<PAGE>   1
                                  FORM 10-KSB

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]   FOR THE FISCAL YEAR ENDED JUNE
         30, 1997
                                                            OR
[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED] for the transition period from
         ____________ to ____________

                        Commission file number:  1-14150

                               THE COMPANY DOCTOR
                 (Name of small business issuer in its charter)


                      DELAWARE                             72-1234136
          (State or other jurisdiction of               (I.R.S. Employer
           incorporation or organization)            Identification Number)
                    SUITE 1800                   
           5215 NORTH O'CONNOR BOULEVARD         
                   IRVING, TEXAS                              75039
      (Address of principal executive offices)             (Zip Code)

        Issuer's telephone number, including area code:  (972) 401-8300

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

        Title of each class            Name of each exchange on which registered
COMMON STOCK, NO PAR VALUE PER SHARE               BOSTON STOCK EXCHANGE
  WARRANTS TO PURCHASE COMMON STOCK       

 Securities registered pursuant to section 12(g) of the Securities Exchange Act:

                                      NONE

Check whether the issuer (1) 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
                   ---     ---

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ]

State issuer's revenues for its most recent fiscal year:  $11,034,467

The aggregate market value of the 3,413,650 shares of Common Stock held by
non-affiliates was $12,587,834 as of September 23, 1997.  For purposes of the
foregoing calculation only, each of the issuer's officers and directors is
deemed to be an affiliate.  The market value of the shares was calculated based
on the closing sales of such shares on The Nasdaq SmallCap Market on such date.

As of September 23, 1997, 4,906,949 shares of the issuer's Common Stock were
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      NONE

Transitional Small Business Disclosure Format:  Yes     No  X 
                                                    ---     ---
<PAGE>   2
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

        The Company Doctor manages facilities that provide occupational and
industrial medical and related services exclusively to employees and
prospective employees of corporate customers located in the states of Texas,
Louisiana and Arkansas.  The Company currently manages eleven occupational and
industrial medicine facilities servicing over approximately 4,000 employers and
clients including local offices of such corporations as Blockbuster Video, Excel
Telecommunications, Fibrebond Corp., Interceramic Tile, Southwest Airlines,
U-Haul Corporation, Levi, the U.S. Postal Service and Atlantic Richfield Co.
(ARCO).  At these facilities, prospective employees of the corporate customer
can be pre-screened and work-related injuries and medical conditions arising
from employment can be diagnosed and treated.  See "Item 1. Description of
Business -  Healthcare Operations and Services."

        Currently, the Company's operating revenues are derived primarily
through a non-exclusive Practice Management Agreement with The Physician Group,
P.A. ("The Physician Group"), a Texas professional association of physicians
and other medical professionals which is paid by the employer for services
either on a fee-for-service basis or on a prepaid "capitated" basis (a fixed
monthly fee for each employee).  The Company receives a management fee for the
provision of non-medical services, including marketing, management of the
practice and use of the facilities, and provision of non-medical procedures and
programs.  The Company also receives a portion of its operating revenues from
management of two facilities outside The Physician Group.  See "Item 1.
Description of Business - Physician Services, Recruitment and Duties" and -
"Affiliations, Joint Ventures and Acquisitions."

        At its nine Texas facilities, the Company utilizes The Physician Group
to render the actual medical services provided to employees and prospective
employees of its clients.  Because most states have enacted laws limiting the
practice of medicine to licensed individuals or professional organizations
comprised of licensed individuals, the Company is dependent on The
Physician Group or other professional associations of licensed professionals to
render medical services at the Company's facilities.  The Company anticipates
it will continue to contract with The Physician Group to provide medical
services at facilities which the Company acquires or opens in Texas in the
future.

        The Company believes its management techniques and cost containment
strategies have in many cases resulted in reductions in loss ratios by workers'
compensation insurers and, thereafter, in reduced insurance premiums charged to
the Company's clients.  To benefit indirectly from the advantages of its own
cost containment programs, the Company implemented an arrangement with Employers
General Insurance Group ("EGIG"), a subsidiary of Old Republic General Insurance
Group, Inc., a company listed on the New York Stock Exchange with an A+ rating
from A.M. Best Company, to develop and offer an insurance and occupational
medicine product known as "Comp2000" which is a fully-guaranteed fixed cost
workers' compensation insurance policy that includes The Physician Group's
capitated preventive healthcare services.  See "Item 1. Description of Business
- Healthcare Operations and Services and - Insurance and Insurance Related
Operations."

