALES AND MARKETING

     We selectively invest in marketing and sales resources and activities in an
effort to attract new patients, expand business relationships, grow revenue at
our existing centers and maintain present business alliances and contractual
agreements. Marketing activities include having frequent contact with referring
physicians and their office staffs, organizing and presenting educational
programs on new applications and uses of technology, developing and conducting
customer service programs and proactively calling managed care organizations and
third-party insurance companies to solicit additional contracts. Sales
activities principally focus on referring physicians and managed care entities,
while general awareness programs are targeted to patients and referring
physicians.

GOVERNMENT REGULATION AND SUPERVISION

     General.  The healthcare industry is highly regulated, and we can give no
assurance that the regulatory environment in which we operate will not change
significantly in the future. Our ability to operate profitably will depend in
part upon us, the contracted radiology practices and their affiliated physicians
obtaining and maintaining all necessary licenses, certificates of need and other
approvals and operating in compliance with applicable healthcare regulations. We
believe that healthcare regulations will continue to change. Therefore, we
monitor developments in healthcare law and modify our operations from time to
time as the business and regulatory environment changes. Although we intend to
continue to operate in compliance, we cannot ensure that we will be able to
adequately modify our operations so as to address changes in the regulatory
environment.

     Licensing and Certification Laws.  Ownership, construction, operation,
expansion and acquisition of diagnostic imaging centers are subject to various
federal and state laws, regulations and approvals concerning licensing of
centers, personnel, certificates of need and other required certificates for
certain types of healthcare centers and major medical equipment. The laws of
some of the states in which we operate limit our ability to acquire new
diagnostic imaging equipment or expand or replace our existing equipment at
diagnostic imaging centers in those states. In addition, free-standing
diagnostic imaging centers that provide services not performed as part of a
physician office must meet Medicare requirements to be certified as an
independent diagnostic testing facility to bill the Medicare program. We may not
be able to receive the required regulatory approvals for any future
acquisitions, expansions or replacements, and the failure to obtain these
approvals could limit the market for our services.

     Fee-Splitting; Corporate Practice of Medicine.  The laws of many states,
including many of the states in which the contracted radiology practices are
located, prohibit us from exercising control over the medical judgments or
decisions of physicians and from engaging in certain financial arrangements,
such as splitting professional fees with physicians. These laws and their
interpretations vary from state to state and
                                        9
<PAGE>

are enforced by state courts and regulatory authorities, each with broad
discretion. A component of our business has been to enter into service
agreements with radiology practices. We provide management, administrative,
technical and other non-medical services to the radiology practices in exchange
for a service fee. We structure our relationships with the radiology practices,
including the purchase of diagnostic imaging centers, in a manner that we
believe keeps us from engaging in the practice of medicine or exercising control
over the medical judgments or decisions of the radiology practices or their
physicians or violating the prohibitions against fee-splitting. State regulatory
authorities or other parties may assert that we are engaged in the corporate
practice of medicine or that the payment of service fees to us by the radiology
practices constitutes fee-splitting. If such a claim were successfully asserted,
we could be subject to civil and criminal penalties and could be required to
restructure or terminate the applicable contractual arrangements. This result or
our inability to successfully restructure our relationships to comply with these
statutes could jeopardize our business strategy.

     Medicare and Medicaid Reimbursement Program.  Our revenue is derived
through our ownership, operation and management of diagnostic imaging centers
and from service fees paid to us by contracted radiology practices. During the
year ended December 31, 2001, approximately 28% of our revenue generated at our
diagnostic imaging centers was derived from government sponsored healthcare
programs (principally, Medicare and Medicaid).

     Initiatives have been proposed that, if implemented, would have the effect
of substantially decreasing reimbursement rates for outpatient diagnostic
imaging services provided at hospital facilities. We believe that we will have
opportunities to increase the use of our diagnostic imaging services through
additional joint venture or outsourcing arrangements with hospitals, in part due
to such federal healthcare regulatory changes that favor outpatient centers that
are managed or owned in joint venture or outsourcing arrangements with third
parties. As of January 2002, Medicare has decreased reimbursement rates for
physician and outpatient services, including diagnostic imaging services. Our
centers are principally dependent on our ability to attract referrals from
primary care physicians, specialists and other healthcare providers. The
referral often depends on the existence of a contractual arrangement with the
referred patient's health benefit plan.

     Any further change in Medicare or Medicaid rates or conditions for
reimbursement could substantially reduce the amounts reimbursed to us or our
contracted radiology practices for services provided. These reductions could
have a significant adverse effect on our revenue and financial results by
creating downward pricing pressure.

     Medicare and Medicaid Fraud and Abuse.  Federal law prohibits the knowing
and willful offer, payment, solicitation or receipt of any form of remuneration
in return for, or to induce, (i) the referral of a person, (ii) the furnishing
or arranging for the furnishing of items or services reimbursable under the
Medicare, Medicaid or other governmental programs or (iii) the purchase, lease
or order or arranging or recommending purchasing, leasing or ordering of any
item or service reimbursable under the Medicare, Medicaid or other governmental
programs. Enforcement of this anti-kickback law is a high priority for the
federal government, which has substantially increased enforcement resources and
is scheduled to continue increasing such resources. The applicability of the
anti-kickback law to many business transactions in the healthcare industry has
not yet been subject to judicial or regulatory interpretation. Noncompliance
with the federal anti-kickback legislation can result in exclusion from the
Medicare, Medicaid or other governmental programs and civil and criminal
penalties.

     We receive fees under our service agreements for management and
administrative services, which include contract negotiation and marketing
services. We do not believe we are in a position to make or influence referrals
of patients or services reimbursed under Medicare, Medicaid or other
governmental programs to radiology practices or their affiliated physicians or
to receive referrals. However, we may be considered to be in a position to
arrange for items or services reimbursable under a federal healthcare program.
Because the provisions of the federal anti-kickback statute are broadly worded
and have been broadly interpreted by federal courts, it is possible that the
government could take the position that our arrangements with the contracted
radiology practices implicate the federal anti-kickback statute. Violation

                                        10
<PAGE>

of the law can result in monetary fines, civil and criminal penalties, and
exclusion from participation in federal or state healthcare programs, any of
which could have an adverse effect on our business and results of operations.
While our service agreements with the contracted radiology practices will not
meet a "safe harbor" to the federal anti-kickback statute, failure to meet a
"safe harbor" does not mean that agreements violate the anti-kickback statute.
We have sought to structure our agreements to be consistent with fair market
value in arms' length transactions for the nature and amount of management and
administrative services rendered. For these reasons, we do not believe that
service fees payable to us should be viewed as remuneration for referring or
influencing referrals of patients or services covered by such programs as
prohibited by statute.

     Significant prohibitions against physician referrals have been enacted by
Congress. These prohibitions are commonly known as the "Stark Law." The Stark
Law prohibits a physician from referring Medicare or Medicaid patients to an
entity providing "designated health services," including, without limitation,
radiology services, in which the physician has an ownership or investment
interest or with which the physician has entered into a compensation
arrangement. The penalties for violating the Stark Law include a prohibition on
payment by these governmental programs and civil penalties of as much as $15,000
for each violative referral and $100,000 for participation in a "circumvention
scheme." We believe that, although we receive fees under our service agreements
for management and administrative services, we are not in a position to make or
influence referrals of patients.

     On January 4, 2001, the Health Care Financing Administration, Department of
Health and Human Services, now known as the Centers for Medicare and Medicaid
Services ("CMS"), published final regulations to implement the Stark Law. Under
the final regulations, radiology and certain other imaging services and
radiation therapy services and supplies are services included in the designated
health services subject to the self-referral prohibition. Under the final
regulations, such services include the professional and technical components of
any diagnostic test or procedure using X-rays, ultrasound or other imaging
services, computerized axial tomography, MRI, radiation therapy and diagnostic
mammography services (but not screening mammography services). The final
regulations, however, exclude from designated health services: (i) X-ray,
fluoroscopy or ultrasonic procedures that require the insertion of a needle,
catheter, tube or probe through the skin or into a body orifice; (ii) radiology
procedures that are integral to the performance of, and performed during,
nonradiological medical procedures; (iii) nuclear medicine procedures; and (iv)
"invasive" or "interventional" radiology, because the radiology services in
these procedures are merely incidental or secondary to another procedure that
the physician has ordered.

     The Stark Law provides that a request by a radiologist for diagnostic
radiology services or a request by a radiation oncologist for radiation therapy,
if such services are furnished by or under the supervision of such radiologist
or radiation oncologist pursuant to a consultation requested by another
physician, does not constitute a "referral" by a "referring physician." If such
requirements are met, the Stark Law self-referral prohibition would not apply to
such services. The effect of the Stark Law on the radiology practices,
therefore, will depend on the precise scope of services furnished by each such
practice's radiologists and whether such services derive from consultations or
are self-generated. We believe that (other than self-referred patients) all of
the services covered by the Stark Law provided by the contracted radiology
practices derive from requests for consultation by non-affiliated physicians.
Therefore, we believe that the Stark Law is not implicated by the financial
relationships between us and the contracted radiology practices.

     In addition, we believe that we have structured our acquisitions of the
assets of existing practices, and we intend to structure any future
acquisitions, so as to not violate the anti-kickback and Stark Law and
regulations. Specifically, we believe the consideration paid by us to physicians
to acquire the tangible and intangible assets associated with their practices is
consistent with fair market value in arms' length transactions and is not
intended to induce the referral of patients. Should any such practice be deemed
to constitute an arrangement designed to induce the referral of Medicare or
Medicaid patients, then our acquisitions could be viewed as possibly violating
anti-kickback and anti-referral laws and regulations. A determination of
liability under any such laws could have an adverse effect on our business,
financial condition and results of operations.
                                        11
<PAGE>

     The federal government recently announced an initiative to audit all
Medicare carriers, which are the companies that adjudicate and pay Medicare
claims. These audits are expected to intensify governmental scrutiny of
individual providers. An unsatisfactory audit of any of our diagnostic imaging
centers or contracted radiology practices could result in significant repayment
obligations, exclusion from the Medicare, Medicaid, or other governmental
programs and/or civil and criminal penalties.

     Federal regulatory and law enforcement authorities have recently increased
enforcement activities with respect to Medicare and Medicaid fraud and abuse
regulations and other reimbursement laws and rules, including laws and
regulations that govern our activities and the activities of the radiology
practices. Our or the radiology practices' activities may be investigated,
claims may be made against us or the radiology practices and these increased
enforcement activities may directly or indirectly have an adverse effect on our
business, financial condition and results of operations.

     State Anti-kickback and Physician Self-referral Laws.  All of the states in
which our diagnostic imaging centers are located have adopted a form of
anti-kickback law and almost all of those states have also adopted a form of
Stark Law. The scope of these laws and the interpretations of them vary from
state to state and are enforced by state courts and regulatory authorities, each
with broad discretion. Generally, state laws cover all referrals by all
healthcare providers for all healthcare services. A determination of liability
under such laws could result in fines and penalties and restrictions on our
ability to operate in these jurisdictions.

     Federal False Claims Act.  The Federal False Claims Act provides, in part,
that the federal government may bring a lawsuit against any person whom it
believes has knowingly presented, or caused to be presented, a false or
fraudulent request for payment from the federal government, or who has made a
false statement or used a false record to get a claim approved. The Federal
False Claims Act further provides that a lawsuit thereunder may be initiated in
the name of the United States by an individual who is an original source of the
allegations. The government has taken the position that claims presented in
violation of the federal anti-kickback law or Stark Law may be considered a
violation of the Federal False Claims Act. Penalties include civil penalties of
not less than $5,500 and not more than $11,000 for each false claim, plus three
times the amount of damages that the federal government sustained because of the
act of that person. We believe that we are in compliance with the rules and
regulations that apply to the Federal False Claims Act. However, we could be
found to have violated certain rules and regulations resulting in sanctions
under the Federal False Claims Act, and if we are so found in violation, any
sanctions imposed could result in fines and penalties and restrictions on and
exclusion from participation in federal and state healthcare programs that are
integral to our business.

     Healthcare Reform Initiatives.  Healthcare laws and regulations may change
significantly in the future. We continuously monitor these developments and
modify our operations from time to time as the regulatory environment changes.
We cannot assure you, however, that we will be able to adapt our operations to
address new regulations or that new regulations will not adversely affect our
business. In addition, although we believe that we are operating in compliance
with applicable federal and state laws, neither our current or anticipated
business operations nor the operations of the contracted radiology practices has
been the subject of judicial or regulatory interpretation. We cannot assure you
that a review of our business by courts or regulatory authorities will not
result in a determination that could adversely affect our operations or that the
healthcare regulatory environment will not change in a way that restricts our
operations.

     Health Insurance Portability and Accountability Act of 1996.  In an effort
to combat healthcare fraud, Congress enacted the Health Insurance Portability
and Accountability Act of 1996 ("HIPAA"). HIPAA, among other things, amends
existing crimes and criminal penalties for Medicare fraud and enacts new federal
healthcare fraud crimes, including actions affecting non-governmental payors.
Under HIPAA, a "healthcare benefit program" includes any private plan or
contract affecting interstate commerce under which any medical benefit, item or
services is provided. A person or entity that knowingly and willfully obtains
the money or property of any healthcare benefit program by means of false or
fraudulent representations in connection with the delivery of healthcare
services is subject to a fine and/or

                                        12
<PAGE>

imprisonment. In addition, HIPAA authorizes the imposition of civil money
penalties against entities that employ or enter into contracts with excluded
Medicare or Medicaid program participants if such entities provide services to
federal health program beneficiaries. A finding of liability under HIPAA could
have a material adverse effect on our business, financial condition and results
of operations.

     Further, HIPAA requires healthcare providers and their business associates
to maintain the privacy and security of individually identifiable health
information. HIPAA imposes federal standards for electronic transactions with
health plans, the security of electronic health information and for protecting
the privacy of individually identifiable health information. The government
recently published regulations to implement the privacy standards with an
initial compliance date of April 14, 2003. We may encounter certain costs
associated with complying with the primary provisions. A finding of liability
under HIPAA's privacy or security provisions may also result in criminal and
civil penalties, and could have a material adverse effect on our business,
financial condition, and results of operations.

     Compliance Program.  With the assistance of our special healthcare
regulatory counsel, we implemented a program to monitor compliance with federal
and state laws and regulations applicable to healthcare entities. We have
appointed a compliance officer who is charged with implementing and supervising
our compliance program, which includes the adoption of (i) "Standards of
Conduct" for our employees and affiliates and (ii) an "Ethics Process" that
specifies how employees, affiliates and others may report regulatory or ethical
concerns to our compliance officer. We believe that our compliance program meets
the relevant standards provided by the Office of Inspector General of the
Department of Health and Human Services. An important part of our compliance
program consists of conducting periodic audits of various aspects of our
operations and that of the contracted radiology practices. We also conduct
mandatory educational programs designed to familiarize our employees with the
regulatory requirements and specific elements of our compliance program.

     Insurance Laws and Regulation.  Certain states have enacted statutes or
adopted regulations affecting risk assumption in the healthcare industry,
including statutes and regulations that subject any physician or physician
network engaged in risk-based managed care contracting to applicable insurance
laws and regulations. These laws and regulations may require physicians and
physician networks to meet minimum capital requirements and other safety and
soundness requirements. Implementing additional regulations or compliance
requirements could result in substantial costs to us and the contracted
radiology practices and limit our ability to enter into capitated or other
risk-sharing managed care arrangements.

COMPETITION

     The market for diagnostic imaging services is competitive. We compete
principally on the basis of our reputation, our ability to offer multiple
modalities, our conveniently located centers and our cost-effective,
high-quality diagnostic imaging services. We compete locally with groups of
radiologists, established hospitals, clinics and certain other independent
organizations that own and operate imaging equipment. Our major national
competitors include Alliance Imaging, Inc., HEALTHSOUTH Corporation, InSight
Health Services Corp., Medical Resources, Inc., Syncor International Corporation
and U.S. Diagnostic, Inc. Some of our local or national competitors that provide
diagnostic imaging services may now or in the future have access to greater
financial resources than we do and may have access to newer, more advanced
equipment.

     In addition, in the past some non-radiologist physician practices have
refrained from establishing their own diagnostic imaging centers because of the
federal physician self-referral legislation. Final regulations issued in January
2001 clarify certain of the exceptions to the physician self-referral
legislation, which may create opportunities for and encourage some physician
practices to establish their own diagnostic imaging centers within their group
practices, which may compete with us.

     Each of the contracted radiology practices under our comprehensive services
model has entered into agreements with its physician shareholders and full-time
employed radiologists that generally prohibit those shareholders and
radiologists from competing for a period of two years within defined geographic
regions

                                        13
<PAGE>

after they cease to be owners or employees, as applicable. In most states, a
covenant not to compete will be enforced only:

     - to the extent it is necessary to protect a legitimate business interest
       of the party seeking enforcement;

     - if it does not unreasonably restrain the party against whom enforcement
       is sought; and

     - if it is not contrary to public interest.

     Enforceability of a non-compete covenant is determined by a court based on
all of the facts and circumstances of the specific case at the time enforcement
is sought. For this reason, it is not possible to predict whether, or to what
extent, a court will enforce the contracted radiology practices' covenants. The
inability of the contracted radiology practices or us to enforce radiologists'
non-compete covenants could result in increased competition from individuals who
are knowledgeable about our business strategies and operations.

     We may not be able to compete effectively for the acquisition of diagnostic
imaging centers, joint venture opportunities or other outsourcing relationships.
Our competitors may have better established operating histories and greater
resources than we do. Competitors may make it more difficult to complete
acquisitions or joint ventures on terms beneficial to us.

CORPORATE LIABILITY AND INSURANCE

     We may be subject to professional liability claims including, without
limitation, for improper use or malfunction of our diagnostic imaging equipment.
We maintain insurance policies with coverages that we believe are appropriate in
light of the risks attendant to our business and consistent with industry
practice. We also require the contracted radiology practices to maintain
sufficient professional liability insurance consistent with industry practice.
However, adequate liability insurance may not be available to us and the
contracted radiology practices in the future at acceptable costs or at all.

     Providing medical services entails the risk of professional malpractice and
other similar claims. The physicians employed by the contracted radiology
practices are from time to time subject to malpractice claims. We structure our
relationships with the practices under our agreements with them in a manner that
we believe does not constitute the practice of medicine by us or subject us to
professional malpractice claims for acts or omissions of physicians in the
contracted radiology practices. Nevertheless, claims, suits or complaints
relating to services provided by the contracted radiology practices may be
asserted against us in the future, including malpractice.

     Any claim made against us not fully covered by insurance could be costly to
defend against, result in a substantial damage award against us and divert the
attention of our management from our operations, which could have an adverse
effect on our financial performance. In addition, claims might adversely affect
our business or reputation.

     The contracted radiology practices maintain professional liability
insurance coverage primarily on a claims made basis. This insurance provides
coverage for claims asserted when the policy is in effect, regardless of when
the events that caused the claim occurred. The contracted radiology practices
are required by the terms of the service agreements to maintain medical
malpractice liability insurance consistent with minimum limits mandated in their
hospital contracts or by applicable state law.

     We maintain general liability and umbrella coverage in commercially
reasonable amounts. Additionally, we maintain workers' compensation insurance on
all employees. Coverage is placed on a statutory basis and responds to each
state's specific requirements.

     In 1997, a law became effective in the State of Texas that permits injured
patients to sue health insurance carriers, HMOs and other managed care entities
for medical malpractice. This law could increase the cost of liability insurance
to us for services provided in Texas or any other states in which we do business
if similar legislation is adopted in those states.

                                        14
<PAGE>

     We have assumed and succeeded to substantially all of the obligations of
some of the operations that we have acquired. Therefore, claims may be asserted
against us for events that occurred prior to our acquiring these acquisitions.
In connection with our acquisitions, the sellers of the operations that we have
acquired have agreed to indemnify us for certain claims. However, we may not be
able to collect payment under these indemnity agreements which could affect us
adversely.

EMPLOYEES

     As of December 31, 2001, we had approximately 2,600 employees,
approximately 70 of whom are employed at our headquarters and regional offices
and the remainder of whom are employed at our diagnostic imaging centers and
regional administrative operations. We believe that our relationship with our
employees is good.

ITEM 2. PROPERTIES.

     Radiologix's corporate headquarters are located at 3600 JP Morgan Chase
Tower, 2200 Ross Avenue, Dallas, Texas 75201-2776, in approximately 26,000
square feet occupied under a lease, which expires on August 31, 2011.

ITEM 3. LEGAL PROCEEDINGS.

     We are not currently subject to any material litigation nor, to our
knowledge, is any material litigation threatened against us. All of our current
litigation is (i) expected to be covered by liability insurance or (ii) not
expected to adversely affect our business. Some risk exists, however, that we
could subsequently be named as a defendant in additional lawsuits or that
pending litigation could adversely affect us.

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

     Radiologix did not submit any matters to a vote of security holders during
the fourth quarter of 2001.

                                    PART II

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

     Radiologix's common stock is listed and has traded on the American Stock
Exchange since May 10, 2000 under the symbol "RGX." Prior to May 10, 2000,
Radiologix's common stock was traded on the NASDAQ National Market System under
the symbol "RDLX." The following table sets forth the high and low bid prices
per share of the common stock for the years ended December 31, 2000 and 2001 as
reported by NASDAQ prior to May 10, 2000 and the American Stock Exchange
thereafter, for the periods indicated below:

<Table>
<Caption>
                                                              HIGH       LOW
                                                              ----       ---
<S>                                                           <C>        <C>
2000
First Quarter...............................................  $ 6 5/8    $3 1/8
Second Quarter..............................................    5         3 1/4
Third Quarter...............................................    6 3/8     3 7/16
Fourth Quarter..............................................    7 1/16    3 5/8
2001
First Quarter...............................................    5 7/20    3 3/10
Second Quarter..............................................    4 7/10    2 3/4
Third Quarter...............................................    6 39/50   2 3/4
Fourth Quarter..............................................   10 1/4     5 43/50
</Table>

                                        15
<PAGE>

     As of the close of business on March 22, 2002, the last reported sales
price per share of Radiologix's common stock was $11.92 and approximately 104
shareholders owned the common stock of record. This number does not include
persons whose shares are held by a bank, brokerage house or clearing company,
but does include the banks, brokerage houses and clearing companies.

     No cash dividends have been paid on Radiologix's common stock since the
organization of Radiologix and Radiologix does not anticipate paying dividends
in the foreseeable future. Radiologix currently intends to retain earnings for
future growth and expansion opportunities.

     The Company has a $24.2 million convertible junior subordinated note, which
matures July 31, 2009, and bears interest, payable quarterly in cash or payment
in kind securities, at an annual rate of 8.0%. At August 1, 2001, the
convertible junior subordinated note was convertible into Radiologix's common
stock at the price of $7.52 per share. If by August 1, 2002 or August 1, 2003
the closing price of Radiologix's common stock has not exceeded $7.52 for 45 of
the 60 days of the determination period, the interest rate will be increased to
8.25% and 8.5%, respectively. DB Capital Partners SBIC, L.P. purchased the
subordinated note in August 1999 in a private transaction. Proceeds from the
sale were used to acquire Questar.

                                        16
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.

     The following selected consolidated historical financial data is derived
from Radiologix's consolidated financial statements for the periods indicated
and, as such, reflects the impact of acquired entities from the effective dates
of such transactions. The information in the table and its notes should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with Radiologix's consolidated financial
statements and their notes included elsewhere in this report.

                      SELECTED CONSOLIDATED FINANCIAL DATA

<Table>
<Caption>
                                                         YEAR ENDED DECEMBER 31,
                                           ---------------------------------------------------
                                            1997       1998       1999       2000       2001
                                           -------   --------   --------   --------   --------
                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>       <C>        <C>        <C>        <C>
SERVICE FEE REVENUE......................  $ 9,545   $149,327   $199,700   $246,687   $276,650
COSTS AND EXPENSES:
  Salaries and benefits..................    2,922     42,227     52,826     66,567     75,667
  Field supplies.........................    1,036      8,865     11,630     13,265     16,514
  Field rent and lease expense...........      852     11,532     18,444     30,191     34,378
  Other field expenses...................    1,557     25,311     32,278     45,871(a)   47,339
  Bad debt expense.......................      862     13,723     18,838     34,389(b)   25,682
  Merger related costs...................       --         --         --      1,772      1,000
  Supplemental incentive compensation....       --         --         --         --        615
  Corporate general and administrative...    4,910      9,597     11,192     10,571     13,855
  Depreciation and amortization..........      888     12,178     18,403     22,118     23,504
  Interest expense, net..................      617      7,541     12,357     18,036     15,540
                                           -------   --------   --------   --------   --------
          Total costs and expenses.......   13,644    130,974    175,968    242,780    254,094
                                           -------   --------   --------   --------   --------
Income (loss) before equity in earnings
  of investments, non-operating income,
  minority interests in consolidated
  subsidiaries, taxes and extraordinary
  loss...................................   (4,099)    18,353     23,732      3,907     22,556
  Equity in earnings of investments......      220      4,339      3,581      4,274      5,017
  Non-operating income...................       --         --         --         --      1,300
  Minority interests in consolidated
     subsidiaries........................      (49)      (710)      (910)      (948)    (1,092)
                                           -------   --------   --------   --------   --------
Income (loss) before taxes and
  extraordinary loss.....................   (3,928)    21,982     26,403      7,233     27,781
  Income tax expense.....................       --      6,499     10,346      2,900     11,112
                                           -------   --------   --------   --------   --------
Income (loss) before extraordinary
  loss...................................   (3,928)    15,483     16,057      4,333     16,669
Extraordinary loss on early
  extinguishment of debt, net of tax.....       --         --         --         --     (2,838)
                                           -------   --------   --------   --------   --------
Net income (loss)........................  $(3,928)  $ 15,483   $ 16,057   $  4,333   $ 13,831
                                           =======   ========   ========   ========   ========
Earnings Per Share:
  Basic
  Income (loss) before extraordinary
     loss................................  $ (1.13)  $   0.83   $   0.83   $   0.22   $   0.85
  Income (loss) after extraordinary
     loss................................  $ (1.13)  $   0.83   $   0.83   $   0.22   $   0.71
  Diluted
  Income (loss) before extraordinary
     loss................................  $ (1.13)  $   0.80   $   0.80   $   0.22   $   0.78
  Income (loss) after extraordinary
     loss................................  $ (1.13)  $   0.80   $   0.80   $   0.22   $   0.66
</Table>

                                        17
<PAGE>

<Table>
<Caption>
                                                                    AS OF DECEMBER 31,
                                                              ------------------------------
                                                                1999       2000       2001
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
Balance Sheet Data:
  Working capital...........................................  $ 25,181   $ 36,682   $ 55,214
  Total assets..............................................   244,840    268,636    284,725
  Long-term debt and capital lease obligations..............   164,840    175,836    172,947
  Convertible notes.........................................    20,000     20,000     24,205
  Stockholders' equity......................................    25,375     29,719     44,476
</Table>

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

(a) Other field expenses for the year ended December 31, 2000 includes a $3.7
    million charge for the write-off in the fourth quarter of 2000 of a note
    receivable. See Note 2 to consolidated financial statements.

(b) Bad debt expense for the year ended December 31, 2000 includes a $13.3
    million charge recorded in the fourth quarter of 2000. See Note 2 to
    consolidated financial statements.

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

OVERVIEW

     We are a leading national provider of diagnostic imaging services through
our ownership and operation of free-standing, outpatient diagnostic imaging
centers. We utilize sophisticated technology and technical expertise to perform
a broad range of imaging procedures, such as magnetic resonance imaging (or
MRI), computed tomography (or CT), positron emission tomography (or PET),
nuclear medicine, ultrasound, mammography, bone densitometry (or DEXA), general
radiography (or X-ray) and fluoroscopy. For the year ended December 31, 2001, we
derived 78% of our service fee revenue from the ownership, management and
operation of our radiology and imaging center network and 22% of our service fee
revenue from the administrative, management and information services provided to
contracted radiology practices. As of December 31, 2001, we owned, operated or
maintained an ownership interest in imaging equipment at 120 locations and
provided management services to ten radiology practices. As of December 31,
2001, our imaging centers are located in 18 states, with concentrated geographic
coverage in markets located in California, Florida, Kansas, Maryland, New York,
Texas and Virginia.

     We focus on providing quality patient care and service to ensure patient
and referring physician satisfaction. Our development of comprehensive radiology
networks permits us to invest in technologically advanced imaging equipment,
including MRI, open MRI, spiral CT and PET. Our consolidation of diagnostic
imaging centers into coordinated networks improves response time, increases
overall patient accessibility, permits us to standardize certain customer
relations procedures and permits us to develop "best practices" for our
diagnostic imaging centers. We seek the input and participation of the
contracted radiology practices to which we provide administrative, management
and information services to develop best practices and to improve productivity
and the quality of services. By focusing on further improving and, where
appropriate, standardizing the operations of our diagnostic imaging centers, we
believe that we can increase patient and referring physician satisfaction, which
should lead to increased referrals and increased utilization of our diagnostic
imaging centers.

     We contract with radiology practices to provide professional services,
including the supervision and interpretation of diagnostic imaging procedures
performed in our diagnostic imaging centers. We believe that we do not engage in
the practice of medicine nor do we employ physicians. The radiology practices
maintain full control over the provision of professional radiological services.
The contracted radiology practices generally have outstanding physician and
practice credentials and reputations; strong competitive market positions; a
broad sub-specialty mix of physicians; a history of growth and potential for
continued growth; and a willingness to embrace our strategy for the delivery of
diagnostic imaging services.

     Payment for diagnostic imaging services comes primarily from commercial
third-party payors (62%), governmental payors (28% including Medicare and
Medicaid) and private and other payors (10%). In
                                        18
<PAGE>

August 2000, Medicare made significant changes in the reimbursement methodology
for hospital outpatient services. We believe that we will have opportunities to
increase the use of our diagnostic imaging services through additional joint
venture or outsourcing arrangements with hospitals, in part because such federal
healthcare regulatory changes favor outpatient centers that are managed or owned
in joint venture or outsourcing arrangements with third parties. As of January
2002, Medicare has decreased reimbursement rates for physician and outpatient
services, including diagnostic imaging services. Our centers are principally
dependent on our ability to attract referrals from primary care physicians,
specialists and other healthcare providers. The referral often depends on the
existence of a contractual arrangement with the referred patient's health
benefit plan. For the year ended December 31, 2001, approximately 9% of our
revenue generated at our diagnostic imaging centers was generated from capitated
arrangements.

     Our service fee revenue is dependent upon the operating results of the
contracted radiology practices and diagnostic imaging centers. Where state law
allows, service fees due under the service agreements for the contracted
radiology practices are derived from two distinct revenue streams: (1) a
negotiated percentage (typically 20% to 30%) of the adjusted professional
revenues as defined in the service agreements; and (2) 100% of the adjusted
technical revenues as defined in the service agreements. In states where the law
requires a flat fee structure, we have negotiated a base service fee, which is
equal to the estimated fair market value of the services provided under the
service agreements and which is renegotiated each year to equal the fair market
value of the services provided under the service agreements. The fixed fee
structure results in us receiving substantially the same amount of service fee
as we would have received under a negotiated percentage fee structure. Adjusted
professional revenues and adjusted technical revenues are determined by
deducting certain contractually agreed-upon expenses (non-physician salaries and
benefits, rent, depreciation, insurance, interest and other physician costs)
from the contracted radiology practices' revenue. Revenues of our subsidiary,
Questar Imaging, Inc. of Tampa, Florida ("Questar") are primarily derived from
technical revenues generated from those imaging centers.

RESULTS OF OPERATIONS

     We report the results of our operations through four designated regions of
the United States: Mid-Atlantic, Northeastern, Central and Western regions. In
addition, we report separately the results of our operations of the imaging
centers of our subsidiary, Questar. Our operations in each of the four
designated regions are comprised of the ownership and operation of diagnostic
imaging centers and the provision of administrative, management and information
services to the contracted radiology practices that provide professional
interpretation and supervision services in connection with our diagnostic
imaging centers and to hospitals and radiology practices with which we operate
joint ventures. Our services leverage our existing infrastructure and improve
radiology practice or joint venture profitability, efficiency and effectiveness.
We have divided the operations into the four regions and Questar only for
purposes of the division of internal management responsibilities, but do not
focus on each of these regions as a separate product line or make financial
decisions as if they were separate product lines. The Questar operations are
treated as a separate group only from the perspective that the imaging centers
of Questar do not have the same type of management service agreement with
physicians as we have with each of the contracted radiology practices in the
four designated regions. In addition, any imaging centers of Questar that are in
the same market as the operations of the contracted radiology practices in the
four designated regions are not included in the service agreements of the
contracted radiology practices.

     The operating margin in 2001 for each of the four regions and Questar was
impacted by a change in the estimation of contractual allowances of the billed
charges. Generally, the change in the estimation of contractual allowances
increased the contractual allowance which decreased the revenue of the
contracted radiology practices and diagnostic imaging centers recognized and
therefore, the service fee recognized and the operating margin. The operating
margin for the Mid-Atlantic region of 32% and 31% for the twelve months ended
December 31, 2000 and 2001, respectively, remained relatively constant. The
operating margin of the Northeastern region decreased from 30% for the twelve
months ended December 31, 2000 to 26% in 2001. The decline in the operating
margin between periods is primarily the result of a decrease in the fixed fee
recognized at one of the New York practices. The operating margin for the
Central region of

                                        19
<PAGE>

35% and 34% for the twelve months ended December 31, 2000 and 2001,
respectively, remained relatively constant. The operating margin for the Western
region of 24% and 26% for the twelve months ended December 31, 2000 and 2001,
respectively, also remained relatively constant. The operating margin for
Questar of 23% and 17% for the twelve months ended December 31, 2000 and 2001,
respectively, decreased. The significant decrease in the operating margin was a
direct result of the change in the estimation of contractual allowances for
billed charges and also due to additional costs, such as maintenance agreements
put in place, associated with operating the facilities. These operating margins
as discussed exclude the buyout of operating leases for $13.9 million in the
fourth quarter of 2001 and charges in the fourth quarter of 2000 of $13.3
million for the provision of uncollectible accounts receivable and a $3.7
million charge for the write-off of a note receivable due from one of our
contracted radiology practices.

     On August 1, 1999, Radiologix acquired all the outstanding stock of
Questar, a private operator of primarily MRI radiology centers. The total 1999
consideration for the transaction was approximately $18.9 million in cash, plus
the assumption of $16.8 million in liabilities. The total consideration for all
other 1999 acquisitions was approximately $6.5 million in cash, 50,264 shares of
our common stock valued at $304,000, plus the assumption of $3.2 million in
liabilities.

     In March 2000, Radiologix completed an acquisition of an imaging center in
Osceola, Florida for total consideration of approximately $2.7 million. During
2000, we continued to complete the development of imaging centers of Questar for
total consideration of approximately $5.9 million. Total consideration paid for
all other acquisitions and affiliations in 2000 was approximately $1.5 million.

     In November 2001, Radiologix completed the acquisition of an imaging center
in Laurel, Maryland for total consideration of $906,000.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 2001

  SERVICE FEE REVENUE

     Revenue of the contracted radiology practices and diagnostic imaging
centers is recorded when services are rendered by the contracted radiology
practices and diagnostic imaging centers based on established charges and
reduced by contractual allowances and estimated bad debts. We use historical
collection experience in estimating contractual allowances and bad debt expense.
The factors influencing the historical collection experience include the
contracted radiology practices' and diagnostic imaging centers' patient mix,
impact of managed care contract pricing and contract revenue and the aging of
patient accounts receivable balances. As these factors change, the historical
collection experience is revised accordingly in the period known. Service fee
revenue represents contracted radiology practices' and diagnostic imaging
centers' revenue less amounts retained by contracted radiology practices. The
amounts retained by contracted radiology practices represents amounts paid to
the physicians pursuant to the service agreements between us and the contracted
radiology practices. Under the service agreements, we provide each contracted
radiology practice with the facilities and equipment used in its medical
practice, assume responsibility for managing the operations of the practice, and
employ substantially all of the non-physician personnel utilized by the
contracted radiology practice. Although we assist in negotiating managed care
contracts for the contracted radiology practices, we assume no risk under these
arrangements.

     The following table sets forth the amounts of revenue from the contracted
radiology practices and diagnostic imaging centers and the amounts retained by
contracted radiology practices (in thousands):

<Table>
<Caption>
                                                         1999       2000       2001
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Revenue from contracted radiology practices and
  diagnostic imaging centers, net of contractual
  allowances.........................................  $286,824   $344,887   $383,527
Less: amounts retained by contracted radiology
  practices..........................................   (87,124)   (98,200)  (106,877)
                                                       --------   --------   --------
Service fee revenue, as reported.....................  $199,700   $246,687   $276,650
                                                       ========   ========   ========
</Table>

                                        20
<PAGE>

     Revenue from contracted radiology practices and diagnostic imaging centers,
net of contractual allowances, increased $38.6 million, from $344.9 million in
2000 to $383.5 million in 2001. This increase was primarily due to increased
procedure volume, a shift in the mix to "high-end" procedures and the addition
of new reading contracts and agreements with managed care organizations. The
increase in volume growth was primarily attributable to a 14.8% increase in
magnetic resonance imaging ("MRI") procedures and a 13.6% increase in computed
tomography ("CT") procedures provided in imaging centers. Revenue from
contracted radiology practices and diagnostic imaging centers, net of
contractual allowances in 2001, was impacted by a change in the estimation of
contractual allowances of the billed charges. Generally, the change in the
estimation of contractual allowances increased the contractual allowance which
decreased the revenue of the contracted radiology practices and diagnostic
imaging centers and therefore the service fee recognized. Amounts retained by
contracted radiology practices increased from $98.2 million in 2000 to $106.9
million in 2001. This increase is directly attributable to the growth in revenue
from contracted radiology practices and diagnostic imaging centers and the
higher profitability of the contracted radiology practices and diagnostic
imaging centers. The increase in revenue from contracted radiology practices and
diagnostic imaging centers, net of contractual allowances offset by the increase
in amounts retained by contracted radiology practices, resulted in service fee
revenue increasing $30 million, from $246.7 million in 2000 to $276.7 million,
in 2001.

  COSTS AND EXPENSES

     The comparison between periods for costs and expenses discussed below as a
percentage of service fee revenue is impacted in 2001 by the change in the
estimation of contractual allowances of the billed charges. The change in the
estimation of contractual allowances increased the contractual allowance, which
decreased the revenue of the contracted radiology practices and diagnostic
imaging centers and service fee recognized. As a result of this change, costs
and expenses as a percentage of service fee revenue will be at a higher stated
value in 2001 when compared to 2000.

  SALARIES AND BENEFITS

     Salaries and benefits increased $9.1 million, from $66.6 million in 2000 to
$75.7 million in 2001. As a percentage of service fee revenue, these costs were
27.0% and 27.4% in 2000 and 2001, respectively.

  FIELD SUPPLIES

     Field supplies increased $3.2 million, from $13.3 million in 2000 to $16.5
million in 2001. As a percentage of service fee revenue, these costs were 5.4%
and 6.0% in 2000 and 2001, respectively. The increase in supplies is primarily
attributable to an increase in volume of speciality procedures. These procedures
require supplies at higher unit cost than typically required for other types of
procedures.

  FIELD RENT AND LEASE EXPENSE

     Field rent and lease expense increased $4.2 million, from $30.2 million in
2000 to $34.4 million in 2001. As a percentage of service fee revenue, these
costs were 12.2% and 12.4% in 2000 and 2001, respectively. The increase in these
costs is primarily attributable to additional equipment operating leases entered
into subsequent to fiscal 2000.

  OTHER FIELD EXPENSES

     Other field expenses increased $1.5 million, from $45.9 million in 2000 to
$47.4 million in 2001. As a percentage of service fee revenue, these costs were
18.6% and 17.1% in 2000 and 2001, respectively. During the fourth quarter of
2000, $3.7 million was recognized for the write-off of a note receivable. The
note receivable was due from one of the contracted radiology practices and was
determined in the fourth quarter to no longer be collectible. As a result of the
write-off, we have adjusted this contracted radiology group's incentive
technical bonus potential.

                                        21
<PAGE>

  BAD DEBT EXPENSE

     Bad debt expense decreased $8.7 million, from $34.4 million in 2000 to
$25.7 million in 2001. As a percentage of service fee revenue, these costs were
13.9% and 9.3% in 2000 and 2001, respectively. Since service fee revenue
represents contracted radiology practices' and diagnostic imaging centers'
revenue less amounts retained by contracted radiology practices, these
percentages are inherently at a higher stated value. Therefore, bad debt expense
should be compared for 2000 and 2001 as a percentage of revenue of the
contracted radiology practices and diagnostic imaging centers, net of
contractual allowances, rather than as a percentage of service fee revenue. As a
percentage of revenue of the contracted radiology practices and diagnostic
imaging centers, bad debt expense was 10.0% and 6.7% in 2000 and 2001,
respectively. This decrease was primarily due to a $13.3 million charge recorded
in the fourth quarter of 2000 for the provision of uncollectible accounts.
During the fourth quarter of 2000, we performed an extensive review of our
accounts receivable and collection experience utilizing reports and analyses not
previously available. Based on this review, we believed that the estimation
process of determining contractual allowances for billed charges needed to be
revised and that a portion of our accounts receivable was no longer collectible.
This review allowed us to better analyze old accounts receivable, however it did
not indicate what our historical collection rates would have been if the newly
implemented collection policies and procedures had been in place. Accordingly,
the adjustment for an increase in the provision for uncollectible accounts was
recognized as a bad debt expense as opposed to an increase in contractual
allowances. We recognized the $13.3 million charge in the fourth quarter as a
change in accounting estimate when the information became known.

  MERGER RELATED COSTS

     During the third quarter of 2001, we recorded $1 million in merger related
costs. The charge was our share of transaction costs incurred by Saunders Karp &
Megrue, L.P. and its affiliates in connection with the proposed merger between
Radiologix and SKM-RD Acquisition Corp. The proposed merger was terminated in
April 2001. In the fourth quarter of 2000, we also incurred a $1.8 million
charge for the write-off of transaction costs incurred in connection with the
proposed merger with SKM.

  SUPPLEMENTAL INCENTIVE COMPENSATION

     In the fourth quarter of 2001, upon the successful completion of a $160
million senior notes offering, we incurred $615,000 in supplemental incentive
compensation.

  CORPORATE GENERAL AND ADMINISTRATIVE

     Corporate general and administrative expenses increased $3.3 million, from
$10.6 million in 2000 to $13.9 million in 2001. As a percentage of service fee
revenue, these costs were 4.3% and 5.0% in 2000 and 2001, respectively. The
increase in these costs is primarily due to the further development of our
infrastructure at the corporate office, including additional employees and
associated employee benefits and incentive compensation.

  NON-OPERATING INCOME

     Non-operating income of $1.3 million was recognized in the fourth quarter
of 2001 as partial consideration for early termination of management services
provided at certain imaging sites not owned or operated by the Company.

  DEPRECIATION AND AMORTIZATION

     Depreciation and amortization expense increased $1.4 million, from $22.1
million in 2000 to $23.5 million in 2001. We have continued to buy new equipment
to replace older equipment resulting in increased depreciation expense. As a
percentage of service fee revenue, these costs were 9.0% and 8.5% in 2000 and
2001, respectively.

                                        22
<PAGE>

  INTEREST EXPENSE, NET

     Interest expense, net, decreased $2.5 million, from $18 million in 2000 to
$15.5 million in 2001. The decrease in interest expense in 2001 from 2000 was
due to lower interest rates and the pay-down of outstanding debt during 2001.

  INCOME TAX EXPENSE

     Income tax expense of $2.9 million in 2000 and $11.1 million in 2001
remained constant at a 40% effective tax rate.

  EXTRAORDINARY LOSS

     In the fourth quarter of 2001, we incurred a charge of $4.7 million ($2.8
million, after tax) as an extraordinary loss for the early extinguishment of
debt in relation to terminating our senior credit facility with the proceeds
from our senior notes issuance in December 2001.

  NET INCOME

     Net income increased from $4.3 million in 2000 to $13.8 million in 2001.
Net income as a percentage of service fee revenue was 5% in 2001, which
increased from 1.8% in 2000. Included in net income for 2001 are $780,000 of
after tax non-operating income offset by $600,000 after tax expense related to
merger costs and $369,000 after tax expense for supplemental incentive
compensation related to our senior notes offering. In addition, net income for
2001 included an extraordinary loss of $2.8 million after tax. Included in net
income for 2000 is an $8 million after tax charge for the provision of
uncollectible accounts, $2.2 million after tax write-off of a note receivable
and $1.1 million after tax expense related to merger costs.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 2000

  SERVICE FEE REVENUE

     Revenue from contracted radiology practices and diagnostic imaging centers,
net of contractual allowances, increased $58.1 million from $286.8 million in
1999 to $344.9 million in 2000. Service fee revenue increased $47 million, to
$246.7 million in 2000 from $199.7 million in 1999. Of the increase from 1999 to
2000, $17.6 million resulted from a 9.3% increase in revenues from same store
facilities. Same store facilities are facilities that were owned and operated by
us during the twelve months ended December 31, 1999 and 2000. This increase was
primarily due to increased procedure volume, a shift in the mix to "high-end"
procedures and the addition of new reading contracts and agreements with managed
care organizations. Of the remaining increase from 1999 to 2000, $24.2 million
resulted from facilities acquired and developed in 1999 and 2000, and $5.2
million resulted from "tuck-in" acquisitions of imaging centers during the
period.

  SALARIES AND BENEFITS

     Salaries and benefits increased $13.8 million, from $52.8 million in 1999
to $66.6 million in 2000. Of the increase from 1999 to 2000, $7.8 million
resulted from a same store facilities increase of 15.4%. An increase of $4.8
million resulted from facilities acquired and developed in 1999 and 2000, and
the remaining $1.2 million increase resulted from "tuck-in" acquisitions of
imaging centers during 2000. As a percentage of service fee revenue, these costs
were 26.5% and 27.0% in 1999 and 2000, respectively.

  FIELD SUPPLIES

     Field supplies increased $1.7 million, from $11.6 million in 1999 to $13.3
million in 2000. Of the increase from 1999 to 2000, $451,000 resulted from a
same store facilities increase of 4.1%. An increase of $780,000 resulted from
facilities acquired and developed in 2000, and the remaining $404,000 resulted

                                        23
<PAGE>

from "tuck-in" acquisitions of imaging centers during the period. As a
percentage of service fee revenue, these costs were 5.8% and 5.4% in 1999 and
2000, respectively.

  FIELD RENT AND LEASE EXPENSE

     Field rent and lease expense increased $11.8 million, from $18.4 million in
1999 to $30.2 million in 2000. Of the increase from 1999 to 2000, $4.9 million
resulted from a same store facilities increase of 30.1%. The increase is
primarily the result of the additional equipment leases entered into during the
year and at December 1999. An increase of $5.6 million resulted from facilities
acquired and developed in 2000, and the remaining $1.3 million resulted from
"tuck-in" acquisitions of imaging centers in 1999 and 2000. As a percentage of
service fee revenue, these costs were 9.2% and 12.2% in 1999 and 2000,
respectively.

  OTHER FIELD EXPENSES

     Other field expenses increased $13.6 million, from $32.3 million in 1999 to
$45.9 million in 2000. Of the increase from 1999 to 2000, $8.6 million resulted
from existing facilities representing a 28.7% same store increase. An increase
of $4.1 million resulted from facilities acquired and developed in 1999 and
2000, and $898,000 resulted from "tuck-in" acquisitions of imaging centers in
1999 and 2000. As a percentage of service fee revenue, these costs were 18.6%
and 16.2% in 2000 and 1999, respectively. Other field expenses include a $3.7
million write-off of a note receivable during the fourth quarter of 2000. The
note receivable was due from one of the contracted radiology practices and was
determined to no longer be collectible. As a result of the write-off, we have
adjusted this contracted radiology group's incentive technical bonus potential.
In addition, other field expenses include repairs and maintenance, service
contracts, utilities and communication costs.

  BAD DEBT EXPENSE

     Bad debt expense increased $15.6 million, from $18.8 million in 1999 to
$34.4 million in 2000. As a percentage of service fee revenue, these costs were
13.9% and 9.4% in 2000 and 1999, respectively. Since service fee revenue
represents contracted radiology practices' and diagnostic imaging centers'
revenue less amounts retained by contracted radiology practices, these
percentages are inherently at a higher stated value. Therefore, bad debt expense
should be compared for 2000 and 2001 as a percentage of the revenue of the
contracted radiology practice rather than as a percentage of service fee
revenue. As a percentage of revenue of the contracted radiology practice and
diagnostic imaging centers, bad debt expense was 6.6% and 10.0% in 1999 and
2000, respectively. This increase was primarily due to a $13.3 million charge
recorded in the fourth quarter of 2000 for the provision of uncollectible
accounts. During the fourth quarter of 2000, we performed an extensive review of
our accounts receivable and collection experience utilizing reports and analyses
not previously available. Based on this review, we believed that the estimation
process of determining contractual allowances for billed charges needed to be
revised and that a portion of our accounts receivable was no longer collectible.
The review allowed us to better analyze old accounts receivable, however it did
not indicate what our historical collection rates would have been if newly
implemented collection policies and procedures had been in place. Accordingly,
the adjustment for an increase in the provision for uncollectible accounts was
recognized as a bad debt expense as opposed to an increase in contractual
allowances. We recognized the $13.3 million charge in the fourth quarter as a
change in accounting estimate when the information became known.

  MERGER RELATED COSTS

     During the fourth quarter of 2000, we incurred a $1.8 million charge for
the write-off of transaction costs incurred in connection with the proposed
merger with SKM.

                                        24
<PAGE>

  CORPORATE GENERAL AND ADMINISTRATIVE

     Corporate general and administrative expenses decreased $600,000, from
$11.2 million in 1999 to $10.6 million in 2000. As a percentage of service fee
revenue, these costs were 5.6% and 4.3% in 1999 and 2000, respectively.

  DEPRECIATION AND AMORTIZATION

     Depreciation and amortization expense increased $3.7 million, from $18.4
million in 1999 to $22.1 million in 2000. This increase was principally due to
amortization of intangible assets resulting from our acquisition of additional
facilities and practices. In addition, we have continued to buy new equipment to
replace older equipment, and this upgrade of equipment resulted in increased
depreciation expense. As a percentage of service fee revenue, these costs were
9.2% and 9.0% in 1999 and 2000, respectively.

  INTEREST EXPENSE, NET

     Interest expense, net, increased $5.7 million, from $12.3 million in 1999
to $18 million in 2000. As a percentage of service fee revenue, these costs were
6.2% and 7.3% in 1999 and 2000, respectively. The percentage increase is a
result of our acquisitions throughout 1999, an increase in days sales
outstanding in accounts receivable and the issuance of $20 million of
convertible notes in August 1999 (see Note 5 to consolidated financial
statements) to fund the Questar transaction, all of which resulted in us
carrying higher debt levels.

  INCOME TAX EXPENSE

     The Company's effective tax rate for 2000 increased to 40.0% from 39.2% in
1999. The increase is primarily due to the non-deductible amortization of
goodwill and a shift in state income taxes based on the Company's recent
expansions.

  NET INCOME

     Net income decreased from $16.1 million in 1999 to $4.3 million in 2000.
Net income as a percentage of revenue was 1.8% in 2000 compared to 8% in 1999.
Included in net income for 2000, is a $8 million after tax charge for the
provision of uncollectible accounts, $2.2 million after tax write-off of a note
receivable and $1.1 million after tax expense related to merger costs.

                                        25
<PAGE>

SUMMARY OF OPERATIONS BY QUARTER

     The following table presents unaudited quarterly operating results for each
of Radiologix's last eight fiscal quarters. Radiologix believes that all
necessary adjustments have been included in the amounts stated below to present
fairly the quarterly results when read in conjunction with the consolidated
financial statements. Results of operations for any particular quarter are not
necessarily indicative of results of operations for a full year or predictive of
future periods.

<Table>
<Caption>
                                                 2000 QUARTER Ended                            2001 QUARTER ENDED
                                      -----------------------------------------   --------------------------------------------
                                       MAR.      JUNE      SEPT.        DEC.       MAR.      JUNE        SEPT.         DEC.
                                        31        30         30        31(a)        31        30         30(b)        31(c)
                                      -------   -------   --------   ----------   -------   -------   -----------   ----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                   <C>       <C>       <C>        <C>          <C>       <C>       <C>           <C>
Statement of Income Data:
  Service fee revenue...............  $59,251   $61,783   $62,487     $ 63,166    $65,911   $68,236     $69,175      $73,328
  Income (loss) before income taxes
    and extraordinary loss..........   6,784     7,308      7,064      (13,923)    5,830     6,586        6,305        9,060
  Extraordinary loss................      --        --         --           --        --        --           --       (2,838)
  Net income (loss).................  $4,070    $4,385    $ 4,246     $ (8,368)   $3,498    $3,952      $ 3,782      $ 2,599
  Income (loss) per share before
    extraordinary loss
    Basic...........................  $ 0.21    $ 0.22    $  0.22     $  (0.43)   $ 0.18    $ 0.20      $  0.19      $  0.28
    Diluted.........................  $ 0.20    $ 0.21    $  0.20     $  (0.43)   $ 0.17    $ 0.19      $  0.18      $  0.24
  Net Income (Loss) Per Share:
    Basic...........................  $ 0.21    $ 0.22    $  0.22     $  (0.43)   $ 0.18    $ 0.20      $  0.19      $  0.13
    Diluted.........................  $ 0.20    $ 0.21    $  0.20     $  (0.43)   $ 0.17    $ 0.19      $  0.18      $  0.12
  Weighted Average Shares
    outstanding:
    Basic...........................  19,463    19,502     19,506       19,507    19,507    19,507       19,578       19,643
    Diluted.........................  22,084    22,067     22,143       19,507    22,171    22,047       22,817       23,584
</Table>

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

(a)  Net loss for the quarter ended December 31, 2000 includes a $13.3 million
     charge for the provision of uncollectible accounts, $3.7 million charge for
     the write-off of a note receivable and a $1.8 million charge for
     transaction related costs. See Note 2 to consolidated financial statements.

(b)  Net income for the quarter ended September 30, 2001 includes $1 million in
     merger related costs. See Note 11 to consolidated financial statements.

(c)  Net income for the quarter ended December 31, 2001 includes $615,000 in
     supplemental incentive compensation in connection with our senior notes
     offering and $1.3 million of non-operating income as partial consideration
     for early termination of management services provided at certain imaging
     sites not owned or operated by Radiologix. In addition, net income for the
     quarter ended December 31, 2001 includes a $4.7 million ($2.8 million net
     of tax) extraordinary charge for the early extinguishment of debt. See
     Notes 5 and 11 to consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

     Liquidity for the year ended December 31, 2001 was derived principally from
net cash proceeds from operating activities, as well as borrowings under our
credit facility and senior notes. As of December 31, 2001, we had net working
capital of $55.2 million, including cash and cash equivalents of $10.8 million.
We had current liabilities of $40.4 million, including current maturities of
$5.5 million. For the year ended December 31, 2001, we generated $41 million in
net operating cash flow, invested $19.1 million and used cash of $14.8 million
in financing activities.

     Net cash from operating activities for the year ended December 31, 2001
increased $27.7 million, from $13.3 million in 2000 to $41 million in 2001. The
increase in cash from operating activities is primarily due to improved
collections of accounts receivable which resulted in a decrease in accounts
receivable days outstanding from 76 days at December 31, 2000 to 69 days at
December 31, 2001, as well as the implementation of certain cash management
strategies. In addition, cash paid for income taxes was only $7.5 million in
2001 compared to $11.5 million in 2000. For the year ended December 31, 1999,
net cash used in operating activities was $1.5 million. For the year ended
December 31, 1999, cash used of $14.7 million for other receivables and other
assets included a $4.2 million income tax receivable, a

                                        26
<PAGE>

$3.8 million note due from an affiliated joint venture and a $4 million note
receivable due from a contracted radiology practice.

     Net cash used in investing activities for the years ended December 31,
1999, 2000, and 2001 was $45 million, $23.1 million, and $19.1 million,
respectively. Purchases of property and equipment during the years ended
December 31, 1999, 2000 and 2001 were $31.5 million, $14 million, and $7.2
million, respectively. In addition, for the year ended December 2001, $13.9
million was used to buy out certain operating leases of equipment. Proceeds from
the sale of equipment during the year ended December 31, 1999 were $10 million.
For the years ended December 31, 1999, 2000 and 2001, we paid $25.4 million,
$10.1 million, and $906,000, respectively, for acquisitions and affiliations. In
August 1999, we acquired all the outstanding stock of Questar, a private
operator of primarily MRI radiology centers. The total consideration for the
transaction was $18.9 million in cash, plus the assumption of $16.8 million in
liabilities. The total consideration for all other 1999 acquisitions and
affiliations was approximately $6.5 million in cash, 50,264 shares of
Radiologix's common stock valued at approximately $304,000, plus the assumption
of $3.2 million in liabilities. In March 2000, we completed an acquisition of an
imaging center in Osceola, Florida for total consideration of approximately $2.7
million. During 2000, we continued to complete the development of imaging
centers of Questar for total consideration of approximately $5.9 million. Total
consideration paid for all other acquisitions and affiliations were
approximately $1.5 million. In November 2001, we completed the acquisition of an
imaging center in Laurel, Maryland for total consideration of $906,000.

     Net cash flows from financing activities for the years ended December 31,
1999 and 2000 were $44.2 million and $9.1 million, respectively. Net cash used
in financing activities for the year ended December 31, 2001 was $14.8 million.
Borrowings of long-term debt for the years ended December 31, 1999, 2000 and
2001 were used to enter into contractual arrangements with radiology practices
and the acquisition of Questar, for purchases of equipment and capital
improvements, as well as for working capital needs. At December 31, 2001, we had
outstanding borrowings of $160 million under our senior notes, $24.2 million
outstanding under our convertible debt obligations and an additional $13 million
in other debt obligations.

     On March 30, 2001, we amended our $160 million senior credit facility with
our existing banks. Under the terms of the amended senior credit facility,
borrowings consisted of a $100 million term loan and a $60 million revolving
credit facility, including a $5 million swing line facility. Under the
amendment, we made $4 million of scheduled principal installments on June 29,
2001 and September 28, 2001. Scheduled principal installments for the fiscal
year ended 2001 had been reduced from $48 million under the prior agreement to
$12 million under the new amendment. Each of the facilities would terminate on
November 26, 2003. The interest rate was (i) an adjusted LIBOR rate, plus an
applicable margin which could vary from 3.0% to 4.0% dependent on certain
financial ratios or (ii) the prime rate, plus an applicable margin which could
vary from 2.0% to 3.0%. In each case, the applicable margin varied based on
financial ratios maintained by us. The senior credit facility included certain
restrictive covenants including prohibitions on the payment of dividends,
limitations on capital expenditures and the maintenance of certain financial
ratios (including minimum fixed charge coverage ratio and maximum leverage
ratio, as defined). Borrowings under the senior credit facility were secured by
all service agreements to which we were a party, a pledge of the stock of our
subsidiaries and all of our assets.

     In December 2001, we terminated our senior credit facility with proceeds
from a $160 million senior notes ("Senior Notes") issuance, due December 15,
2008. In connection with the redemption, we recorded an extraordinary loss from
the early extinguishment of our senior credit facility debt in the amount of
$4.7 million, $2.8 million after tax. The Senior Notes bear interest at an
annual rate of 10 1/2% payable semiannually in arrears on June 15 and December
15 of each year, commencing June 15, 2002. The Senior Notes are redeemable on or
after December 15, 2005 at various redemption prices, plus accrued and unpaid
interest to the date of redemption. The Senior Notes are unsecured obligations
which rank senior in right of payment to all of our subordinated indebtedness
and equal in right of payment with all other senior indebtedness. The Senior
Notes are unconditionally guaranteed on a senior unsecured basis by certain
restricted existing and future subsidiaries.
                                        27
<PAGE>

     In addition to the Senior Notes issuance in December 2001, we entered into
a credit facility whereby we can borrow up to $35 million. At December 31, 2001,
no borrowings were outstanding under the credit facility. Under the credit
facility the interest rate is (i) an adjusted LIBOR rate, plus an applicable
margin, which can vary from 3.0% to 3.5%, or (ii) the prime rate, plus an
applicable margin, which can vary from 1.75% to 2.25%. In each case, the
applicable margin varies based on financial ratios maintained by us. The credit
facility includes certain restrictive covenants, including prohibitions on the
payment of dividends, limitations or capital expenditures and the maintenance of
certain financial ratios (including minimum fixed charge to coverage ratio and
maximum leverage ratio, as defined). Borrowings under the credit facility are
secured by all service agreements to which we are a party, a pledge of the stock
of our subsidiaries and all of our assets.

     The contractual obligations of long-term debt, including capital lease
obligations and noncancellable operating leases are as follows (in millions):

<Table>
<Caption>
                                                             PAYMENTS DUE BY PERIOD
                                                       -----------------------------------
                                                       LESS THAN    1-3     4-5    AFTER 5
                                              TOTAL     1 YEAR     YEARS   YEARS    YEARS
                                              ------   ---------   -----   -----   -------
<S>                                           <C>      <C>         <C>     <C>     <C>
Long term debt..............................  $184.2     $  --     $  --   $ --    $184.2
Capital lease obligations...................    13.0       5.5       7.5     --        --
Operating leases............................    59.4      18.1      37.5    3.8        --
                                              ------     -----     -----   ----    ------
          Total contractual cash
            obligations.....................  $256.6     $23.6     $45.0   $3.8    $184.2
                                              ======     =====     =====   ====    ======
</Table>

     On December 30, 1999, we entered into a sale-leaseback transaction in which
radiology equipment with a net book value of approximately $10 million was sold
for $10 million and leased back for five years. The operating lease bears
interest at 9.96%, and equal monthly payments began in July 2000. In December
2001, Radiologix repurchased some of this equipment and other equipment
previously held under operating leases for approximately $13.9 million. Future
minimum lease payments under these operating leases would have been $3.6 million
for years 2002 through 2004 and $2.3 million for 2005.

     We operate in a capital intensive, high fixed-cost industry that requires
significant amounts of capital to fund operations, particularly the initial
start-up and development expense of new diagnostic imaging centers and the
acquisition of additional centers and new diagnostic imaging equipment. To the
extent we are unable to generate sufficient cash from our operations, funds are
not available under our senior credit facility or we are unable to structure or
obtain operating leases, we may be unable to meet our capital expenditure
requirements. Furthermore, we may not be able to raise any necessary additional
funds through bank financing or the issuance of equity or debt securities on
terms acceptable to us, if at all.

CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements requires the use of judgments and
estimates. Our critical accounting policies are described below to provide a
better understanding of how we develop our judgments about future events and
related estimations and how they can impact our financial statements. A critical
accounting policy is one that requires our most difficult, subjective or complex
estimates and assessments and is fundamental to our results of operations. We
identified our most critical accounting policies to be:

     - estimation of contractual allowances and bad debts of accounts
       receivable; and

     - evaluation of intangible and long-lived asset for impairment.

  CONTRACTUAL ALLOWANCES AND BAD DEBT

     Revenue of the contracted radiology practices and diagnostic imaging
centers is recorded when services are rendered by the contracted radiology
practice and diagnostic imaging center based on established charges and reduced
by estimated contractual allowances. Service fee revenue is recorded net of
estimated contractual allowances and amounts retained by the contracted
radiology practices under the

                                        28
<PAGE>

terms of the service agreements. We estimate contractual allowances based on the
patient mix at each contracted radiology practice and diagnostic imaging center,
impact of managed care contract pricing, and historical collection information.
We operate 120 imaging centers in 18 different states, each of which has
multiple managed care contracts and a differing patient mix. We review monthly
the estimated contractual allowance rates for each contracted radiology practice
and diagnostic imaging center. The contractual allowance rate is adjusted as
changes to the factors discussed above become known. We record bad debt expense
based on historical collection rates and our evaluation of each contracted
radiology practice and diagnostic imaging center.

  IMPAIRMENT OF INTANGIBLE AND LONG-LIVED ASSETS

     Subsequent to an acquisition, we continually evaluate whether events and
circumstances have occurred that indicate the remaining balance of the
intangible assets and property and equipment may not be recoverable or that the
remaining useful lives may warrant revision. We evaluate the potential
impairment of intangibles separately from property and equipment. When factors
indicate that intangible assets or property and equipment should be evaluated
for possible impairment, we determine whether the intangible assets or property
and equipment are recoverable or if impairment exists, in which case an
adjustment is made to the carrying value of the related asset. In making this
determination, we use an estimate of the related contracted radiology practices'
and diagnostic imaging services' undiscounted cash flows over the remaining
lives of the intangible assets or the property and equipment and compare it to
the contracted radiology practices' and diagnostic imaging centers' intangible
assets or property and equipment balances. When an adjustment is required, we
evaluate the remaining amortization periods. An impairment loss recognized would
be measured as the amount by which the carrying amount of the asset exceeds the
fair value of the asset. We recorded no impairment charges during 1999, 2000 or
2001.

     Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142"), became effective for us on January 1, 2002.
SFAS No. 142 requires that goodwill and other intangible assets with an
indefinite useful life no longer be amortized as expenses of operations, but
rather carried on the balance sheet as permanent assets. These intangible assets
are to be subject to at least annual assessments for impairment by applying a
fair-value-based test. Amortization of goodwill and other indefinite-lived
intangible assets amounted to $1.2 million ($749,900 on an after tax basis) for
the year ended December 31, 2001. These expense amounts, under SFAS 142, will
not be recorded in years after fiscal 2001. We are developing plans to determine
fair values of its operations in which goodwill and other indefinite-lived
intangibles have been recorded and will assess whether an impairment charge is
warranted as of January 1, 2002, or at any other assessment dates. Our service
agreements, included in the consolidated balance sheets as intangible assets,
net, are not considered to have an indefinite useful life and will continue to
be amortized over a useful life of 25 years.

     This discussion and analysis should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this
report.

                           FORWARD-LOOKING STATEMENTS

     Throughout this report we make "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking
statements include words such as "may," "will," "would," "could," "likely,"
"estimate," "intend," "plan," "continue," "believe," "expect" or "anticipate"
and other similar words and include all discussions about our acquisition and
development plans. We do not guarantee that the transactions and events
described in this report will happen as described or that any positive trends
noted in this report will continue. The forward-looking statements contained in
this report are generally located in the material set forth under the headings
"Our Company," "Risk Factors," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "The Diagnostic
Imaging Services Industry" and "Business," but may be found in other locations
as well. These forward-looking statements generally relate to our plans,
objectives and expectations for future operations

                                        29
<PAGE>

and are based upon management's reasonable estimates of future results or
trends. Although we believe that our plans and objectives reflected in or
suggested by such forward-looking statements are reasonable, we may not achieve
such plans or objectives. You should read this report completely and with the
understanding that actual future results may be materially different from what
we expect. We will not update forward-looking statements even though our
situation may change in the future.

     SPECIFIC FACTORS THAT MIGHT CAUSE ACTUAL RESULTS TO DIFFER FROM OUR
EXPECTATIONS, INCLUDE, BUT ARE NOT LIMITED TO:

     - economic, competitive, demographic, business and other conditions in our
       markets;

     - a decline in patient referrals;

     - changes in the rates or methods of third-party reimbursement for
       diagnostic imaging services;

     - the termination of our contracts with radiology practices;

     - the availability of additional capital to fund capital expenditure
       requirements;

     - burdensome lawsuits against our contracted radiology practices and us;

     - reduced operating margins due to our managed care contracts and capitated
       fee arrangements;

     - any failure on our part to comply with state and federal anti-kickback
       and anti-self-referral laws or any other applicable healthcare
       regulations;

     - our substantial indebtedness, debt service requirements and liquidity
       constraints;

     - risks related to our senior notes and healthcare securities generally;
       and

     - other factors discussed in the "Risk Factors" section or elsewhere in
       this report.

     All future written and verbal forward-looking statements attributable to us
or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this section. In light of
these risks, uncertainties and assumptions, the forward-looking events discussed
in this report might not occur.

                                  RISK FACTORS

     An investment in our common stock or notes involves a high degree of risk.
You should carefully consider the risk factors listed below, as well as the
other information included or incorporated in this report, before investing in
our common stock or notes.

RISKS RELATED TO OUR COMPANY AND OUR INDUSTRY

  OUR REVENUE IS DEPENDENT ON REFERRALS.

     We generate most of our revenue from fees charged for the use of our
diagnostic imaging equipment at our centers. This revenue depends on referrals
from third parties, many of which are made by physicians who have no contractual
obligation to refer patients to us. We also generate revenue from service fees
that we receive from the contracted radiology practices. If a sufficiently large
number of physicians discontinues referring patients to us, our procedure volume
could decrease, which would reduce our revenue and operating margins.

     Further, commercial third-party payors have implemented programs to control
costs that could limit the ability of physicians to refer patients to us. For
example, prepaid healthcare plans, such as health maintenance organizations, in
certain instances provide diagnostic imaging services directly and contract
directly with providers and require their enrollees to obtain these services
from only these providers. Some insurance companies and self-insured employers
also limit these services to contracted providers. These "closed panel" systems
are now common in the managed care environment. Other systems create an economic
disincentive for referrals to providers outside of the system's designated panel
of providers. We
                                        30
<PAGE>

may not be able to compete successfully for managed care contracts against
entities with greater resources within a market area.

  CHANGES IN THIRD-PARTY REIMBURSEMENT RATES OR METHODS FOR DIAGNOSTIC IMAGING
  SERVICES COULD CREATE DOWNWARD PRICING PRESSURE, WHICH WOULD RESULT IN A
  DECLINE IN OUR REVENUE AND HARM OUR FINANCIAL POSITION.

     Our revenue is derived through our ownership, operation and management of
diagnostic imaging centers and from service fees paid to us by contracted
radiology practices. Substantially all of the revenue of our diagnostic imaging
centers and the contracted radiology practices is currently derived from
commercial third-party payors, government sponsored healthcare programs
(principally, Medicare and Medicaid) and private and other payors. For 2001,
revenue generated at our diagnostic imaging centers consisted of 62% from
commercial third-party payors, 28% from Medicare and Medicaid and 10% from
private and other payors.

     Rates paid by commercial third-party payors are based on established
physician and hospital charges and are generally higher than Medicare
reimbursement rates. Any decrease in the relative number of patients covered by
commercial third-party payors could decrease our revenue.

     Any change in the rates of or conditions for reimbursement from commercial
third-party payors, Medicare or Medicaid could substantially reduce the amounts
reimbursed to us or our contracted radiology practices for services provided.
These reductions could have a significant adverse effect on our revenue and
financial results by creating downward pricing pressure.

  WE COULD BE HARMED IF THE CONTRACTED RADIOLOGY PRACTICES TERMINATE THEIR
  AGREEMENTS WITH US OR LOSE A SIGNIFICANT NUMBER OF RADIOLOGISTS.

     Our diagnostic imaging services include a professional component that must
be provided by radiologists who are not directly employed by us. We do not
control the radiologists who perform professional services for us. Instead,
these radiologists are employed by the contracted radiology practices that
maintain agreements with us. These agreements typically have terms of between 10
and 40 years, but may be terminated by either party under certain limited
conditions. Depending on the termination event, the radiology practice may have
the right to require us to sell, assign and transfer to it, the assets and
related liabilities and obligations associated with the professional and
technical radiology services provided by the radiology practice immediately
prior to the termination. The termination or material modification of any of
them could reduce our revenue.

     If a significant number of radiologists terminate their relationships with
the contracted radiology practices and the radiology practices cannot recruit
sufficient qualified radiologists to fulfill practice obligations under our
agreements with them, our ability to maximize the use of our diagnostic imaging
centers could be adversely affected. Competition in recruiting radiologists may
make it difficult for contracted radiology practices to maintain adequate levels
of radiologists. Neither we nor the contracted radiology practices maintain
insurance on the lives of any affiliated physicians.

  WE MAY NOT BE ABLE TO SUCCESSFULLY COMPLETE OUR MARKET DEVELOPMENT PLANS.

     We intend to increase our presence in existing markets through acquisitions
of centers, developing de novo centers and adding additional equipment at
existing centers, establishing additional joint venture and outsourcing
relationships and selectively entering into contractual relationships with
high-quality, profitable radiology practices. We may not be able to expand
either within our existing markets or in new markets. In addition, any expansion
may not be beneficial to our overall strategy, and any such expansion may not
ultimately produce returns that justify our investment.

                                        31
<PAGE>

     Our ability to expand is dependent upon many factors, including our ability
to:

     - identify attractive and willing candidates for acquisitions, joint
       ventures or outsourcing relationships;

     - adapt our structure to comply with federal and state legal requirements
       affecting our arrangements with contracted radiology practices, including
       state prohibitions on fee-splitting, corporate practice of medicine and
       self-referrals;

     - obtain regulatory approvals and certificates of need, where necessary,
       and comply with licensing and certification requirements applicable to
       our diagnostic imaging centers, the contracted radiology practices and
       the physicians associated with the contracted radiology practices;

     - recruit a sufficient number of qualified radiology technologists;

     - expand our infrastructure and management; and

     - obtain adequate financing.

     Our ability to expand is also dependent on our ability to compete for
opportunities. We may not be able to compete effectively for the acquisition of
diagnostic imaging centers, joint venture opportunities or other outsourcing
relationships. Our competitors may have better established operating histories
and greater resources than we do. Competitors may make it more difficult to
complete acquisitions or joint ventures on terms beneficial to us.

     Acquisitions involve a number of special risks, including the following:

     - possible adverse effects on our operating results;

     - diversion of management's attention and resources;

     - failure to retain key personnel;

     - difficulties in integrating new operations into our existing management
       infrastructure;

     - amortization or write-offs of acquired intangible assets; and

     - risks associated with unanticipated events or liabilities.

     Additionally, although we will continue to structure our operations in an
effort to comply with applicable antitrust laws, federal or state governmental
authorities may view us as being dominant in a particular market and, therefore,
cause us to divest ourselves of relationships or assets.

  WE AND THE CONTRACTED RADIOLOGY PRACTICES MAY BECOME SUBJECT TO BURDENSOME
  LAWSUITS.

     We may be subject to professional liability claims, including, without
limitation, for improper use or malfunction of our diagnostic imaging equipment.
We maintain insurance policies with coverages that we believe are appropriate in
light of the risks attendant to our business and consistent with industry
practice. We also require the contracted radiology practices to maintain
professional liability insurance consistent with industry practice. However,
adequate liability insurance may not be available to us and the contracted
radiology practices in the future at acceptable costs or at all.

     Providing medical services entails the risk of professional malpractice and
other similar claims. The physicians employed by the contracted radiology
practices are from time to time subject to malpractice claims. We structure our
relationships with the practices under our agreements with them in a manner that
we believe does not constitute the practice of medicine by us or subject us to
professional malpractice claims for acts or omissions of physicians in the
contracted radiology practices. Nevertheless, claims, suits or complaints
relating to services provided by the contracted radiology practices may be
asserted against us in the future, including malpractice.

     Any claim made against us not fully covered by insurance could be costly to
defend against, result in a substantial damage award against us and divert the
attention of our management from our operations,

                                        32
<PAGE>

which could have an adverse effect on our financial performance. In addition,
claims might adversely affect our business or reputation.

     We have assumed and succeeded to substantially all of the obligations of
some of the operations that we have acquired. Therefore, claims may be asserted
against us for events that occurred prior to these acquisitions. In connection
with our acquisitions, the sellers of the operations that we have acquired have
agreed to indemnify us for certain claims. However, we may not be able to
collect payment under these indemnity agreements, which could affect us
adversely.

  MOST OF OUR IMAGING MODALITIES REQUIRE THE UTILIZATION OF RADIATION, AND
  CERTAIN IMAGING MODALITIES UTILIZE RADIOACTIVE MATERIALS. THESE OPERATIONS
  GENERATE REGULATED WASTE AND COULD SUBJECT US TO REGULATION, RELATED COSTS AND
  DELAYS AND POTENTIAL LIABILITIES FOR INJURIES OR VIOLATIONS OF ENVIRONMENTAL,
  HEALTH AND SAFETY LAWS.

     Most of our imaging modalities utilize radiation, and certain imaging
modalities utilize radioactive material. These operations generate medical and
other regulated wastes. Storage, use and disposal of these materials and waste
products present the risk of accidental environmental contamination and physical
injury. We are subject to federal, state and local regulations governing
storage, handling and disposal of these materials. We cannot completely
eliminate the risk of accidental contamination or injury from these hazardous
materials. In the event of an accident, we would be held liable for any
resulting damages, and any liability could exceed the limits of or fall outside
the coverage of our insurance. We may not be able to maintain insurance on
acceptable terms, or at all. We could incur significant costs and the diversion
of our management's attention to comply with current or future environmental,
health and safety laws and regulations.

  WE MAY EXPERIENCE COMPETITION FROM OTHER DIAGNOSTIC IMAGING COMPANIES. THIS
  COMPETITION COULD ADVERSELY AFFECT OUR REVENUE AND OUR BUSINESS.

     The market for diagnostic imaging services is competitive. We compete
principally on the basis of our reputation for providing multiple modalities,
our conveniently located centers and our cost-effective, high-quality diagnostic
imaging services. We compete locally with groups of radiologists, established
hospitals, clinics and certain other independent organizations that own and
operate imaging equipment. Our major national competitors include Alliance
Imaging, Inc., HEALTHSOUTH Corporation, InSight Health Services Corp., Medical
Resources, Inc., Syncor International Corporation and U.S. Diagnostic, Inc. Some
of our local or national competitors that provide diagnostic imaging services
may now or in the future have access to greater financial resources than we do
and may have access to newer, more advanced equipment.

     In addition, in the past some non-radiologist physician practices have
refrained from establishing their own diagnostic imaging centers because of the
federal physician self-referral legislation. Final regulations issued in January
2001 clarify certain of the exceptions to the physician self-referral
legislation, which may create opportunities for and encourage some physician
practices to establish their own diagnostic imaging centers within their group
practices, which may compete with us.

  TECHNOLOGICAL CHANGE IN OUR INDUSTRY COULD REDUCE THE DEMAND FOR OUR SERVICES
  AND REQUIRE US TO INCUR SIGNIFICANT COSTS TO UPGRADE OUR EQUIPMENT.

     Technological change in the diagnostic imaging industry has been gradual.
In the future, however, the development of new technologies or refinements of
existing modalities may make our existing equipment technologically or
economically obsolete, or cause a reduction in the value of, or reduce the need
for, our services. Diagnostic imaging equipment is currently manufactured by
numerous companies. Competition among manufacturers for a greater share of the
diagnostic imaging equipment market may result in technological advances in the
speed and imaging capacity of new equipment. Consequently, the obsolescence of
our equipment may be accelerated. We may not have the financial ability to
acquire the new or improved equipment.

                                        33
<PAGE>

  A FAILURE TO MEET OUR CAPITAL EXPENDITURE REQUIREMENTS COULD ADVERSELY AFFECT
  OUR BUSINESS.

     We operate in a capital intensive, high fixed-cost industry that requires
significant amounts of capital to fund operations, particularly the initial
start-up and development expenses of new diagnostic imaging centers and the
acquisition of additional centers and new diagnostic imaging equipment. We incur
capital expenditures to, among other things:

     - upgrade and replace existing equipment;

     - purchase new diagnostic imaging equipment; and

     - expand within our existing markets and enter new markets.

     To the extent we are unable to generate sufficient cash from our
operations, funds are not available under our senior credit facility or we are
unable to structure or obtain operating leases, we may be unable to meet our
capital expenditure requirements. Furthermore, we may not be able to raise any
necessary additional funds through bank financing or the issuance of equity or
debt securities on terms acceptable to us, if at all.

  OUR SUCCESS DEPENDS IN PART ON OUR KEY PERSONNEL AND WE MAY NOT BE ABLE TO
  RETAIN SUFFICIENT QUALIFIED PERSONNEL.

     Our success depends in part on our ability to attract and retain qualified
senior and executive management, managerial and technical personnel. Competition
in recruiting these personnel may make it difficult for us to continue our
growth and success. The loss of their services or our inability in the future to
attract and retain management and other key personnel could hinder the
implementation of our business strategy. We do not maintain key person insurance
for any of our executive officers. Recently, there has been a shortage in
certain of our markets of qualified radiology technologists, the personnel who
operate our equipment. If we are unable to recruit and retain a sufficient
number of qualified technologists, we will be unable to operate our centers at
maximum capacity.

  OUR INABILITY TO ENFORCE NON-COMPETE AGREEMENTS WITH THE RADIOLOGISTS MAY
  INCREASE COMPETITION.

     Each of the contracted radiology practices under our comprehensive services
model has entered into agreements with its physician shareholders and full-time
employed radiologists that generally prohibit those shareholders and
radiologists from competing for a period of two years within defined geographic
regions after they cease to be owners or employees, as applicable. In most
states, a covenant not to compete will be enforced only:

     - to the extent it is necessary to protect a legitimate business interest
       of the party seeking enforcement;

     - if it does not unreasonably restrain the party against whom enforcement
       is sought; and

     - if it is not contrary to public interest.

     Enforceability of a non-compete covenant is determined by a court based on
all of the facts and circumstances of the specific case at the time enforcement
is sought. For this reason, it is not possible to predict whether, or to what
extent, a court will enforce the contracted radiology practices' covenants. The
inability of the contracted radiology practices or us to enforce radiologists'
non-compete covenants could result in increased competition from individuals who
are knowledgeable about our business strategies and operations.

  IT IS DIFFICULT TO ESTIMATE OUR UNCOLLECTIBLE ACCOUNTS RECEIVABLE AND
  CONTRACTUAL ALLOWANCES FOR BILLED CHARGES, WHICH MAY IMPACT OUR EARNINGS.

     Due to the complex nature of billing for healthcare services, it is
difficult for us to estimate our uncollectible accounts receivable and our
contractual allowances for billed charges. If we have to revise our estimates
and our existing reserves are not adequate, this may impact our earnings. In
late 2000, we
                                        34
<PAGE>

engaged in an extensive review of our collection processes and our method of
determining allowances for contractual adjustments and bad debts. At that time,
management determined, based on reports and analyses not previously available,
that the estimation process needed to be revised and that a portion of our
accounts receivable were no longer collectible. Accordingly, we incurred a $13.3
million pre-tax charge for uncollectible accounts receivable during the fourth
quarter of 2000.

  OUR RECORDED GOODWILL AMOUNTS MAY BE IMPAIRED UNDER NEW ACCOUNTING STANDARDS.

     At December 31, 2001, we had approximately $28.5 million recorded as
goodwill. Under new accounting standards effective January 1, 2002, we will be
required to assess our recorded goodwill amounts for impairment by applying a
fair-value-based test. We are currently in the process of assessing whether an
impairment charge is warranted as of January 1, 2002. Accordingly, we may be
required to record a non-cash charge by writing down all or a portion of our
recorded goodwill amounts. Such a write down could have a material impact on our
results of operations in 2002 or future periods.

  MANAGED CARE CONTRACTS AND CAPITATED FEE ARRANGEMENTS COULD REDUCE OUR
  OPERATING MARGINS.

     During 2001, approximately 91% of revenue generated at our diagnostic
imaging centers was derived from payments made on a fee-for-service basis and
approximately 9% was derived from capitated arrangements. Under capitated or
other risk-sharing arrangements, the healthcare provider typically is paid a
pre-determined amount per-patient per-month from the payor in exchange for
providing all necessary covered services to patients covered under the
arrangement. These contracts pass much of the financial risk of providing
outpatient diagnostic imaging services, including the risk of over-use, from the
payor to the provider. Our success will depend in part on our ability to
negotiate effectively, on behalf of the contracted radiology practices and the
diagnostic imaging centers that we own, operate or manage, contracts with HMOs,
employer groups and other third-party payors for services to be provided on a
risk-sharing or capitated basis by some or all of the radiology practices and/or
diagnostic imaging centers. Risk-sharing arrangements result in better revenue
predictability, but more unpredictability of expenses and, consequently,
profitability. We may not be able to negotiate satisfactory arrangements on a
capitated or other risk-sharing basis, on behalf of our diagnostic imaging
centers or the contracted radiology practices. In addition, to the extent that
patients or enrollees covered by these contracts require more frequent or
extensive care than anticipated, we would incur unanticipated costs not offset
by additional revenue, which would reduce operating margins.

  WE MAY BE UNABLE TO GENERATE REVENUE WHEN OUR EQUIPMENT IS NOT OPERATIONAL.

     Timely, effective service is essential to maintaining our reputation and
high utilization rates on our imaging equipment. Our warranties and maintenance
contracts do not compensate us for loss of revenue when our systems are not
fully operational. Equipment manufacturers may not be able to perform repairs or
supply needed parts in a timely manner. Thus, if we experience more equipment
malfunctions than anticipated or if we are unable to promptly obtain the service
necessary to keep our equipment functioning effectively, our revenue could
decline and our ability to provide services would be harmed.

  OUR CORPORATE ORGANIZATIONAL DOCUMENTS COULD DISCOURAGE ACQUISITION PROPOSALS
  AND MAKE DIFFICULT A CHANGE OF CONTROL.

     Certain provisions of Radiologix's Restated Certificate of Incorporation,
as amended, Radiologix's Amended and Restated Bylaws and Delaware law could
discourage potential acquisition proposals, delay or prevent a change in control
of Radiologix and, consequently, limit the price that investors might be willing
to pay in the future for shares of our common stock. These provisions include
the inability to remove directors except for cause and our ability to issue,
without further stockholder approval, shares of preferred stock with rights and
privileges senior to the common stock. We are also subject to Section 203 of the
Delaware General Corporation Law which, subject to certain exceptions, prohibits
a Delaware corporation from engaging in any of a broad range of business
combinations with an "interested stockholder" for three years after the
stockholder became an interested stockholder.
                                        35
<PAGE>

     We have also entered into employment agreements with our four executive
officers, which contain provisions that require us to pay certain amounts to the
executives upon their termination following a change of control. These
agreements may delay or prevent a change of control of Radiologix.

RISKS RELATING TO GOVERNMENT REGULATION OF OUR BUSINESS

  STATE AND FEDERAL ANTI-KICKBACK AND ANTI-SELF-REFERRAL LAWS MAY ADVERSELY
  AFFECT OUR INCOME.

     Various federal and state laws govern financial arrangements among
healthcare providers. Federal anti-kickback law prohibits the knowing and
willful offer, payment, solicitation or receipt of any form of remuneration in
return for, or to induce, the referral of Medicare or Medicaid patients, or in
return for, or to induce, the purchase, lease or order of items or services that
are covered by Medicare or Medicaid. Similarly, many state laws prohibit the
solicitation, payment or receipt of remuneration in return for, or to induce,
the referral of patients in private as well as government programs. Violation of
these anti-kickback laws may result in substantial civil or criminal penalties
for individuals or entities and/or exclusion from federal or state healthcare
programs. We believe that we are operating in compliance with applicable law and
believe that our arrangements with providers would not be found to violate the
anti-kickback laws. However, these laws could be interpreted in a manner
inconsistent with our operations.

     Federal law prohibiting physician self-referrals (the "Stark Law")
prohibits a physician from referring Medicare or Medicaid patients to an entity
for certain "designated health services" if the physician has a prohibited
financial relationship with that entity, unless an exception applies. Diagnostic
radiology (other than nuclear medicine) is a designated health service. Although
we believe that our operations do not violate these laws, our activities may be
challenged. If a challenge to our activities is successful, it could have an
adverse effect on our operations. In addition, legislation may be enacted in the
future that further addresses Medicare and Medicaid fraud and abuse or that
imposes additional requirements or burdens on us.

     All of the states in which our diagnostic imaging centers are located have
adopted a form of anti-kickback law and almost all of those states have also
adopted a form of Stark Law. The scope of these laws and the interpretations of
them vary from state to state and are enforced by state courts and regulatory
authorities, each with broad discretion. A determination of liability under the
laws described in this risk factor could result in fines and penalties and
restrictions on our ability to operate in these jurisdictions.

  FEDERAL FALSE CLAIMS ACT VIOLATIONS COULD AFFECT OUR PARTICIPATION IN
  GOVERNMENT PROGRAMS.

     The Federal False Claims Act provides, in part, that the federal government
may bring a lawsuit against any person whom it believes has knowingly presented,
or caused to be presented, a false or fraudulent request for payment from the
federal government, or who has made a false statement or used a false record to
get a claim approved. The Federal False Claims Act further provides that a
lawsuit thereunder may be initiated in the name of the United States by an
individual who is an original source of the allegations. The government has
taken the position that claims presented in violation of the federal
anti-kickback law or Stark Law may be considered a violation of the Federal
False Claims Act. Penalties include fines ranging from $5,500 to 11,000 for each
false claim, plus three times the amount of damages that the federal government
sustained because of the act of that person. We believe that we are in
compliance with the rules and regulations that apply to the Federal False Claims
Act. However, we could be found to have violated certain rules and regulations
resulting in sanctions under the Federal False Claims Act. If we are found in
violation, any sanctions imposed could result in fines and penalties and
restrictions on and exclusions from participation in federal and state
healthcare programs that are integral to our business.

                                        36
<PAGE>

  OUR AGREEMENTS WITH THE CONTRACTED RADIOLOGY PRACTICES MUST BE STRUCTURED TO
  AVOID THE CORPORATE PRACTICE OF MEDICINE AND FEE-SPLITTING.

     The laws of many states, including many of the states in which the
contracted radiology practices are located, prohibit us from exercising control
over the medical judgments or decisions of physicians and from engaging in
certain financial arrangements, such as splitting professional fees with
physicians. These laws and their interpretations vary from state to state and
are enforced by state courts and regulatory authorities, each with broad
discretion. A component of our business has been to enter into service
agreements with radiology practices. We provide management, administrative,
technical and other non-medical services to the radiology practices in exchange
for a service fee. We structure our relationships with the radiology practices,
including the purchase of diagnostic imaging centers, in a manner that we
believe keeps us from engaging in the practice of medicine or exercising control
over the medical judgments or decisions of the radiology practices or their
physicians or violating the prohibitions against fee-splitting. State regulatory
authorities or other parties may assert that we are engaged in the corporate
practice of medicine or that the payment of service fees to us by the radiology
practices constitutes fee-splitting. If such a claim were successfully asserted,
we could be subject to civil and criminal penalties and could be required to
restructure or terminate the applicable contractual arrangements. This result,
or our inability to successfully restructure our relationships to comply with
these statutes, could jeopardize our business strategy.

  LICENSING AND CERTIFICATION LAWS MAY LIMIT OUR ABILITY TO EXPAND.

     Ownership, construction, operation, expansion and acquisition of diagnostic
imaging centers are subject to various federal and state laws, regulations and
approvals concerning licensing of centers, personnel, certificates of need and
other required certificates for certain types of healthcare centers and major
medical equipment. The laws of some of the states in which we operate limit our
ability to acquire new diagnostic imaging equipment or expand or replace our
existing equipment at diagnostic imaging centers in those states. In addition,
free-standing diagnostic imaging centers that provide services that are not
performed as part of a physician office must meet Medicare requirements to be
certified as an independent diagnostic testing facility to bill the Medicare
program. We may not be able to receive the required regulatory approvals for any
future acquisitions, expansions or replacements, and the failure to obtain these
approvals could limit the market for our services.

  THE REGULATORY FRAMEWORK IS UNCERTAIN AND EVOLVING.

     Healthcare laws and regulations may change significantly in the future. We
continuously monitor these developments and modify our operations from time to
time as the regulatory environment changes. We cannot assure you, however, that
we will be able to adapt our operations to address new regulations or that new
regulations will not adversely affect our business. In addition, although we
believe that we are operating in compliance with applicable federal and state
laws, neither our current or anticipated business operations nor the operations
of the contracted radiology practices have been the subject of judicial or
regulatory interpretation. We cannot assure you that a review of our business by
courts or regulatory authorities will not result in a determination that could
adversely affect our operations or that the healthcare regulatory environment
will not change in a way that restricts our operations.

     Certain states have enacted statutes or adopted regulations affecting risk
assumption in the healthcare industry, including statutes and regulations that
subject any physician or physician network engaged in risk-based managed care
contracting to applicable insurance laws and regulations. These laws and
regulations may require physicians and physician networks to meet minimum
capital requirements and other safety and soundness requirements. Implementing
additional regulations or compliance requirements could result in substantial
costs to us and the contracted radiology practices and limit our ability to
enter into capitated or other risk-sharing managed care arrangements.

                                        37
<PAGE>

RISKS RELATED TO NOTES

  OUR SUBSTANTIAL LEVEL OF INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL
  CONDITION AND PREVENT US FROM FULFILLING OUR OBLIGATIONS ON OUR NOTES OR NOTES
  ISSUED TO REPLACE THEM.

     At December 31, 2001, we had approximately $197.2 million of indebtedness.
In addition, we have the ability to borrow up to $35 million under our senior
credit facility. Also, subject to restrictions in the indenture and the senior
credit facility, we may incur additional indebtedness.

     Our high level of indebtedness could have important consequences, including
the following:

     - our ability to obtain additional financing for working capital, capital
       expenditures, acquisitions or general corporate purposes may be impaired;

     - we must use a substantial portion of our cash flow from operations to pay
       interest on our notes and our other indebtedness, which will reduce the
       funds available to us for other purposes;

     - all of the indebtedness outstanding under the senior credit facility is
       secured by substantially all of our assets and will mature prior to any
       notes;

     - our high level of indebtedness could place us at a competitive
       disadvantage to our competitors that have less debt;

     - some of our debt has a variable rate of interest, which exposes us to the
       risk of increased interest rates; and

     - our high level of indebtedness makes us more vulnerable to economic
       downturns and adverse developments in our business.

     We expect to obtain the money to pay our expenses and to pay the amounts
due under our notes and other debt from our operations and from borrowings under
our senior credit facility. Our ability to meet our expenses thus depends on our
future performance, which will be affected by financial, business, economic and
other factors. We will not be able to control many of these factors, such as
economic conditions in the markets where we operate and pressure from
competitors. Our business may not generate sufficient cash flow from operations
in the future, our currently anticipated growth in revenue and cash flow may not
be realized on schedule and future borrowings may not be available to us under
our senior credit facility in an amount sufficient to enable us to repay
indebtedness, including our notes, or to fund other liquidity needs. If we do
not have enough money, we may be required to refinance all or part of our then
existing debt (including our notes), sell assets or borrow more money. We cannot
guarantee that we will be able to do so on terms acceptable to us, or at all. In
addition, the terms of existing or future debt agreements, including our senior
credit facility and any indenture, may restrict us from adopting any of these
alternatives. The failure to generate sufficient cash flow or to achieve these
alternatives could significantly adversely affect the value of our notes and our
ability to pay the amounts due under them.

  BECAUSE OUR NOTES ARE UNSECURED, THE RIGHT TO ENFORCE REMEDIES IS LIMITED BY
  THE RIGHTS OF HOLDERS OF SECURED DEBT.

     Our notes are not secured. Our senior credit facility is secured by
substantially all of our assets and a pledge of the capital stock of all of our
wholly owned subsidiaries. If we become insolvent or are liquidated, or if any
payment under the senior credit facility is accelerated, our lenders will be
entitled to exercise the remedies available to a secured lender under applicable
law and will have a claim on those assets before the holders of any notes. The
liquidation value of our assets may not be sufficient to repay in full any
indebtedness under the senior credit facility, as well as our other
indebtedness, including our notes.

  OUR ABILITY TO REPAY OUR NOTES AND OUR OTHER DEBT DEPENDS ON CASH FLOW FROM
  OUR SUBSIDIARIES, SOME OF WHICH ARE NOT OBLIGATED TO MAKE FUNDS AVAILABLE TO
  MAKE PAYMENTS ON NOTES.

     Radiologix is a holding company. Its only material assets are its ownership
interests in its subsidiaries. Consequently, it depends on distributions or
other intercompany transfers of funds from its subsidiaries to
                                        38
<PAGE>

meet its debt service and other obligations, including with respect to its
notes. Our non-guarantor subsidiaries are not obligated to make funds available
for payment on our notes. Only our subsidiaries that are not unrestricted
subsidiaries will guarantee our notes. The financial statements included in this
report are presented on a consolidated basis, including all of our subsidiaries.
The aggregate service fee revenue and EBITDA for 2001 of our subsidiaries that
are not guarantors of our notes were $20.4 million and $5.7 million,
respectively, or 7.4% and 8.5%, respectively, of our total service fee revenue
and EBITDA for 2001. The aggregate total assets at December 31, 2001 of our
subsidiaries that are not guarantors of our notes were $10.8 million, or 3.8% of
our total assets at December 31, 2001. The operating results of our guarantor
subsidiaries may not be sufficient to enable us to make payments on our notes.
In addition, our rights and the rights of our creditors, including holders of
our notes, to participate in the assets of any of our non guarantor subsidiaries
upon their liquidation or recapitalization will generally be subject to the
prior claims of those subsidiaries' creditors. As a result, our notes are
effectively subordinated to the indebtedness of the non-guarantor subsidiaries.
As of December 31, 2001, the total liabilities of our non-guarantor
subsidiaries, excluding intercompany liabilities, were $4.8 million.

  THE INDENTURE FOR OUR NOTES AND OUR SENIOR CREDIT FACILITY IMPOSE SIGNIFICANT
  OPERATING AND FINANCIAL RESTRICTIONS, WHICH MAY PREVENT US FROM PURSUING
  CERTAIN BUSINESS OPPORTUNITIES AND TAKING CERTAIN ACTIONS.

     The indenture for our notes and our senior credit facility impose
significant operating and financial restrictions on us. These restrictions limit
our ability to, among other things:

     - borrow money;

     - pay dividends on or redeem or repurchase our stock;

     - make investments;

     - create liens;

     - sell certain assets or merge with or into other companies;

     - enter into certain transaction with affiliates;

     - sell stock in our subsidiaries; and

     - restrict dividends, distributions or other payments from our
       subsidiaries.

     In addition, our senior credit facility requires us to maintain specified
financial ratios. These covenants could adversely affect our ability to finance
our future operations or capital needs and pursue available business
opportunities. A breach of any of these covenants or our inability to maintain
the required financial ratios could result in a default in respect of the
related indebtedness. If a default occurs, the relevant lenders could elect to
declare the indebtedness, together with accrued interest and other fees, to be
immediately due and payable and proceed against any collateral securing that
indebtedness. Acceleration of our other indebtedness could result in a default
under the terms of the indentures governing our notes and our assets may not be
sufficient to satisfy our obligations under our indebtedness, including our
notes.

  A COURT COULD CANCEL THE GUARANTEES UNDER CERTAIN CIRCUMSTANCES.

     Each of our subsidiaries that is not an unrestricted subsidiary guarantees
our notes. If, however, a guarantor becomes a debtor in a case under the United
States Bankruptcy Code or encounters other financial difficulty, under federal
or state fraudulent conveyance laws a court might avoid (that is, cancel) its
guarantee. The court might do so if it found that, when the guarantor entered
into its guarantee or, in some states, when payments became due under its
guarantee, it (i) received less than reasonably equivalent value or fair
consideration for the guarantee and (ii) either (a) was or was rendered
insolvent, (b) was left with inadequate capital to conduct its business, or (c)
believed or should have believed that it would incur debts beyond its ability to
pay. The court might also avoid a guarantee, without regard to the

                                        39
<PAGE>

above factors, if it found that the guarantor entered into its guarantee with
actual intent to hinder, delay, or defraud its creditors.

     A court would likely find that a guarantor did not receive reasonably
equivalent value or fair consideration for its guarantee unless it benefited
directly or indirectly from the issuance of our notes. If a court avoided a
guarantee, a note holder would no longer have a claim against the guarantor. In
addition, the court might direct a note holder to repay any amounts already
received from the guarantor. If the court were to avoid any guarantor's
guarantee, we cannot assure a note holder that funds would be available to pay
our notes from another guarantor or from any other source.

     The test for determining solvency for purposes of the foregoing will depend
on the law of the jurisdiction being applied. In general, a court would consider
an entity insolvent either if the sum of its existing debts exceeds the fair
value of all its property, or if the present fair saleable value of its assets
is less than the amount required to pay the probable liability on its existing
debts as they become due. For this analysis, "debts" includes contingent and
unliquidated debts.

     The indenture states that the liability of each guarantor on its guarantee
is limited to the maximum amount that the subsidiary can incur without risk that
the guarantee will be subject to avoidance as a fraudulent conveyance. This
limitation may not protect the guarantees from a fraudulent conveyance attack
or, if it does, that the guarantees will be in amounts sufficient, if necessary,
to pay obligations under our notes when due.

  WE MAY NOT BE ABLE TO SATISFY OUR OBLIGATIONS TO HOLDERS OF OUR NOTES UPON A
  CHANGE OF CONTROL.

     Upon the occurrence of a "change of control," as defined in our indenture,
a note holder will have the right to require us to purchase our notes at a price
equal to 101% of the principal amount, together with any accrued and unpaid
interest and liquidated damages, if any, to the date of purchase. Our failure to
purchase, or give notice of purchase of, our notes would be a default under the
indenture, which would in turn be a default under our senior credit facility.
Moreover, our failure to repay all amounts outstanding under our senior credit
facility upon a default would also be a default under the indenture.

     In addition, a change of control may constitute an event of default under
our senior credit facility. A default under our senior credit facility will
result in an event of default under the indenture if the lenders accelerate the
debt under our senior credit facility.

     If a change of control occurs, we may not have enough assets to satisfy all
obligations under our senior credit facility and the indenture related to our
notes. Upon the occurrence of a change of control, we could seek to refinance
the indebtedness under our senior credit facility and our notes or obtain a
waiver from the lenders or the note holders. We may not be able to obtain a
waiver or refinance our indebtedness on commercially reasonable terms, if at
all.

  THERE ARE RESTRICTIONS ON TRANSFERS OF OUR NOTES.

     We relied upon an exemption from registration under the Securities Act and
applicable state securities laws in offering our senior notes in 2001. As a
result, our notes may be transferred or resold only in transactions registered
under, or exempt from, the Securities Act and applicable state securities laws.
We intend to file a registration statement with the SEC and to cause that
registration statement to become effective with respect to exchange notes to be
issued in exchange for the notes we issued in December 2001. The SEC, however,
has broad discretion to declare any registration statement effective and may
delay or deny the effectiveness of any registration statement for a variety of
reasons.

  NO ESTABLISHED TRADING MARKET EXISTS FOR OUR NOTES, AND NOTE HOLDERS MAY NOT
  BE ABLE TO SELL THEM QUICKLY OR AT THE PRICE THAT NOTE HOLDERS PAID.

     Our notes are a new issue of securities and no established trading market
exists for them. Even if the registration statement becomes effective, which
will generally allow resales of the exchange notes, the exchange notes will
constitute a new issue of securities with no established trading market. We do
not
                                        40
<PAGE>

intend to list the notes or any exchange notes on any securities exchange or to
arrange for quotation on any automated dealer quotation systems. We expect that
our notes will be designated for trading in the PORTAL market. Jefferies &
Company, Inc. and Deutsche Banc Alex Brown make a market in the 2001 notes and
have advised us that they intend to make a market in the exchange notes, but
they are not obligated to do so. They may discontinue any market making at any
time, in their sole discretion. As a result, we cannot assure you as to the
liquidity of any trading market for the 2001 notes or the exchange notes.

     Note holders may not be able to sell 2001 notes or exchange notes at a
particular time or at favorable prices. We also cannot assure note holders as to
the level of liquidity of the trading market for the exchange notes or, in the
case of any holders of the 2001 notes who do not exchange them, the trading
market for the 2001 notes following the offer to exchange them for exchange
notes. As a result, 2001 note holders may be required to bear the financial risk
of their investment in the 2001 notes indefinitely. Future trading prices of the
2001 notes and exchange notes may be volatile and will depend on many factors,
including:

     - our operating performance and financial condition;

     - our ability to complete the offer to exchange the 2001 notes for the
       exchange notes;

     - the interest of securities dealers in making a market for them; and

     - the market for similar securities.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Radiologix's exposure to market risk for a change in interest rates relates
primarily to Radiologix's cash equivalents and its senior credit facility. At
December 31, 2001, Radiologix had no borrowings outstanding under its senior
credit facility. Radiologix's notes bear interest at fixed rates.

                                        41
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Report of Independent Public Accountants....................    43
Consolidated Balance Sheets as of December 31, 2000 and
  2001......................................................    44
Consolidated Statements of Income for the Years Ended
  December 31, 1999, 2000 and 2001..........................    45
Consolidated Statements of Stockholders' Equity for the
  Years Ended December 31, 1999, 2000 and 2001..............    46
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1999, 2000 and 2001..........................    47
Notes to Consolidated Financial Statements..................    48
Schedule II -- Valuation and Qualifying Accounts for the
  Years Ended December 31, 1999, 2000 and 2001..............    76
</Table>

                                        42
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Radiologix, Inc.:

     We have audited the accompanying consolidated balance sheets of Radiologix,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the 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. 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 Radiologix Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

     Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of the
consolidated financial statements 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 audit 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.

                                                   ARTHUR ANDERSEN LLP

February 11, 2002
Dallas, Texas

                                        43
<PAGE>

                       RADIOLOGIX, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2000        2001
                                                              ---------   ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                   SHARE DATA)
<S>                                                           <C>         <C>
                                      ASSETS

CURRENT ASSETS:
  Cash and cash equivalents.................................  $  3,620    $ 10,761
  Accounts receivable, net of allowances of $38,101 and
     $24,119 in 2000 and 2001, respectively.................    68,214      71,325
  Due from affiliates.......................................     5,472       2,673
  Income tax receivable.....................................     7,341         350
  Other current assets......................................     7,637      10,517
                                                              --------    --------
          Total current assets..............................    92,284      95,626
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
  $83,734 and $92,771 in 2000 and 2001, respectively........    57,375      60,339
INVESTMENTS IN JOINT VENTURES...............................     7,293       7,095
INTANGIBLE ASSETS, net......................................    98,848      98,093
DEFERRED FINANCING COSTS, net...............................     3,907      10,837
OTHER ASSETS................................................     8,929      12,735
                                                              --------    --------
          Total assets......................................  $268,636    $284,725
                                                              ========    ========


                       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable and accrued expenses.....................  $ 21,757    $ 17,743
  Accrued physician retention...............................     9,878       8,832
  Accrued salaries and benefits.............................     5,081       8,318
  Current portion of long-term debt.........................    12,720         398
  Current portion of capital lease obligations..............     6,037       5,066
  Other current liabilities.................................       129          55
                                                              --------    --------
          Total current liabilities.........................    55,602      40,412
DEFERRED INCOME TAXES.......................................     4,097       6,619
LONG-TERM DEBT, net of current portion......................   166,157     184,905
CAPITAL LEASE OBLIGATIONS, net of current portion...........    10,922       6,783
OTHER LIABILITIES...........................................       786         348
                                                              --------    --------
          Total liabilities.................................   237,564     239,067
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES.............     1,353       1,182
STOCKHOLDERS' EQUITY:
  Preferred stock, $.0001 par value; 10,000,000 shares
     authorized; no shares issued and outstanding...........        --          --
  Common stock, $.0001 par value; 50,000,000 shares
     authorized; 19,507,228 and 19,698,154 shares issued and
     outstanding in 2000 and 2001, respectively.............         2           2
  Additional paid-in capital................................      (579)        347
  Retained earnings.........................................    30,296      44,127
                                                              --------    --------
          Total stockholders' equity........................    29,719      44,476
                                                              --------    --------
          Total liabilities and stockholders' equity........  $268,636    $284,725
                                                              ========    ========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        44
<PAGE>

                       RADIOLOGIX, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           1999          2000          2001
                                                        -----------   -----------   -----------
                                                           (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                     <C>           <C>           <C>
SERVICE FEE REVENUE...................................  $   199,700   $   246,687   $   276,650
COSTS AND EXPENSES:
  Salaries and benefits...............................       52,826        66,567        75,667
  Field supplies......................................       11,630        13,265        16,514
  Field rent and lease expense........................       18,444        30,191        34,378
  Other field expenses................................       32,278        45,871        47,339
  Bad debt expense....................................       18,838        34,389        25,682
  Merger related costs................................           --         1,772         1,000
  Supplemental incentive compensation.................           --            --           615
  Corporate general and administrative................       11,192        10,571        13,855
  Depreciation and amortization.......................       18,403        22,118        23,504
  Interest expense, net...............................       12,357        18,036        15,540
                                                        -----------   -----------   -----------
          Total costs and expenses....................      175,968       242,780       254,094
                                                        -----------   -----------   -----------
INCOME BEFORE EQUITY IN EARNINGS OF INVESTMENTS,
  NON-OPERATING INCOME, MINORITY INTERESTS IN
  CONSOLIDATED SUBSIDIARIES, TAXES AND EXTRAORDINARY
  LOSS................................................       23,732         3,907        22,556
  Equity in earnings of investments...................        3,581         4,274         5,017
  Non-operating income................................           --            --         1,300
  Minority interests in consolidated subsidiaries.....         (910)         (948)       (1,092)
                                                        -----------   -----------   -----------
INCOME BEFORE TAXES AND EXTRAORDINARY LOSS............       26,403         7,233        27,781
  Income tax expense..................................       10,346         2,900        11,112
                                                        -----------   -----------   -----------
INCOME BEFORE EXTRAORDINARY LOSS......................       16,057         4,333        16,669
  Extraordinary loss on early extinguishment of debt,
     net of tax.......................................           --            --        (2,838)
                                                        -----------   -----------   -----------
NET INCOME............................................  $    16,057   $     4,333   $    13,831
                                                        ===========   ===========   ===========
NET INCOME PER COMMON SHARE:
  Basic:
     Income before extraordinary loss.................  $      0.83   $      0.22   $      0.85
     Income after extraordinary loss..................  $      0.83   $      0.22   $      0.71
  Diluted:
     Income before extraordinary loss.................  $      0.80   $      0.22   $      0.78
     Income after extraordinary loss..................  $      0.80   $      0.22   $      0.66
WEIGHTED AVERAGE SHARES OUTSTANDING:
  Basic...............................................   19,304,771    19,494,959    19,559,185
  Diluted.............................................   20,692,058    19,808,520    22,652,372
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        45
<PAGE>

                       RADIOLOGIX, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<Table>
<Caption>
                                                COMMON STOCK       ADDITIONAL
                                             -------------------    PAID-IN     RETAINED
                                               SHARES     AMOUNT    CAPITAL     EARNINGS    TOTAL
                                             ----------   ------   ----------   --------   -------
                                                       (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                          <C>          <C>      <C>          <C>        <C>
BALANCE, December 31, 1998.................  19,243,949   $   2      $(910)     $ 9,906    $ 8,998
  Common stock issued in connection with
     acquisitions..........................      50,264      --        304           --        304
  Exercise of stock options................     129,840      --         16           --         16
  Net income...............................          --      --         --       16,057     16,057
                                             ----------   -----      -----      -------    -------
BALANCE, December 31,1999..................  19,424,053       2       (590)      25,963     25,375
  Exercise of stock options................      83,175      --         11           --         11
  Net income...............................          --      --         --        4,333      4,333
                                             ----------   -----      -----      -------    -------
BALANCE, December 31, 2000.................  19,507,228       2       (579)      30,296     29,719
  Exercise of stock options................      73,048      --        326           --        326
  Common stock issued in connection with
     terminated merger with SKM............     117,878      --        600           --        600
  Net income...............................          --      --         --       13,831     13,831
                                             ----------   -----      -----      -------    -------
BALANCE, December 31, 2001.................  19,698,154   $   2      $ 347      $44,127    $44,476
                                             ==========   =====      =====      =======    =======
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        46
<PAGE>

                       RADIOLOGIX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                       YEAR ENDED
                                                              -----------------------------
                                                               1999      2000       2001
                                                              -------   -------   ---------
                                                                     (IN THOUSANDS)
<S>                                                           <C>       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Income, before extraordinary loss.........................  $16,057   $ 4,333   $  16,669
  Adjustments to reconcile net cash provided by (used in)
     operating activities  --
     Minority interests.....................................      910       948       1,092
     Depreciation and amortization..........................   18,403    22,118      23,504
     Equity in earnings of investments......................   (3,581)   (4,274)     (5,017)
     Stock issued for termination of merger.................       --        --         600
     Change in assets and liabilities
       Accounts receivable, net.............................  (21,889)   (6,232)     (3,110)
       Other receivables and other assets...................  (14,703)   (8,048)      5,329
       Accounts payable and accrued expenses................    3,341     4,480       1,949
                                                              -------   -------   ---------
          Net cash provided by (used in) operating
            activities......................................   (1,462)   13,325      41,016
                                                              -------   -------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment.......................  (31,458)  (14,002)     (7,184)
  Buy out of operating leases...............................       --        --     (13,910)
  Cash paid for acquisitions................................  (25,406)  (10,125)       (906)
  Proceeds from the sale of property and equipment..........   10,000        --          --
  Distributions from joint ventures.........................    1,907     1,067       3,951
  Other investments.........................................       --        --      (1,055)
                                                              -------   -------   ---------
          Net cash used in investing activities.............  (44,957)  (23,060)    (19,104)
                                                              -------   -------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from senior credit facility, net.................   35,000    14,500       1,795
  Proceeds from issuance of long-term debt..................   10,673     1,609     160,000
  Payments on long-term debt................................   (1,453)   (6,521)   (163,084)
  Financing costs...........................................       --      (546)    (13,808)
  Proceeds from the exercise of stock options...............       16        11         326
                                                              -------   -------   ---------
          Net cash provided by (used in) financing
            activities......................................   44,236     9,053     (14,771)
                                                              -------   -------   ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........   (2,183)     (682)      7,141
CASH AND CASH EQUIVALENTS, beginning of period..............    6,485     4,302       3,620
                                                              -------   -------   ---------
CASH AND CASH EQUIVALENTS, end of period....................  $ 4,302   $ 3,620   $  10,761
                                                              =======   =======   =========
SUPPLEMENTAL CASH DISCLOSURE:
  Cash interest paid........................................  $10,225   $18,036   $  14,859
  Income taxes paid.........................................  $14,459   $11,479   $   7,504
NON-CASH TRANSACTIONS DURING THE PERIOD:
  Assets acquired...........................................  $18,945   $   220   $      --
                                                              -------   -------   ---------
  Liabilities and debt assumed..............................  $19,955   $    --   $      --
                                                              -------   -------   ---------
  Common stock issued.......................................  $   304   $    --   $     600
                                                              -------   -------   ---------
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        47
<PAGE>

                       RADIOLOGIX, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 2000 AND 2001

1.  DESCRIPTION OF BUSINESS

     Radiologix, Inc. (together with its subsidiaries, "Radiologix" or the
"Company"), a Delaware corporation, is the leading national provider of
diagnostic imaging services through its ownership and operation of
free-standing, outpatient diagnostic imaging centers. Radiologix utilizes
sophisticated technology and technical expertise to perform a broad range of
imaging procedures, such as magnetic resonance imaging (or MRI), computed
tomography (or CT), positron emission tomography (or PET), nuclear medicine,
ultrasound, mammography, bone densitometry (or DEXA), general radiography (or
X-ray) and fluoroscopy. Radiologix operates 120 diagnostic imaging centers
located in 18 states, with a concentration of diagnostic imaging centers in
markets located in California, Florida, Kansas, Maryland, New York, Texas and
Virginia. Radiologix offers multi-modality imaging services at 70 of its
diagnostic imaging centers, which provide patients and referring physicians
access to advanced diagnostic imaging services in one convenient location.

     Radiologix also provides administrative, management and information
services to certain radiology practices that provide professional services in
connection with its diagnostic imaging centers and to hospitals and radiology
practices with which the Company operates joint ventures. The services
Radiologix provides leverage its existing infrastructure and improve radiology
practice or joint venture profitability, efficiency and effectiveness.

     Radiologix has two models by which it contracts with radiology practices: a
comprehensive services model and a technical services model. Under the
comprehensive services model, the Company enters into a long-term agreement with
a radiology practice group (typically 40 years). Under this arrangement, in
addition to obtaining technical fees for the use of Radiologix's diagnostic
imaging equipment and the provision of technical services, the Company provides
management services and receives a fee based on the practice group's
professional revenue, including revenue derived from outside of our diagnostic
imaging centers. Under the technical services model, the Company enters into a
shorter-term agreement with a radiology practice group (typically 10 to 15
years) and pays them a fee based on cash collections from reimbursements for
imaging procedures. In both the comprehensive services and technical services
models, the Company owns the diagnostic imaging assets, and, therefore, receives
100% of the technical reimbursements associated with imaging procedures.
Additionally, in most instances, both the comprehensive services and the
technical services models contemplate an incentive technical bonus for the
radiology group if the net technical income exceeds specified thresholds. The
service agreements cannot be terminated by either party without cause,
consisting primarily of bankruptcy or material default. However, under certain
conditions, Radiologix can terminate the service agreement if the number of
physicians in a practice falls below a certain percentage of the total
physicians of the radiology practice. Two physicians of two of the contracted
radiology practices are members of the Board of Directors of the Company.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of Radiologix
Inc. and its majority-owned subsidiaries for the years ended December 31, 1999,
2000 and 2001. All significant intercompany transactions have been eliminated.
Certain prior year amounts have been reclassified to conform to current year
presentation.

  USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS

     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

                                        48
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

amounts of assets and liabilities, results of operations and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

  CASH AND CASH EQUIVALENTS

     Radiologix considers all highly liquid investments with original maturities
of three months or less as cash equivalents.

  ACCOUNTS RECEIVABLE

     Accounts receivables principally represent receivables from patients and
other third-party payors for medical services provided by the contracted
radiology practices and diagnostic imaging centers. Under the terms of the
service agreements, Radiologix purchases the accounts receivable at their
estimated collectible value from the contracted radiology practices. Accounts
receivable for services rendered at the contracted radiology practices and
diagnostic imaging centers have been recorded at their established charges and
reduced by estimated contractual allowances and bad debts. Allowances for
contractual adjustments and bad debts are provided for accounts receivable based
on estimated collection rates. These allowances are reviewed periodically and
adjusted based on historical payment rates. Generally, any increase to the
allowances would reduce the revenue of the contracted radiology practices and
diagnostic imaging centers and therefore, reduce the service fee recorded by
Radiologix and any decrease to the allowances would increase the revenue of the
contracted radiology practices and diagnostic imaging centers and therefore,
increase the service fee provided by Radiologix.

     During the fourth quarter of 2000, the Company recorded a $13.3 million
charge for uncollectible accounts receivable. During the fourth quarter of 2000,
the Company performed an extensive review of its accounts receivable and
collection experience utilizing reports and analyses not previously available.
Based on this review, the Company believes that the estimation process of
determining contractual allowances for billed charges needed to be revised and
that a portion of its accounts receivable were no longer collectible. This
review allowed the Company to better analyze old accounts receivable, however
did not tell the Company what historical collection rates would have been if
newly implemented collection policies and procedures had been in place.
Accordingly, the increase in the provision for uncollectible accounts was
recognized as a bad debt expense as opposed to an increase in contractual
allowance. The Company recognized the $13.3 million charge in the fourth quarter
as, a change in the accounting estimate when the information became known.

  PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Property and equipment are depreciated using the straight-line
method.

  INTANGIBLE ASSETS

     The value of intangible assets (consisting primarily of service agreements
and goodwill) is recorded at cost at the date of acquisition. Intangible assets
are being amortized on a straight-line basis over a 25-year period. The Company
believes that the life of the core businesses acquired and the delivery of
radiology management services will exceed 25 years. As of December 31, 2000 and
2001, accumulated amortization was approximately $9.9 million and $14.3 million,
respectively.

     Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142"), becomes effective for the Company on
January 1, 2002. SFAS No. 142 requires that goodwill and other intangible assets
with an indefinite useful life no longer be amortized as expenses of

                                        49
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operations, but rather carried on the balance sheet as permanent assets. These
intangible assets are to be subject to at least annual assessments for
impairment by applying a fair-value-based test. Amortization of goodwill and
other indefinite-lived intangible assets amounted to $1.2 million ($749,900 on
an after tax basis) for the year ended December 31, 2001. These expense amounts,
under SFAS 142, will not be recorded in years after fiscal 2001. The Company is
developing plans to determine fair values of its operations in which goodwill
and other indefinite-lived intangibles have been recorded and will assess
whether an impairment charge is warranted as of January 1, 2002, or at any other
assessment dates. The Company's service agreements, included in the consolidated
balance sheets as intangible assets, net, are not considered to have an
indefinite useful life and will continue to be amortized over a useful life of
25 years.

     The intangible asset related to the service agreement is recorded on the
date of acquisition, and represents the difference between the cost of
purchasing the right to manage a radiology practice and the net assets acquired.
Under the initial 40-year term of the agreements, the contracted radiology
practices have agreed to provide medical services on an exclusive basis only
through facilities managed by Radiologix. In the event a contracted radiology
practice breaches the service agreement, or if Radiologix terminates with cause,
the contracted radiology practice is required to purchase all related tangible
and intangible assets, including the unamortized portion of the service
agreement intangible asset, at the then net book value.

  OTHER ASSETS

     During the fourth quarter of 2000, the Company recorded a charge of $3.7
million for the write-off of a note receivable included in other current assets
and other assets in the accompanying consolidated financial statements. The note
receivable was due from one of the Company's contracted radiology practices and
was determined to no longer be collectible. As a result of the write-off, the
Company adjusted this contracted radiology group's incentive technical bonus
potential. In addition, the Company recorded a $1.8 million charge for
transaction related costs, which were included in deferred financing costs in
the accompanying consolidated financial statements.

     During the fourth quarter of 2001, the Company recorded a charge of $4.7
million ($2.8 million net of tax) for deferred financing costs related to the
termination of its senior credit facility with the proceeds from its $160
million senior notes issuance. The charge is reflected as an extraordinary loss
on early extinguishment of debt in the accompanying consolidated financial
statements.

  IMPAIRMENT OF LONG-LIVED ASSETS

     Subsequent to an acquisition, Radiologix continually evaluates whether
events and circumstances have occurred that indicate the remaining balance of
the intangible assets and property and equipment may not be recoverable or that
the remaining useful lives may warrant revision. Radiologix evaluates the
potential impairment of intangibles separately from property and equipment. When
factors indicate that intangible assets or property and equipment should be
evaluated for possible impairment, Radiologix determines whether the intangible
assets or property and equipment are recoverable or if impairment exists, in
which case an adjustment is made to the carrying value of the related asset. In
making this determination, Radiologix uses an estimate of the related contracted
radiology practices' and diagnostic imaging services' undiscounted cash flows
over the remaining lives of the intangible assets or the property and equipment
and compare it to the contracted radiology practices' and diagnostic imaging
centers' intangible assets or property and equipment balances. When an
adjustment is required, Radiologix evaluates the remaining amortization periods.
An impairment loss recognized would be measured as the amount by which the
carrying amount of the asset exceeds the fair value of the asset. Radiologix
recorded no impairment charges during 1999, 2000 or 2001.

                                        50
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  ACCRUED PHYSICIAN RETENTION

     Accrued physician retention represents amounts payable to contracted
radiology practices under the service agreements. The service agreements require
Radiologix to remit physician retention to the contracted radiology practices by
the end of the subsequent month after the month in which services were rendered.

  REVENUE PRESENTATION

     The Financial Accounting Standards Board's Emerging Issues Task Force
issued its abstract, Issue 97-2, "Application of FASB Statement No. 94 and
Accounting Principles Board ("APB") Opinion No. 16 to Physician Practice
Management Entities and Certain Other Entities with Contractual Arrangements"
("EITF 97-2"). Since Radiologix has not established a "controlling financial
interest" under EITF 97-2, Radiologix does not consolidate the contracted
radiology practices.

     The following table sets forth the amounts of revenue for the contracted
radiology practices and diagnostic imaging centers that would have been
presented in the consolidated statements of income had Radiologix met the
provisions of EITF 97-2 (in thousands):

<Table>
<Caption>
                                                        1999       2000       2001
                                                      --------   --------   ---------
<S>                                                   <C>        <C>        <C>
Revenue from contracted radiology practices and
  diagnostic imaging centers, net of contractual
  allowances........................................  $286,824   $344,887   $ 383,527
Less: amounts retained by contracted radiology
  practices.........................................   (87,124)   (98,200)   (106,877)
                                                      --------   --------   ---------
Service fee revenue, as reported....................  $199,700   $246,687   $ 276,650
                                                      ========   ========   =========
</Table>

     Revenue of the contracted radiology practices and diagnostic imaging
centers is recorded when services are rendered by the contracted radiology
practice and diagnostic imaging center based on established charges and reduced
by contractual allowances and estimated bad debts. The Company uses historical
collection experience in estimating its contractual allowances and bad debt
expense. The factors influencing the historical collection experience include
the contracted radiology practices' and diagnostic imaging centers' patient mix,
impact of managed care contract pricing and contract revenue and the aging of
patient accounts receivable balances. As these factors change, the historical
collection experience is revised accordingly in the period known.

     Service fee revenue represents contracted radiology practices' and
diagnostic imaging centers' revenue less amounts retained by contracted
radiology practices. The amounts retained by contracted radiology practices
represents amounts paid to the physicians pursuant to the service agreements
between Radiologix and the contracted radiology practices. Under the service
agreements, the Company provides each contracted radiology practice with the
facilities and equipment used in its medical practice, assumes responsibility
for the management of the operations of the practice, and employs substantially
all of the non-physician personnel utilized by the contracted radiology
practice. Although Radiologix assists in negotiating managed care contracts for
the contracted radiology practices, it assumes no risk under these arrangements.

     The Company's service fee revenue is dependent upon the operating results
of the contracted radiology practices and diagnostic imaging centers. Where
state law allows, service fees due under the service agreements for the
contracted radiology practices are derived from two distinct revenue streams:
(1) a negotiated percentage (typically 20% to 30%) of the adjusted professional
revenues as defined in the service agreements; and (2) 100% of the adjusted
technical revenues as defined in the service agreements. In states where the law
requires a flat fee structure, Radiologix has negotiated a base service fee,
which is equal to the estimated fair market value of the services provided under
the service agreements and which is renegotiated each year to equal the fair
market value of the services provided under the service

                                        51
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreements. The fixed fee structure results in Radiologix receiving
substantially the same amount of service fee as it would have received under its
negotiated percentage fee structure. Adjusted professional revenues and adjusted
technical revenues are determined by deducting certain contractually agreed-upon
expenses (non-physician salaries and benefits, rent, depreciation, insurance,
interest and other physician costs) from the contracted radiology practices'
revenue. Questar revenues are primarily derived from technical revenues
generated from its diagnostic imaging centers.

  INCOME TAXES

     The Company accounts for income taxes under the liability method which
states that deferred taxes are to be determined based on the estimated future
tax effects of differences between the financial statement and tax bases of
assets and liabilities given the provisions of enacted tax laws. Deferred income
tax provisions and benefits are based on the changes to the asset or liability
from period to period. Radiologix and its subsidiaries file a consolidated
federal tax return.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosure about the fair value of certain financial instruments. The
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate fair value due to the short maturity of
these instruments. The carrying amounts of the Company's long-term debt and
capital lease obligations also approximate fair value.

  CONCENTRATION OF CREDIT RISK

     The Company's accounts receivable consist primarily of service fee revenues
due from radiology practices and medical service revenues due from patients
funded through Medicare, Medicaid, commercial insurance and private payment. The
Company estimates that approximately 25%, 23% and 23% of the radiology
practices' revenue in 2001, 2000 and 1999, respectively, is funded through the
Medicare program. The Company and its practices perform ongoing credit
evaluations of their patients and generally does not require collateral. The
Company and its practices maintain allowances for potential credit losses.

  RECENT ACCOUNTING PRONOUNCEMENTS

     Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144") becomes effective for
the Company on January 1, 2002. SFAS 144 addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of. This statement supersedes SFAS 121; however, SFAS 144 retains
the fundamental provisions of SFAS 121 for (a) recognition and measurement of
the impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. SFAS 144 also supersedes the
accounting and reporting provisions of APB Opinion No, 30, "Reporting the
Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" for segments of a business to be disposed of. The Company does not
believe that the adoption of SFAS 144 will have a material effect on its
financial position or results of operations.

3.  ACQUISITIONS AND AFFILIATIONS

  1999 ACQUISITIONS AND AFFILIATIONS

     In August 1999, Radiologix acquired all the outstanding stock of Questar
Imaging, Inc. of Tampa, Florida, ("Questar") a private operator of primarily MRI
radiology centers. The total 1999 consideration

                                        52
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for the transaction was $18.9 million in cash, plus the assumption of $16.8
million in liabilities. This transaction was accounted for using the purchase
method. Pro-forma information is not presented for the acquisition of Questar,
as it did not materially affect the 1999 financial statements for the years
presented.

     The total consideration for all other 1999 acquisitions and affiliations
was approximately $6.5 million in cash, 50,264 shares of Radiologix's common
stock valued at approximately $304,000, plus the assumption of $3.2 million in
liabilities.

  2000 ACQUISITIONS AND AFFILIATIONS

     In March 2000, Radiologix completed an acquisition of an imaging center in
Osceola, Florida for total consideration of approximately $2.7 million. During
2000, Radiologix continued to complete the development of imaging centers of
Questar for total consideration of approximately $5.9 million. Total
consideration paid for all other acquisitions and affiliations were
approximately $1.5 million.

  2001 ACQUISITIONS AND AFFILIATIONS

     In November 2001, Radiologix completed the acquisition of an imaging center
in Laurel, Maryland for total consideration of $906,000.

4.  PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31, 2000 and
2001 (in thousands):

<Table>
<Caption>
                                                 USEFUL LIFE           2000       2001
                                                 -----------         --------   --------
<S>                                        <C>                       <C>        <C>
Equipment (primarily medical               5-7 Years
  equipment).............................                            $113,256   $121,161
Leasehold improvements...................  Remaining life of lease     24,348     28,444
Buildings................................  15 Years                     3,505      3,505
                                                                     --------   --------
                                                                      141,109    153,110
Less -- Accumulated depreciation.........                             (83,734)   (92,771)
                                                                     --------   --------
Property and equipment, net..............                            $ 57,375   $ 60,339
                                                                     ========   ========
</Table>

5.  LONG-TERM DEBT

     Long-term debt consists of the following at December 31, 2000 and 2001 (in
thousands):

<Table>
<Caption>
                                                                2000       2001
                                                              --------   --------
<S>                                                           <C>        <C>
10 1/2% Senior Notes, due December 15, 2008.................  $     --   $160,000
Senior Credit Facility, interest at Radiologix's option at
  LIBOR plus 3.25% (10.06% at December 31, 2000) or the
  prime rate of a lending partner plus 2.25% (11.75% at
  December 31, 2000), due November 2003.....................   157,000         --
8% Convertible junior subordinated note due July 2009.......    20,000     24,205
Note(s) payable to bank(s) and capital lease obligations,
  various interest rates....................................    18,836     12,947
                                                              --------   --------
                                                               195,836    197,152
Less -- Current portion of long-term debt...................    18,757      5,464
                                                              --------   --------
Long-term debt, net of current portion......................  $177,079   $191,688
                                                              ========   ========
</Table>

                                        53
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The maturities of long-term debt including capital lease obligations, for
the five years ending December 31, 2006 are $5.5 million in fiscal 2002, $5.3
million in fiscal 2003, $1.9 million in fiscal 2004, $.3 million in fiscal 2005
and $184.2 million due in fiscal 2006 and thereafter.

     As of December 31, 2000 and 2001, accumulated amortization of deferred
financing costs was approximately $2.4 million and $272,000, respectively. Such
costs are being amortized over a straight-line method, which approximates the
effective interest method.

  SENIOR CREDIT FACILITY

     On March 30, 2001, the Company amended its $160 million senior credit
facility with its existing banks. Under the terms of the amended senior credit
facility, borrowings consisted of a $100 million term loan and a $60 million
revolving credit facility, including a $5 million swing line facility. Under the
amendment, the Company made $4 million of scheduled principal installments on
June 29, 2001 and September 28, 2001. Scheduled principal installments for the
fiscal year ended 2001 had been reduced from $48 million under the prior
agreement to $12 million under the new amendment. Each of the facilities would
terminate on November 26, 2003. The interest rate was (i) an adjusted LIBOR
rate, plus an applicable margin which could vary from 3.0% to 4.0% dependent on
certain financial ratios or (ii) the prime rate, plus an applicable margin which
could vary from 2.0% to 3.0%. In each case, the applicable margin varied based
on financial ratios maintained by Radiologix. The senior credit facility
included certain restrictive covenants including prohibitions on the payment of
dividends, limitations on capital expenditures and the maintenance of certain
financial ratios (including minimum fixed charge coverage ratio and maximum
leverage ratio, as defined). Borrowings under the senior credit facility were
secured by all service agreements which Radiologix is, or becomes a party to, a
pledge of the stock of the Company's subsidiaries and all of Radiologix's and
its wholly-owned subsidiaries' assets.

  SENIOR NOTES

     In December 2001, the Company terminated its senior credit facility with
proceeds from a $160 million senior notes ("Senior Notes") issuance, due
December 15, 2008. In connection with the repayment, the Company recorded an
extraordinary loss from the early extinguishment of its senior credit facility
debt in the amount of $4.7 million, $2.8 million after tax. The Senior Notes
bear interest at an annual rate of 10 1/2% payable semiannually in arrears on
June 15 and December 15 of each year, commencing June 15, 2002. The Senior Notes
are redeemable on or after December 15, 2005 at various redemption prices, plus
accrued and unpaid interest to the date of redemption. The Senior Notes are
unsecured obligations which rank senior in right of payment to all of our
subordinate indebtedness and equal in right of payment with all other senior
indebtedness. The Senior Notes are unconditionally guaranteed on a senior
unsecured basis by certain restricted existing and future subsidiaries.

  CREDIT FACILITY

     In addition to the Senior Notes issuance in December 2001, the Company
entered into a credit facility whereby the Company can borrow up to $35 million.
At December 31, 2001, no borrowings were outstanding under the credit facility.
Under the credit facility the interest rate is (i) an adjusted LIBOR rate, plus
an applicable margin which can vary from 3.0% to 3.5% dependent on certain
financial ratios or (ii) the prime rate, plus an applicable margin which can
vary from 1.75% to 2.25%. In each case, the applicable margin varies based on
financial ratios maintained by the Company. The credit facility includes certain
restrictive covenants including prohibitions on the payment of dividends,
limitations or capital expenditures and the maintenance of certain financial
ratios (including minimum fixed charge to coverage ratio and maximum leverage
ratio, as defined). Borrowings under the senior credit facility are secured by

                                        54
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

all service agreements which the Company is or becomes a party to, a pledge of
the stock of the Company's subsidiaries and all of the Company's and its
wholly-owned subsidiaries assets.

  CONVERTIBLE SUBORDINATED DEBT

     The Company has a $24.2 million convertible junior subordinated note, which
matures July 31, 2009, and bears interest, payable quarterly in cash or payment
in kind securities, at an annual rate of 8.0%. At August 1, 2001, the
convertible junior subordinated note was convertible into Radiologix's common
stock at the price of $7.52 per share. If by August 1, 2002 or August 1, 2003
the closing price of Radiologix's common stock has not exceeded $7.52 for 45 of
the 60 days of the determination period, the interest rate will be increased to
8.25% and 8.5%, respectively.

6.  COMMITMENTS AND CONTINGENCIES

  LEASES

     The Company leases office space as well as certain equipment. Future
minimum lease payments under these operating leases for fiscal 2002, 2003, 2004,
2005, 2006 and thereafter are $18.1 million, $16.6 million, $16.1 million, $4.8
million, and $3.8 million, respectively. Rent expense for equipment was
approximately $8.6 million, $19.2 million and $22.7 million in 1999, 2000 and
2001, respectively.

     On December 30, 1999, the Company entered into a sale-leaseback transaction
in which radiology equipment with a net book value of approximately $10 million
was sold for $10 million and leased back for five years. The operating lease
bears interest at 9.96%, and equal monthly payments began in July 2000. In
December 2001, Radiologix repurchased some of this equipment and other equipment
previously held under operating leases for approximately $13.9 million. Future
minimum lease payments under these operating leases would have been $3.6 million
for years 2002 through 2004 and $2.3 million for 2005.

  LITIGATION

     We are not currently subject to any material litigation nor, to our
knowledge, is any material litigation threatened against us. All of our current
litigation is (i) expected to be covered by liability insurance or (ii) not
expected to adversely affect our business. Some risk exists, however, that we
could subsequently be named as a defendant in additional lawsuits or that
pending litigation could adversely affect us.

7.  401(k) PLAN

     The Company established a defined contribution plan (the "401(k) plan") in
January 1999. Employees are eligible immediately upon date of hire. The 401(k)
plan allows for an employer match of contributions made by participants after
such participants have completed 1,000 hours of service. A participant vests 20%
after two years of service, 40% after three years of service, 60% after four
years of service, 80% after five years of service and 100% after six years of
service.

     The Company makes matching contributions under this plan equal to 50% of
each participant's contribution of up to 6% of the participant's compensation.
Company contributions to the plan were approximately $684,000 in 1999, $770,000
in 2000 and $856,000 in 2001.

8.  STOCKHOLDERS' EQUITY

  COMMON STOCK

     In 1999, Radiologix issued 50,264 shares of its common stock in connection
with acquisitions (See Note 3). During 2001, the Company issued 117,878 shares
of its common stock to Saunders Karp &

                                        55
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Megrue, L.P. in connection with the proposed merger between Radiologix and
SKM-RD Acquisition Corp. The proposed merger was terminated in April 2001 (See
Note 11).

  STOCK OPTION PLAN

     Under the 1996 Stock Option Plan (the "Plan") 4,000,000 options to purchase
shares of Radiologix's common stock may be granted to key directors, employees
and other health care professionals associated with Radiologix, as defined by
the Plan. Options granted under the Plan may be either incentive stock options
("ISO") or nonqualified stock options ("NQSO"). The option price per share under
the Plan may not be less than 100% of the fair market value at the grant date
for ISO and may not be less than 85% of the fair market value at the grant date
for NQSO. All of the options granted under the Plan through December 31, 2001
were at fair market value. Generally, options vest over a 5-year period and are
exercisable over a ten-year life. As of December 31, 1999, 2000 and 2001,
2,204,525, 2,530,455 and 2,902,517 shares, respectively, were outstanding under
the Plan. Since the Plan's inception, the Board of Directors granted options to
purchase 30,000 shares of common stock outside the Plan. Compensation expense
related to the non-employee portion of these shares is not material. The
exercise price ranges from $0.13 to $12.00 for each of the years ended December
31, 1999, 2000 and 2001. The following table summarizes the combined activity
under the Plan and the options granted outside the Plan at December 31, 1999,
2000 and 2001 (shares in thousands):

<Table>
<Caption>
                                              1999                 2000                 2001
                                       ------------------   ------------------   ------------------
                                                WTD. AVG.            WTD. AVG.            WTD. AVG.
                                                EXERCISE             EXERCISE             EXERCISE
                                       SHARES     PRICE     SHARES     PRICE     SHARES     PRICE
                                       ------   ---------   ------   ---------   ------   ---------
<S>                                    <C>      <C>         <C>      <C>         <C>      <C>
Outstanding, beginning of year.......  2,117      $7.14     2,205      $7.41     2,530      $6.60
Granted..............................    414      $6.32       796      $4.14       633      $6.21
Exercised............................   (130)     $0.13       (83)     $0.13       (73)     $4.46
Cancelled............................   (196)     $7.11      (388)     $7.45      (188)     $7.07
                                       -----      -----     -----      -----     -----      -----
Outstanding, end of year.............  2,205      $7.41     2,530      $6.60     2,902      $6.55
                                       =====      =====     =====      =====     =====      =====
Exercisable, end of year.............  1,015      $7.20     1,294      $7.17     1,583      $6.99
</Table>

     The following table reflects the weighted average exercise price and
weighted average contractual life of various exercise price ranges of the
2,902,517 options outstanding as of December 31, 2001:

<Table>
<Caption>
                                                          WTD. AVG.            WTD. AVG.
           EXERCISE PRICE RANGE              SHARES     EXERCISE PRICE   CONTRACTUAL LIFE (YRS)
           --------------------             ---------   --------------   ----------------------
<S>                                         <C>         <C>              <C>
$0.13-$3.14...............................    227,000       $ 0.13                4.50
$3.15-$4.49...............................    574,892       $ 3.75                8.17
$4.50-$5.99...............................    340,700       $ 4.89                8.81
$6.00-$7.37...............................    346,000       $ 6.35                7.91
$7.38-$10.99..............................  1,132,050       $ 8.46                7.04
$11.00-$12.00.............................    281,875       $11.99                5.65
</Table>

     The Company accounts for its employee stock-based compensation arrangements
under the provisions of APB No. 25, "Accounting for Stock Issued to Employees."
Radiologix accounts for stock-based compensation of non-employees under the
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
Radiologix did not have any stock-based compensation to non-employees during
1999, 2000 or 2001. SFAS No. 123 also requires that companies electing to
continue to use the intrinsic value method make pro forma disclosure of net
income and net income per share as if the fair value based method of accounting
had been applied. Radiologix used the Black-Scholes option- pricing model to

                                        56
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

estimate the fair value of options. The effects of applying SFAS No. 123 during
1999, 2000 and 2001 are as follows (in thousands, except per share amounts):

<Table>
<Caption>
                                                            1999      2000     2001
                                                           -------   ------   -------
<S>                                                        <C>       <C>      <C>
Net income:
  As reported............................................  $16,057   $4,333   $13,831
  Pro forma..............................................   14,419    2,646    12,464
Net income per share (diluted):
  As reported............................................  $  0.80   $ 0.22   $  0.66
  Pro forma..............................................     0.70     0.13      0.60
</Table>

     The fair value of each option grant is estimated using the following
weighted-average assumptions for grants in 1999, 2000 and 2001, respectively:
risk-free interest rate of 5.8, 5.0, and 5.02 percent; expected life of 2.81,
2.81 and 2.81 years; expected volatility of 69.5, 84.3, and 73.8 percent; and
dividend yield of zero in 1999, 2000 and 2001, respectively. The
weighted-average grant-date fair value of new grants in 1999, 2000 and 2001 were
$5.02 per share, $3.27 per share, and $6.21 per share, respectively.

9.  SERVICE FEE REVENUE

     Service fee revenue consists of the following for the years ended December
31 (in thousands):

<Table>
<Caption>
                                                         1999       2000       2001
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Professional component...............................  $ 53,435   $ 61,061   $ 61,893
Technical component..................................   146,265    185,626    214,757
                                                       --------   --------   --------
                                                       $199,700   $246,687   $276,650
                                                       ========   ========   ========
</Table>

     For the years ended December 31, 1999, 2000 and 2001, four of the Company's
contracted radiology practices each contributed 10% or more of the Company's
service fee revenue as follows (in thousands):

<Table>
<Caption>
PRACTICE                                                   1999      2000      2001
--------                                                  -------   -------   -------
<S>                                                       <C>       <C>       <C>
Advanced Radiology, P.A. ...............................  $55,823   $63,290   $72,323
Hudson Valley Radiology Associates, PLLC................   30,522    27,738    33,205
The Ide Group, P.C. ....................................   26,330    30,127    28,164
Community Radiology Associates, Inc. ...................   19,538    25,167    27,909
</Table>

     The Company also periodically advances funds to the contracted radiology
practices at current interest rates. Such advances are due on demand and are
repaid through reductions in future physician retention payments.

                                        57
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  INCOME TAXES

     Income tax expense in 1999, 2000 and 2001 is composed of the following
amounts (in thousands):

<Table>
<Caption>
                                                             1999      2000     2001
                                                            -------   ------   ------
<S>                                                         <C>       <C>      <C>
Current income tax expense
  Federal.................................................  $ 9,655   $2,970   $7,746
  State and local.........................................    2,524      656    2,037
                                                            -------   ------   ------
                                                             12,179    3,626    9,783
Deferred income tax benefit
  Federal.................................................   (1,571)    (658)    (519)
  State...................................................     (262)     (68)    (137)
                                                            -------   ------   ------
                                                             (1,833)    (726)    (656)
                                                            -------   ------   ------
Income tax expense........................................  $10,346   $2,900   $9,127
                                                            =======   ======   ======
</Table>

     A reconciliation between reported income tax expense and the amount
computed by applying the statutory federal income tax rate of 35% for 1999, 2000
and 2001 is as follows (in thousands):

<Table>
<Caption>
                                                             1999      2000     2001
                                                            -------   ------   ------
<S>                                                         <C>       <C>      <C>
Computed at statutory rate................................  $ 9,241   $2,532   $8,068
State income taxes, net of Federal tax benefit............    1,380      427    1,324
Other.....................................................     (311)     (95)    (406)
Nondeductible amortization................................       36       36      141
                                                            -------   ------   ------
Income tax expense........................................  $10,346   $2,900   $9,127
                                                            =======   ======   ======
</Table>

                                        58
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The tax effects of temporary differences that give rise to the deferred
income taxes at December 31, 2000 and 2001, are presented below (in thousands):

<Table>
<Caption>
                                                               2000      2001
                                                              -------   -------
<S>                                                           <C>       <C>
Deferred tax assets
  Start-up costs............................................  $   877   $   420
  Bad debts.................................................    1,996     3,447
  Gain on sales leaseback transaction.......................      340        --
  Transaction related costs.................................      635        --
  Other.....................................................      317        --
                                                              -------   -------
                                                                4,165     3,867
Deferred tax liabilities
  Cash to accrual adjustments...............................      (57)       --
  Joint venture income......................................   (1,994)   (2,326)
  Amortization..............................................     (940)     (914)
  Depreciation..............................................   (3,332)   (3,379)
                                                              -------   -------
                                                               (6,323)   (6,619)
                                                              -------   -------
          Total net deferred tax liability..................   (2,158)   (2,752)
                                                              -------   -------
Less: Current assets and liabilities........................    1,939     3,867
                                                              -------   -------
Non-current deferred tax liabilities........................  $(4,097)  $(6,619)
                                                              =======   =======
</Table>

11.  NON-RECURRING ITEMS

     During the third quarter of 2001, the Company recorded $1 million in merger
related costs. The charge was our share of transaction costs incurred by
Saunders Karp & Megrue, L.P. and its affiliates in connection with the proposed
merger between Radiologix and SKM-RD Acquisition Corp. The proposed merger was
terminated in April 2001. In the fourth quarter of 2000, the Company also
incurred a $1.8 million charge for the write-off of transaction costs incurred
for the proposed merger.

     In the fourth quarter of 2001, the Company recognized $1.3 million of
non-operating income as partial consideration for early termination of
management services provided at certain imaging sites not owned or operated by
the Company.

     In the fourth quarter of 2001, upon the successful completion of the Senior
Notes offering, the Company incurred $615,000 in supplemental incentive
compensation.

12.  EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT

     In conjunction with the Senior Notes offering, the Company incurred an
extraordinary loss of $4.7 million, $2.8 million after tax for the early
extinguishment of debt in relation to terminating its senior credit facility
with the proceeds from its Senior Notes issuance in December 2001.

13.  EARNINGS PER SHARE

     Radiologix adopted the Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share" ("EPS") effective December 31, 1997. SFAS No. 128
simplifies the computation of EPS by replacing the presentation of primary EPS
with a presentation of basic EPS. Basic EPS is calculated by dividing income
available to common stockholders by the weighted average number of common shares

                                        59
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

outstanding during the period (including shares to be issued). Options,
warrants, and other potentially dilutive securities are excluded from the
calculation of basic EPS. Diluted EPS includes the options, warrants, and other
potentially dilutive securities that are excluded from basic EPS using the
treasury stock method to the extent that these securities are not anti-dilutive.
Diluted EPS also includes the effect of the convertible note (see Note 5) using
the "if converted" method to the extent the securities are not anti-dilutive.
For the year ended December 31, 2001, approximately $1.1 million of tax-effected
interest savings and 2,677,828 weighted average shares related to the
convertible note were included in the computation of diluted EPS. For the year
ended December 31, 2000, approximately $1 million of tax-effected interest
savings and 2,318,841 weighted average shares related to the convertible note
were not included in the computation of diluted EPS because to do so would be
anti-dilutive for the period. For the year ended December 31, 1999,
approximately $399,000 of tax-effected interest savings and 947,483 weighted
average shares were included in the calculation of diluted EPS as an addition to
net income and weighted average shares outstanding, respectively.

     For the years ended December 31, 1999, 2000 and 2001, 439,803, 313,561 and
415,359 shares, respectively, related to stock options were included in diluted
EPS.

14.  QUARTERLY FINANCIAL DATA

     The following table presents unaudited quarterly operating results for each
of Radiologix's last eight fiscal quarters. Radiologix believes that all
necessary adjustments have been included in the amounts stated below to present
fairly the quarterly results when read in conjunction with the consolidated
financial statements. Results of operations for any particular quarter are not
necessarily indicative of results of operations for a full year or predictive of
future periods (in thousands, except per share data).

<Table>
<Caption>
                                          2000 QUARTER ENDED                                    2001 QUARTER ENDED
                          --------------------------------------------------   -----------------------------------------------------
                          MARCH 31   JUNE 30   SEPTEMBER 30   DECEMBER 31(a)   MARCH 31   JUNE 30   SEPTEMBER 30(b)   DECEMBER 31(c)
                          --------   -------   ------------   --------------   --------   -------   ---------------   --------------
<S>                       <C>        <C>       <C>            <C>              <C>        <C>       <C>               <C>
Service fee revenue.....  $59,251    $61,783     $62,487         $ 63,166      $65,911    $68,236       $69,175          $73,328
Income (loss) before
  income taxes and
  extraordinary loss....    6,784      7,308       7,064          (13,923)       5,830      6,586         6,305            9,060
Extraordinary loss......       --         --          --               --           --         --            --           (2,838)
Net income (loss).......  $ 4,070    $ 4,385     $ 4,246         $ (8,368)     $ 3,498    $ 3,952       $ 3,782          $ 2,599
Income (loss) per share
  before extraordinary
  loss
  Basic.................  $  0.21    $  0.22     $  0.22         $  (0.43)     $  0.18    $  0.20       $  0.19          $  0.28
  Diluted...............  $  0.20    $  0.21     $  0.20         $  (0.43)     $  0.17    $  0.19       $  0.18          $  0.24
Net Income (Loss) Per
  Share:
  Basic.................  $  0.21    $  0.22     $  0.22         $  (0.43)     $  0.18    $  0.20       $  0.19          $  0.13
  Diluted...............  $  0.20    $  0.21     $  0.20         $  (0.43)     $  0.17    $  0.19       $  0.18          $  0.12
</Table>

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

(a)  Net loss for the quarter ended December 31, 2000 includes a $13.3 million
     charge for the provision of uncollectible accounts, $3.7 million charge for
     the write-off of a note receivable and a $1.8 million charge for
     transaction related costs. See Note 2 to consolidated financial statements.

(b)  Net income for the quarter ended September 30, 2001 includes $1 million in
     merger related costs. See Note 11 to consolidated financial statements.

(c)  Net income for the quarter ended December 31, 2001 includes $615,000 in
     supplemental incentive compensation and $1.3 million of non-operating
     income as partial consideration for early termination of management
     services provided at certain imaging sites not owned or operated by the
     company. In

                                        60
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     addition, net income for the quarter ended December 31, 2001 includes a
     $4.7 million ($2.8 million net of tax) extraordinary charge for the early
     extinguishment of debt. See Notes 5 and 11 to consolidated financial
     statements.

15.  SEGMENT REPORTING

     The Company reports the results of its operations through four designated
regions of the United States: Mid-Atlantic, Northeastern, Central and Western
regions. In addition, the Company reports the results of its operations of the
imaging centers of its subsidiary, Questar. The Company's operations in each of
the four designated regions are comprised of the ownership and operation of
diagnostic imaging centers and the provision of administrative, management and
information services to the contracted radiology practices that provide
professional interpretation and supervision services in connection with its
diagnostic imaging centers and to hospitals and radiology practices with which
the Company operates joint ventures. The Company's services leverage our
existing infrastructure and improve radiology practice or joint venture
profitability, efficiency and effectiveness. The Company has divided the
operations into the four regions and Questar only for purposes of the division
of internal management responsibilities, but do not focus on each of these
regions as a separate product line or make financial decisions as if they were
separate product lines. The Questar operations are looked at as a separate group
only from the perspective that the imaging centers of Questar do not have the
same type of management service agreement with physicians as we have with each
of the contracted radiology practices in the four designated regions. In
addition, any imaging centers of Questar that are in the same market as the
operations of the contracted radiology practices in the four designated regions
are not included in the service agreements of the contracted radiology
practices. The following is a table, which summarizes the operating results and
assets by the five reportable segments (dollars in thousands):

                      FOR THE YEAR ENDED DECEMBER 31, 2001

<Table>
<Caption>
                                    MID-ATLANTIC   NORTHEASTERN    CENTRAL     WESTERN
                                     REGION(1)      REGION(2)     REGION(3)   REGION(4)   QUESTAR    TOTAL
                                    ------------   ------------   ---------   ---------   -------   --------
<S>                                 <C>            <C>            <C>         <C>         <C>       <C>
Service fee revenue...............    $111,701       $61,369       $34,682     $35,426    $33,472   $276,650
Total operating expense...........      77,212        45,496        22,838      26,232     27,802    199,580
                                      --------       -------       -------     -------    -------   --------
Contribution......................    $ 34,489       $15,873       $11,844     $ 9,194    $ 5,670   $ 77,070
Contribution margin...............          31%           26%           34%         26%        17%        28%
Equity in earnings of
  investments.....................    $  3,651            --         1,366          --         --   $  5,017
Minority interest.................    $   (697)           --          (451)         --         56   $ (1,092)
Depreciation and amortization
  expense.........................    $  6,674         2,977         1,543       2,719      2,629   $ 16,542
Interest expense..................    $  1,654           679           381         575      1,093   $  4,382
Income before taxes...............    $ 29,115        12,217        10,835       5,900      2,004   $ 60,071
Assets............................    $ 61,680        43,795        24,134      22,392     24,048   $176,049
Purchases of property and
  equipment(5)....................    $  4,315         2,099           672          45       (131)  $  7,000
</Table>

                                        61
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                      FOR THE YEAR ENDED DECEMBER 31, 2000

<Table>
<Caption>
                              MID-ATLANTIC   NORTHEASTERN    CENTRAL     WESTERN
                               REGION(1)      REGION(2)     REGION(3)   REGION(4)   QUESTAR    TOTAL
                              ------------   ------------   ---------   ---------   -------   --------
<S>                           <C>            <C>            <C>         <C>         <C>       <C>
Service fee revenue.........    $96,774        $59,865       $28,680     $28,804    $32,564   $246,687
Total operating
  expenses(6)...............     65,550         42,104        18,701      21,839     25,091    173,285
                                -------        -------       -------     -------    -------   --------
Contribution(6).............    $31,224        $17,761       $ 9,979     $ 6,965    $ 7,473   $ 73,402
Contribution margin.........         32%            30%           35%         24%        23%        30%
Equity in earnings of
  investments...............    $ 2,334             --         1,941          --         --   $  4,275
Minority interest...........    $  (446)            --          (453)         --        (50)  $   (949)
Depreciation and
  amortization expense......    $ 6,645          3,251         1,396       2,557      2,811   $ 16,660
Interest expense............    $ 1,571            802           391         670      1,507   $  4,941
Income before taxes(6)......    $24,896         13,708         9,680       3,738      3,105   $ 55,127
Assets......................    $52,766         42,381        22,395      20,191     28,440   $166,173
Purchases of property and
  equipment.................    $ 6,499          2,370           811       1,779        622   $ 12,081
</Table>

                      FOR THE YEAR ENDED DECEMBER 31, 1999

<Table>
<Caption>
                               MID-ATLANTIC   NORTHEASTERN    CENTRAL     WESTERN
                                REGION(1)      REGION(2)     REGION(3)   REGION(4)   QUESTAR    TOTAL
                               ------------   ------------   ---------   ---------   -------   --------
<S>                            <C>            <C>            <C>         <C>         <C>       <C>
Service fee revenue..........    $81,993        $56,852       $24,499     $27,072    $ 9,284   $199,700
Total operating expenses.....     54,073         37,717        16,211      18,844      7,172    134,017
                                 -------        -------       -------     -------    -------   --------
Contribution.................    $27,920        $19,135       $ 8,288     $ 8,228    $ 2,112   $ 65,683
Contribution margin..........         34%            34%           34%         30%        23%        33%
Equity in earnings of
  investments................    $ 2,139             --         1,442          --         --   $  3,581
Minority interest............    $  (357)            --          (517)         --        (36)  $   (910)
Depreciation and amortization
  expense....................    $ 7,043          3,078           956       2,098      1,066   $ 14,241
Interest expense.............    $ 1,488            944           247         756        715   $  4,150
Income before taxes..........    $21,171         15,113         8,010       5,374        295   $ 49,963
Assets.......................    $56,664         36,087        19,211      18,117     18,830   $148,909
Purchases of property and
  equipment..................    $14,173          2,858         4,008       5,109        831   $ 26,979
</Table>

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

(1) Includes the Mid-Atlantic Market.

(2) Includes the Finger Lakes and Hudson Valley Markets.

(3) Includes the South Texas, Treasure Coast and Northeast Kansas Markets.

(4) Includes the Bay Area Market.

(5) Excludes buy out of operating leases for $13.9 million.

(6) Operating expenses exclude a $13.3 million charge for uncollectible accounts
    receivable and a charge of $3.7 million for the write-off of a note
    receivable.

                                        62
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table is a reconciliation of the segment profit to
Radiologix's consolidated reported income before taxes and extraordinary loss
(dollars are in thousands):

<Table>
<Caption>
                                                         1999      2000*       2001
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Segment profit.......................................  $ 49,963   $ 55,127   $ 60,071
Unallocated amounts:
  Merger related costs...............................        --     (1,772)    (1,000)
  Supplemental incentive compensation................        --         --       (615)
  Corporate general and administrative...............   (11,192)   (10,571)   (13,855)
  Non-operating income...............................        --         --      1,300
  Corporate depreciation and amortization............    (4,162)    (5,456)    (6,962)
  Corporate interest expense.........................    (8,206)   (13,095)   (11,158)
                                                       --------   --------   --------
Income before taxes and extraordinary loss...........  $ 26,403   $ 24,233   $ 27,781
                                                       ========   ========   ========
</Table>

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

* Segment profit and income before taxes for 2000 excludes a $13.3 million
  charge for uncollectible accounts receivable and $3.7 million charge for the
  write-off of a note receivable. See Note 2 to the consolidated financial
  statements.

The following table is a reconciliation of the assets and the capital
expenditures for the segments to Radiologix's consolidated assets and capital
expenditures (in thousands):

<Table>
<Caption>
                                                         1999       2000      2001*
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Assets:
  Segment amounts....................................  $148,909   $166,173   $176,049
  Corporate assets (including intangible assets).....    95,931    102,463    108,676
                                                       --------   --------   --------
  Total assets.......................................  $244,840   $268,636   $284,725
                                                       ========   ========   ========
Capital Expenditures
  Segment amounts....................................  $ 26,979   $ 12,081   $  7,000
  Corporate expenditures.............................     4,479      1,921        184
                                                       --------   --------   --------
  Total capital expenditures.........................  $ 31,458   $ 14,002   $  7,184
                                                       ========   ========   ========
</Table>

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

* Total capital expenditures excludes the buy out of operating leases for $13.9
  million. See Note 6 to the consolidated financial statements.

16.  JOINT VENTURE FINANCIAL INFORMATION

     The Company has nine unconsolidated joint ventures with ownership interests
ranging from 22% to 50%. These joint ventures represent partnerships with
hospitals, health systems or radiology practices and were formed for the purpose
of owning and operating diagnostic imaging centers. Professional services at the
joint venture diagnostic imaging centers are performed by the contracted
radiology practices in such

                                        63
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

market area or a radiology practice that participates in the joint venture. The
following table is a summary of key financial data for these joint ventures (in
thousands):

<Table>
<Caption>
                                                           1999      2000      2001
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Current assets..........................................  $13,718   $20,484   $17,005
Noncurrent assets.......................................   11,511    14,887    14,126
Current liabilities.....................................    7,577     6,501     4,690
Noncurrent liabilities..................................      676     1,616       889
Minority interest.......................................    3,581     4,274     5,017
Net revenue.............................................   30,799    42,355    43,118
Net income..............................................  $10,990   $14,248   $13,307
</Table>

17.  SUPPLEMENTAL GUARANTOR INFORMATION

     In connection with the Senior Notes, certain of the Company's subsidiaries
("Subsidiary Guarantors") guaranteed, jointly and severally, the Company's
obligation to pay principal and interest on the Senior Notes on a full and
unconditional basis.

     The following supplemental condensed consolidating financial information
presents the balance sheet as of December 31, 2000 and 2001, and the statements
of income and cash flows for the years ended December 31, 1999, 2000 and 2001.
In the consolidating condensed financial statements, the Subsidiary Guarantors
account for their investment in the Non-guarantor Subsidiaries using the equity
method.

     The Non-guarantor Subsidiaries include Advanced PET Imaging of Maryland,
L.P., Lakewood OpenScan MR, LLC, Lexington MR, Ltd., Montgomery Community
Magnetic Imaging Center Limited Partnership, Tower OpenScan MRI, and MRI at St.
Joseph Medical Center LLC. The Guarantor Subsidiaries include all wholly-owned
subsidiaries of Radiologix, Inc. (the "Parent").

                                        64
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEET
                               DECEMBER 31, 2001

<Table>
<Caption>
                                                                   NON-
                                                  SUBSIDIARY    GUARANTOR                       TOTAL
                                        PARENT    GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                       --------   ----------   ------------   ------------   ------------
                                                                 (IN THOUSANDS)
<S>                                    <C>        <C>          <C>            <C>            <C>
ASSETS
Cash and cash equivalents............  $  7,670    $   (953)     $ 4,044       $      --       $ 10,761
Accounts receivable, net.............        --      69,048        2,277              --         71,325
Other current assets.................     1,713      13,009       (1,182)             --         13,540
                                       --------    --------      -------       ---------       --------
          Total current assets.......     9,383      81,104        5,139              --         95,626
Property and equipment, net..........     1,954      54,571        3,814              --         60,339
Investment in subsidiaries...........   110,635          --           --        (110,635)            --
Intangible assets, net...............        --      96,310        1,783              --         98,093
Other assets, net....................    17,379      13,201           87              --         30,667
                                       --------    --------      -------       ---------       --------
                                       $139,351    $245,186      $10,823       $(110,635)      $284,725
                                       ========    ========      =======       =========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued
  expenses...........................  $  5,777    $ 25,612      $ 3,504       $      --       $ 34,893
Current portion of long-term debt....       232       4,659          573              --          5,464
Other current liabilities............        --          55           --              --             55
                                       --------    --------      -------       ---------       --------
          Total current
            liabilities..............     6,009      30,326        4,077              --         40,412
Long-term debt, net of current
  portion............................   184,905       5,964          819              --        191,688
Other noncurrent liabilities.........   (96,039)    104,168       (1,162)             --          6,967
Minority interests...................        --          --        1,182              --          1,182
Stockholders' equity (deficit).......    44,476     104,728        5,907        (110,635)        44,476
                                       --------    --------      -------       ---------       --------
                                       $139,351    $245,186      $10,823       $(110,635)      $284,725
                                       ========    ========      =======       =========       ========
</Table>

                                        65
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEET
                               DECEMBER 31, 2000

<Table>
<Caption>
                                                                   NON-
                                                  SUBSIDIARY    GUARANTOR                       TOTAL
                                       PARENT     GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                      ---------   ----------   ------------   ------------   ------------
                                                                (IN THOUSANDS)
<S>                                   <C>         <C>          <C>            <C>            <C>
ASSETS:
Cash and cash equivalents...........  $     941    $    191      $ 2,488        $     --       $  3,620
Accounts receivable, net............         --      65,301        2,913              --         68,214
Other current assets................      6,466      13,240          744              --         20,450
                                      ---------    --------      -------        --------       --------
          Total current assets......      7,407      78,732        6,145              --         92,284
Property and equipment, net.........      3,193      51,327        2,855              --         57,375
Investment in subsidiaries..........     73,808          --           --         (73,808)            --
Intangible assets, net..............         --      96,862        1,986              --         98,848
Other assets, net...................     10,666       9,432           31              --         20,129
                                      ---------    --------      -------        --------       --------
                                      $  95,074    $236,353      $11,017        $(73,808)      $268,636
                                      =========    ========      =======        ========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued
  expenses..........................  $   6,584    $ 28,127      $ 2,005        $     --       $ 36,716
Current portion of long-term debt...     12,228       5,810          719              --         18,757
Other current liabilities...........         31          77           21              --            129
                                      ---------    --------      -------        --------       --------
          Total current
            liabilities.............     18,843      34,014        2,745              --         55,602
Long-term debt, net of current
  portion...........................    165,966       9,721        1,392              --        177,079
Other noncurrent liabilities........   (119,454)    121,875        2,462              --          4,883
Minority interests..................         --          --        1,353              --          1,353
Stockholders' equity (deficit)......     29,719      70,743        3,065         (73,808)        29,719
                                      ---------    --------      -------        --------       --------
                                      $  95,074    $236,353      $11,017        $(73,808)      $268,636
                                      =========    ========      =======        ========       ========
</Table>

                                        66
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                  CONDENSED CONSOLIDATING STATEMENT OF INCOME
                      FOR THE YEAR ENDED DECEMBER 31, 2001

<Table>
<Caption>
                                                                   NON-
                                                  SUBSIDIARY    GUARANTOR                       TOTAL
                                        PARENT    GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                       --------   ----------   ------------   ------------   ------------
                                                                 (IN THOUSANDS)
<S>                                    <C>        <C>          <C>            <C>            <C>
Service Fee Revenue..................  $     --    $256,227      $20,423         $  --         $276,650
Costs and expenses:
  Salaries and benefits..............        --      73,127        2,540            --           75,667
  Field supplies.....................        --      15,238        1,276            --           16,514
  Field rent and lease expense.......        --      32,043        2,335            --           34,378
  Other field expenses...............        --      41,349        5,990            --           47,339
  Bad debt expense...................        --      24,145        1,537            --           25,682
  Merger related costs...............     1,000          --           --            --            1,000
  Supplemental incentive
     compensation....................       615          --           --            --              615
  Corporate general and
     administrative..................    13,855          --           --            --           13,855
  Depreciation and amortization......     2,938      19,795          771            --           23,504
  Interest expense, net..............    11,158       4,235          147            --           15,540
                                       --------    --------      -------         -----         --------
          Total costs and expenses...    29,566     209,932       14,596            --          254,094
                                       --------    --------      -------         -----         --------
Income (loss) before taxes, minority
  interest in consolidated
  subsidiaries and equity in earnings
  of investments.....................   (29,566)     46,295        5,827                         22,556
Equity in earnings of investments....        --       5,017           --            --            5,017
Non-operating income.................     1,300          --           --            --            1,300
Minority interests in consolidated
  subsidiaries.......................        --          --       (1,092)           --           (1,092)
                                       --------    --------      -------         -----         --------
Income (loss) before taxes...........   (28,266)     51,312        4,735            --           27,781
Income tax expense (benefit).........   (11,307)     20,525        1,894            --           11,112
                                       --------    --------      -------         -----         --------
Income before extraordinary loss.....   (16,959)     30,787        2,841            --           16,669
Extraordinary loss on early
  extinguishment of debt, net of
  tax................................    (2,838)         --           --            --           (2,838)
                                       --------    --------      -------         -----         --------
  Net income (loss)..................  $(19,797)   $ 30,787      $ 2,841         $  --         $ 13,831
                                       ========    ========      =======         =====         ========
</Table>

                                        67
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                  CONDENSED CONSOLIDATING STATEMENT OF INCOME
                      FOR THE YEAR ENDED DECEMBER 31, 2000

<Table>
<Caption>
                                                                   NON-
                                                  SUBSIDIARY    GUARANTOR                       TOTAL
                                        PARENT    GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                       --------   ----------   ------------   ------------   ------------
                                                                 (IN THOUSANDS)
<S>                                    <C>        <C>          <C>            <C>            <C>
Service Fee Revenue..................  $     --    $230,988      $15,699         $  --         $246,687
Costs and expenses:
  Salaries and benefits..............        --      64,370        2,197            --           66,567
  Field supplies.....................        --      12,378          887            --           13,265
  Field rent and lease expense.......        --      28,260        1,931            --           30,191
  Other field expenses...............        --      40,763        5,108            --           45,871
  Bad debt expense...................        --      34,389           --            --           34,389
  Merger related costs...............     1,772          --           --            --            1,772
  Supplemental incentive
     compensation....................        --          --           --            --               --
  Corporate general and
     administrative..................    10,571          --           --            --           10,571
  Depreciation and amortization......     1,806      19,498          814            --           22,118
  Interest expense, net..............    13,095       4,833          108            --           18,036
                                       --------    --------      -------         -----         --------
          Total costs and expenses...    27,244     204,491       11,045            --          242,780
                                       --------    --------      -------         -----         --------
Income (loss) before taxes, minority
  interest in consolidated
  subsidiaries and equity in earnings
  of investments.....................   (27,244)     26,497        4,654            --            3,907
Equity in earnings of investments....        --       4,274           --            --            4,274
Minority interests in consolidated
  subsidiaries.......................        --          --         (948)           --             (948)
                                       --------    --------      -------         -----         --------
Income (loss) before taxes...........   (27,244)     30,771        3,706            --            7,233
Income tax expense (benefit).........   (10,891)     12,309        1,482            --            2,900
                                       --------    --------      -------         -----         --------
  Net income (loss)..................  $(16,353)   $ 18,462      $ 2,224         $  --         $  4,333
                                       ========    ========      =======         =====         ========
</Table>

                                        68
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                  CONDENSED CONSOLIDATING STATEMENT OF INCOME

                      FOR THE YEAR ENDED DECEMBER 31, 1999

<Table>
<Caption>
                                                                   NON-
                                                  SUBSIDIARY    GUARANTOR                       TOTAL
                                        PARENT    GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                       --------   ----------   ------------   ------------   ------------
                                                                 (IN THOUSANDS)
<S>                                    <C>        <C>          <C>            <C>            <C>
Service Fee Revenue..................  $     --    $186,681      $13,019         $  --         $199,700
Costs and expenses:
  Salaries and benefits..............        --      51,159        1,667            --           52,826
  Field supplies.....................        --      10,851          779            --           11,630
  Field rent and lease expense.......        --      17,280        1,164            --           18,444
  Other field expenses...............        --      27,857        4,421            --           32,278
  Bad debt expense...................        --      18,834            4            --           18,838
  Corporate general and
     administrative..................    11,192          --           --            --           11,192
  Depreciation and amortization......     1,349      16,190          864            --           18,403
  Interest expense, net..............     8,206       3,974          177            --           12,357
                                       --------    --------      -------         -----         --------
          Total costs and expenses...    20,747     146,145        9,076            --          175,968
                                       --------    --------      -------         -----         --------
Income (loss) before taxes, minority
  interest in consolidated
  subsidiaries and equity in earnings
  of investments.....................   (20,747)     40,536        3,943            --           23,732
Equity in earnings of investments....        --       3,581           --            --            3,581
Minority interests in consolidated
  subsidiaries.......................        --          --         (910)           --             (910)
                                       --------    --------      -------         -----         --------
Income (loss) before taxes...........   (20,747)     44,117        3,033            --           26,403
Income tax expense...................    (8,298)     17,431        1,213            --           10,346
                                       --------    --------      -------         -----         --------
  Net income (loss)..................  $(12,449)   $ 26,686      $ 1,820         $  --         $ 16,057
                                       ========    ========      =======         =====         ========
</Table>

                                        69
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                      FOR THE YEAR ENDED DECEMBER 31, 2001

<Table>
<Caption>
                                                                   NON-
                                                  SUBSIDIARY    GUARANTOR                       TOTAL
                                        PARENT    GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                       --------   ----------   ------------   ------------   ------------
                                                                 (IN THOUSANDS)
<S>                                    <C>        <C>          <C>            <C>            <C>
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES...............  $ (3,145)   $ 35,448      $ 8,713         $  --         $ 41,016
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment,
     net.............................    (1,699)     (3,755)      (1,730)           --           (7,184)
  Buy out of operating leases........        --     (13,910)          --            --          (13,910)
  Cash paid for acquisitions.........        --        (906)          --            --             (906)
  Joint ventures.....................        --       3,951           --            --            3,951
  Other items........................       293        (316)      (1,032)           --           (1,055)
                                       --------    --------      -------         -----         --------
          Net cash used in investing
            activities...............    (1,406)    (14,936)      (2,762)           --          (19,104)
                                       --------    --------      -------         -----         --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term
     debt, net.......................     6,943      (7,513)        (719)           --           (1,289)
  Due to/from parent/subsidiaries....    20,811     (17,116)      (3,695)           --               --
  Other items........................   (16,474)      2,973           19            --          (13,482)
                                       --------    --------      -------         -----         --------
          Net cash provided by (used
            in) financing
            activities...............    11,280     (21,656)      (4,395)           --          (14,771)
                                       --------    --------      -------         -----         --------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS...................     6,729      (1,144)       1,556            --            7,141
CASH AND CASH EQUIVALENTS, beginning
  of period..........................       941         191        2,488            --            3,620
                                       --------    --------      -------         -----         --------
CASH AND CASH EQUIVALENTS, end of
  period.............................  $  7,670    $   (953)     $ 4,044         $  --         $ 10,761
                                       ========    ========      =======         =====         ========
</Table>

                                        70
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                      FOR THE YEAR ENDED DECEMBER 31, 2000

<Table>
<Caption>
                                                                   NON-
                                                  SUBSIDIARY    GUARANTOR                       TOTAL
                                        PARENT    GUARANTORS   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                       --------   ----------   ------------   ------------   ------------
                                                                 (IN THOUSANDS)
<S>                                    <C>        <C>          <C>            <C>            <C>
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES...............  $(14,537)   $ 23,268      $ 4,594         $  --         $ 13,325
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment,
     net.............................      (731)    (11,983)      (1,288)           --          (14,002)
  Cash paid for acquisitions.........        --     (10,125)          --            --          (10,125)
  Joint ventures.....................        --       1,211           --            --            1,211
  Other items........................    (4,773)      5,257         (628)           --             (144)
                                       --------    --------      -------         -----         --------
          Net cash used in investing
            activities...............    (5,504)    (15,640)      (1,916)           --          (23,060)
                                       --------    --------      -------         -----         --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term
     debt, net.......................    15,694      (6,286)         180            --            9,588
  Due to/from parent/subsidiaries....     5,522      (2,756)      (2,766)           --               --
  Other items........................        --        (556)          21            --             (535)
                                       --------    --------      -------         -----         --------
          Net cash provided by (used
            in) financing
            activities...............    21,216      (9,598)      (2,565)           --            9,053
                                       --------    --------      -------         -----         --------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS...................     1,175      (1,970)         113            --             (682)
CASH AND CASH EQUIVALENTS, beginning
  of period..........................      (234)      2,161        2,375            --            4,302
                                       --------    --------      -------         -----         --------
CASH AND CASH EQUIVALENTS, end of
  period.............................  $    941    $    191      $ 2,488         $  --         $  3,620
                                       ========    ========      =======         =====         ========
</Table>

                                        71
<PAGE>
                       RADIOLOGIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                      FOR THE YEAR ENDED DECEMBER 31, 1999

<Table>
<Caption>
                                                    SUBSIDIARY   NON-GUARANTOR                     TOTAL
                                          PARENT    GUARANTORS   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                         --------   ----------   -------------   ------------   ------------
                                                                    (IN MILLIONS)
<S>                                      <C>        <C>          <C>             <C>            <C>
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES.................  $(10,563)   $  7,204       $ 1,897         $  --         $ (1,462)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from the sale of property
     and equipment.....................        --      10,000            --            --           10,000
  Purchases of property and equipment,
     net...............................    (3,092)    (25,356)       (3,010)           --          (31,458)
  Cash paid for acquisitions...........        --     (25,406)           --            --          (25,406)
  Joint ventures.......................        --       1,907            --            --            1,907
  Other items..........................       320       3,589        (3,909)           --               --
                                         --------    --------       -------         -----         --------
          Net cash used in investing
            activities.................    (2,772)    (35,266)       (6,919)           --          (44,957)
                                         --------    --------       -------         -----         --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term
     debt, net.........................    50,000      (7,711)        1,931            --           44,220
  Due to/from parent/subsidiaries......   (38,649)     33,791         4,858            --               --
  Other items..........................        --         119          (103)           --               16
                                         --------    --------       -------         -----         --------
          Net cash provided by
            financing activities.......    11,351      26,199         6,686            --           44,236
                                         --------    --------       -------         -----         --------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS.....................    (1,984)     (1,863)        1,664            --           (2,183)
CASH AND CASH EQUIVALENTS, beginning of
  period...............................     1,750       4,024           711            --            6,485
                                         --------    --------       -------         -----         --------
CASH AND CASH EQUIVALENTS, end of
  period...............................  $   (234)   $  2,161       $ 2,375         $  --         $  4,302
                                         ========    ========       =======         =====         ========
</Table>

                                        72
<PAGE>

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

     Not applicable.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information required by Items 401 and 405 of Regulation S-K is
contained under the caption "Directors and Executive Officers" in the
registrant's proxy statement for the 2002 annual meeting of stockholders and is
incorporated here by reference.

ITEM 11.  EXECUTIVE COMPENSATION.

     The information required by Item 402 of Regulation S-K is contained under
the caption "Executive Compensation" in the registrant's proxy statement for the
2002 annual meeting of stockholders and is incorporated here by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required by Item 403 of Regulation S-K is contained under
the caption "Security Ownership of Certain Beneficial Owners and Management" in
the registrant's proxy statement for the 2002 annual meeting of stockholders and
is incorporated here by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by Item 404 of Regulation S-K is contained herein
under the caption "Certain Transactions" in the registrant's proxy statement for
the 2002 annual meeting of stockholders and is incorporated here by reference.

                                    PART IV

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

     The list of financial statements and financial statement schedules filed as
part of this report is incorporated here by reference to Item 8 Financial
Statements and supplementary Data, "Index to Consolidated Financial Statements."

     The list of exhibits filed as part of this report is incorporated by
reference to the Index to Exhibits at the end of this report.

     (a) Exhibits

     (b) Financial Statement Schedules.

     Schedule II, Valuation and Qualifying Accounts for the years ended December
31, 1999, 2000 and 2001 is included herewith.

     (c) Reports on Form 8-K.  The registrant filed the following Current
Reports on Form 8-K during the last quarter of 2001:

          (i) Report dated November 26, 2001, announcing the registrant's intent
     to offer $160 million aggregate principal amount of senior notes due 2008
     in a private placement;

          (ii) Report dated December 7, 2001, announcing its agreement to sell
     $160 million aggregate principal amount of senior notes due 2008 at 100% of
     face value in a private placement; and

                                        73
<PAGE>

          (iii) Report dated December 12, 2001:

             (A) announcing its sale of $160 million aggregate principal amount
        of senior notes due 2008 at 100% of face value in a private placement,

             (B) confirming and adding to 2002 financial guidance, and

             (C) announcing its arrangement of a three-year $35 million
        revolving credit facility to bear interest at LIBOR plus a variable rate
        between 3.0 and 3.5% through General Electric Capital Corporation for
        general corporate purposes.

                                        74
<PAGE>

                                 SIGNATURE PAGE

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, Radiologix has duly caused this Form 10-K to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Dallas, State of
Texas, on March 25, 2002.

                                          RADIOLOGIX

                                          By:       /s/ MARK L. WAGAR
                                            ------------------------------------
                                                      Mark L. Wagar
                                             Chairman of the Board and Chief
                                                    Executive Officer

                               POWER OF ATTORNEY

     Each individual whose signature appears below constitutes and appoints Mark
L. Wagar and Paul M. Jolas, and each of them, such person's true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for such person and in such person's name, place, and stead, in any and all
capacities, to sign any and all amendments to this Form 10-K, and to file the
same with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission, granting unto such attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that such attorneys-in-fact and
agents, or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, this Form 10-K has been signed by the following persons in the
capacities and on the dates indicated.

<Table>
<Caption>
                    SIGNATURE                                      TITLE                       DATE
                    ---------                                      -----                       ----
<C>     <C>                                         <C>                                   <S>

                /s/ MARK L. WAGAR                    Chairman of the Board of Directors   March 25, 2002
 ------------------------------------------------       and Chief Executive Officer
                  Mark L. Wagar                        (Principal Executive Officer)


                /s/ SAMI S. ABBASI                      Chief Financial Officer and       March 25, 2002
 ------------------------------------------------   Executive Vice President (Principal
                  Sami S. Abbasi                            Accounting Officer)


               /s/ PAUL D. FARRELL                                Director                March 25, 2002
 ------------------------------------------------
                 Paul D. Farrell


               /s/ JOSEPH C. MELLO                                Director                March 25, 2002
 ------------------------------------------------
                 Joseph C. Mello


           /s/ DERACE L. SCHAFFER, M.D.                           Director                March 25, 2002
 ------------------------------------------------
             Derace L. Schaffer, M.D.


           /s/ MICHAEL L. SHERMAN, M.D.                           Director                March 25, 2002
 ------------------------------------------------
             Michael L. Sherman, M.D.
</Table>

                                        75
<PAGE>

                                RADIOLOGIX, INC.

                 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

<Table>
<Caption>
                                                BALANCE AT                                   BALANCE AT
                                                BEGINNING                                      END OF
                 DESCRIPTION                    OF PERIOD    PROVISION   OTHER   WRITEOFFS     PERIOD
                 -----------                    ----------   ---------   -----   ---------   ----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                             <C>          <C>         <C>     <C>         <C>
ALLOWANCES FOR BAD DEBT
For the Year Ended December 31, 1999..........   $18,372      18,838      637     (10,871)    $26,976
For the Year Ended December 31, 2000..........   $26,976      34,389       --     (23,264)    $38,101
For the Year Ended December 31, 2001..........   $38,101      25,682       --     (39,664)    $24,119
</Table>

Amounts in "Other" category represent allowance from new affiliations.

                                        76
<PAGE>

                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
  2.1     Stock Purchase Agreement effective as of August 1, 1999 by
          and among American Physician Partners, Inc., Questar
          Imaging, Inc. and the shareholders of Questar Imaging, Inc.@
  3.1     Restated Certificate of Incorporation of American Physician
          Partners, Inc.***
  3.2     Amended and Restated Bylaws of American Physician Partners,
          Inc.***
  3.3     Amendment to Restated Certificate of Incorporation of
          American Physician Partners, Inc. (Incorporated by reference
          to Exhibit 3.3 to the registrant's Form 10-Q for the quarter
          ended June 30, 1999)
  3.4     Amendment to Restated Bylaws of American Physician Partners,
          Inc. (Incorporated by reference to Exhibit 3.4 to the
          registrant's Form 10-Q for the quarter ended June 30, 1999)
  4.1     Form of certificate evidencing ownership of Common Stock of
          American Physician Partners, Inc.**
  4.2     Securities Purchase Agreement dated as of August 3, 1999 by
          and between American Physician Partners, Inc. and BT Capital
          Partners SBIC, L.P.@ (see Exhibit 4.1 thereof)
  4.3     Convertible Junior Subordinated Promissory Note dated August
          1, 1999 issued to BT Capital Partners SBIC, L.P.@ (see
          Exhibit 4.2 thereof).
  4.4     Indenture dated as of December 12, 2001, among Radiologix,
          Inc., as Issuer, its subsidiaries identified in the
          Indenture, as Guarantors, and U.S. Bank, N.A., as Trustee,
          with respect to $160 Million 10 1/2% Senior Notes due
          December 15, 2008.*
  4.5     Registration Rights Agreement dated December 12, 2001, among
          Radiologix, Inc., as Issuer, its subsidiaries identified in
          the Registration Rights Agreement, as Guarantors, and
          Jefferies & Company, Inc. and Deutsche Banc Alex. Brown
          Inc., as Initial Purchasers, with respect to $160 Million
          10 1/2% Senior Notes due December 15, 2008.*
 10.1     American Physician Partners, Inc. 1996 Stock Option Plan.**
 10.2     Amended and Restated Credit Agreement dated December 12,
          2001, among Radiologix, Inc., as Borrower, the Signatory
          Lenders, and General Electric Capital Corporation, as Agent
          and Lender.*
 10.3     Employment Agreement between American Physician Partners,
          Inc. and Mark S. Martin.**
 10.4     Employment Agreement between American Physician Partners,
          Inc. and Paul M. Jolas.**
 10.5     Form of Indemnification Agreement for certain Directors and
          Officers.***
 10.6     Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., APPI-Advanced Radiology,
          Inc. and Carroll Imaging Associates, P.A., Diagnostic
          Imaging Associates, P.A., Drs. Thomas, Wallop, Kim & Lewis,
          P.A., Drs. Copeland, Hyman and Shackman, P.A., Drs. Decarlo,
          Lyon, Hearn & Pazourek, P.A., Harbor Radiologists, P.A.,
          Perilla, Sindler & Associates, P.A.**
 10.7     Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., Ide Admin Corp. and Ide
          Imaging Group, P.C.**
 10.8     Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., M & S X-Ray Associates,
          P.A. and M&S Imaging Associates, P.A.**
 10.9     Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., Rockland Radiological
          Group, P.C. and The Greater Rockland Radiological Group,
          P.C.**
 10.10    Service Agreement dated November, by and among American
          Physician Partners, Inc., Advanced Imaging of Orange County,
          P.C. and The Greater Rockland Radiological Group, P.C.**
 10.11    Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., Central Imaging
          Associates, P.C. and The Greater Rockland Radiological
          Group, P.C.**
</Table>
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
 10.12    Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., Nyack Magnetic Resonance
          Imaging, P.C. and The Greater Rockland Radiological Group,
          P.C.**
 10.13    Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., Pelham Imaging
          Associates, P.C. and The Greater Rockland Radiological
          Group, P.C.**
 10.14    Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., Women's Imaging
          Consultants, P.C. and The Greater Rockland Radiological
          Group, P.C.**
 10.15    Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., Radiology and Nuclear
          Medicine, a Professional Association and RNM L.L.C.**
 10.16    Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., APPI-Valley Radiology,
          Inc. and Valley Radiology Medical Associates, Inc.**
 10.17    Service Agreement dated January 1, 1998, by and among
          American Physician Partners, Inc., Community Imaging
          Partners, Inc., Community Radiology Associates, Inc. and
          Drs. Korsower and Pion Radiology, P.A. (Incorporated by
          reference to Exhibit 10.37 to the registrant's Form 10-Q for
          the quarter ended March 31, 1998)
 10.18    Service Agreement dated April 1, 1998, by and among American
          Physician Partners, Inc., Treasure Coast Imaging Partners,
          Inc. and Radiology Imaging Associates -- Basilico, Gallagher
          & Raffa, M.D., P.A. (Incorporated by reference to Exhibit
          10.38 to the registrant's Form 10-Q for the quarter ended
          June 30, 1998)
 10.19    Employment Agreement between American Physician Partners,
          Inc. and Mark L. Wagar. (Incorporated by reference to
          Exhibit 10.40 to the registrant's Form 10-Q for the quarter
          ended June 30, 1998)
 10.20    Service Agreement dated September 1, 1998, by and among
          American Physician Partners, Inc., WB&A Imaging Partners,
          Inc. and WB&A Imaging, P.C. (Incorporated by reference to
          Exhibit 10.41 to the registrant's Form 10-Q for the quarter
          ended September 30, 1998)
 10.21    Office Building Lease Agreement between The Equitable-Nissei
          Dallas Company and Fibreboard Corporation. (Incorporated by
          reference to Exhibit 10.42 to the registrant's Form 10-Q for
          the quarter ended September 30, 1998)
 10.22    First Amendment to Employment Agreement between American
          Physician Partners, Inc. and Mark L. Wagar.+
 10.23    First Amendment to Employment Agreement between American
          Physician Partners, Inc. and Mark S. Martin.+
 10.24    First Amendment to Employment Agreement between American
          Physician Partners, Inc. and Paul M. Jolas.+
 10.25    Amendment No. 1 to American Physician Partners, Inc. 1996
          Stock Option Plan. (Incorporated by reference to Exhibit
          10.48 to the registrant's Form 10-Q for the quarter ended
          June 30, 1999)
 10.26    Amendment No. 2 of Employment Agreement between Radiologix,
          Inc. and Mark S. Martin. (Incorporated by reference to
          Exhibit 10.49 to the registrant's Form 10-Q for the quarter
          ended March 31, 2000)
 10.27    Amendment No. 2 of Employment Agreement between Radiologix,
          Inc. and Mark L. Wagar.#
 10.28    Amendment No. 3 of Employment Agreement between Radiologix,
          Inc. and Mark S. Martin.#
 10.29    Amendment No. 2 of Employment Agreement between Radiologix,
          Inc. and Paul M. Jolas.#
 10.30    Amended and Restated Agreement and Plan of Merger, dated as
          of September 12, 2000, as amended by and among Radiologix,
          Inc., SKM-RD LLC and SKM-RD Acquisition Corp. (Incorporated
          by reference to the Registrant's Registration Statement No.
          333-45790 on Form S-4.) (see Exhibit 2 thereof)
</Table>
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
 10.31    Second Amendment to Amended and Restated Agreement and Plan
          of Merger, dated as of February 20, 2001, by and among
          Radiologix, Inc., SKM-RD LLC and SKM-RD Acquisition Corp.
          (Incorporated by reference to the Registrant's Registration
          Statement No. 333-45790 on Form S-4.)
 10.32    Assignment and Assumption Agreement dated March 2001, by and
          between Fibreboard Corporation and Radiologix, Inc.
          (Incorporated by reference to the Registrant's Registration
          Statement No. 333-45790 on Form S-4.)
 10.33    Employment Agreement between Radiologix, Inc. and Sami S.
          Abbasi dated as of December 13, 2000 (Incorporated by
          reference to the Registrant's Registration Statement No.
          333-45790 on Form S-4.)
 10.34    Amendment No. 3 of Employment Agreement between Radiologix,
          Inc. and Paul M. Jolas. (Incorporated by reference to the
          Registrant's Registration Statement No. 333-45790 on Form
          S-4.)
 10.35    Service Agreement dated November 26, 1997, by and among
          American Physician Partners, Inc., APPI-Pacific Imaging Inc.
          and PIC Medical Group, Inc.**
 21.1     Subsidiaries*
 23.1     Consent of Arthur Andersen LLP*
 24.1     Power of Attorney (contained on the signature page of this
          Form 10-K)*
 99.1     Letter acknowledging receipt of Arthur Andersen LLP
          letters.*
</Table>

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

*      Filed herewith.

**     Incorporated by reference to Exhibits 4.1, 10.1, 10.3 and 10.5 through
       10.19, respectively, to the registrant's Registration Statement No.
       333-31611 on Form S-4.

***    Incorporated by reference to the corresponding Exhibit number to the
       registrant's Registration Statement No. 333-30205 on Form S-1.

+      Incorporated by reference to Exhibits 10.44, 10.45 and 10.47,
       respectively, to the registrant's Form 10-Q for the quarter ended March
       31, 1999.

@      Incorporated by reference to Exhibits 2.1, 4.1 and 4.2, respectively, to
       the Registrant's Form 8-K filed on August 3, 1999.

#      Incorporated by reference to Exhibits 10.50, 10.51 and 10.52 to the
       Registrant's Form 10-Q for the quarter ended June 30, 2000.