        In order to benefit even more directly from the use of its cost
containment strategies utilized in its practice management activities, the
Company acquired a Texas domiciled, multi-line insurance company, now known as
Risk Management Assurance Corporation ("RMAC"), effective June 30, 1996.
Through RMAC, the Company may enter the workers' compensation insurance
market by reinsurance of insurance policies issued by other workers'
compensation insurers, including EGIG.  See "Item 1. Description of Business -
Insurance and Insurance Related Operations".


                                      2
<PAGE>   3
INDUSTRY OVERVIEW

        Occupational and industrial healthcare consists of (i) workers'
compensation injury care and related services, and (ii) non-injury healthcare
services related to employer needs or statutory requirements.

        Workers' Compensation.  Workers' compensation laws require certain
employers to compensate employees for medical expenses, lost wages and other
costs resulting from work-related accidents, injuries and illnesses.  As each
state is responsible for enactment, implementation and regulation of these
laws, workers' compensation laws and regulations on benefits and arrangements
vary on a state-by-state basis and are often highly complex.  Typically
however, work-related injuries are broadly defined, and injured or ill
employees are entitled to extensive compensation benefits.  Employers are
required to provide first-dollar coverage with no insurance co-payment or
deductible due from the injured or ill employee for medical treatment and, in
many states, there is no lifetime limit on expenses.  In exchange for providing
this coverage for employees, employers are not subject to litigation by
employees for compensation or benefits in excess of those provided by
applicable state statute.  In most states, the employer is required to secure
the payment of compensation benefits through the purchase of commercial
insurance from private insurance companies, participation in state-operated
insurance funds or employer self-insurance.  In the few states, including
Texas, in which employers are not required to purchase such insurance,
uninsured employers are exposed to significant potential liability as the
result of an employee's work-related injury or death.

        Non-Injury Healthcare Services.  Non-injury healthcare services include
employment-related physical examinations (including pre-employment screening
and post-hiring annual physical exams), drug and alcohol testing, functional
capacity testing and other related programs designed to meet specific employer
needs.  Non-injury healthcare services also include programs to assist
employers in complying with an expanding list of federal and state governmental
requirements, including hearing conservation programs, toxic chemical exposure
surveillance and monitoring programs, and Department of Transportation and
Federal Aviation Administration physical examinations.  Federal laws governing
health issues in the workplace, including the Americans with Disabilities Act,
have increased employers' demand for healthcare professionals who have
experience in the delivery of these regulated services.

        The Company believes that the cost of work-related injuries is likely
to continue to rise primarily because of (i) broader definitions of injuries
and illnesses covered by workers' compensation laws, (ii) an aging work force,
(iii) the continued requirement that employers pay all of an employee's cost of
medical treatment, without any employee co- payment or deductible, and a
significant portion of lost wages and non-medical costs, and (iv) the
relatively low utilization to date of comprehensive cost containment programs
in the workers' compensation system.  The Company believes its management
techniques and cost containment strategies can benefit all employers, but in
particular, employers in industries that have relatively high workers'
compensation costs and employers with higher than average claims experience.

HEALTHCARE OPERATIONS AND SERVICES

        Seven of the eleven occupational healthcare facilities currently
managed by the Company are located in the Dallas/Fort Worth, Texas metropolitan
area.  The remaining four facilities are located in Baytown, Texas (a suburb of
Houston); El Paso, Texas; Shreveport, Louisiana; and Little Rock, Arkansas.
The facilities managed by the Company range in size from approximately 3,000
square feet to 10,000 square feet and have capacity to handle from
approximately 40 to 200 patients per day.  Each facility is equipped with
examination rooms, an emergency suite, an intake room, an x-ray room, a small
laboratory and areas for reception, drug testing, collection, rehabilitation
and administration.  The facilities are generally open nine to eleven hours per
day.



                                      -3-
<PAGE>   4
        Licensed physicians in the Company's facilities are generally trained
and experienced in occupational and industrial medicine or have emergency or
general medicine backgrounds.  Each facility utilizes a staff of between five
and 25 full-time persons (or their part-time equivalents), including nurses,
therapists and administrative support personnel.  Each of the Company's
facilities is staffed with one or more licensed physicians.

        A majority of the medical and non-medical services are offered on a
walk-in basis, although specialized services are usually scheduled in advance.
Through The Physician Group, urgent care is offered for employees suffering
from work-related injuries, which most commonly involve soft tissue injuries,
back injuries or exposure to hazardous material.  Patients with injuries beyond
the scope of the physician's expertise are referred to an appropriate medical
facility.

        Fee-for-Services Plan.  The following chart lists the services offered
on a "fee-for-services" basis whereby employers pay The Physician Group for
each medical service rendered and pay the Company for all non-medical services
rendered as the service is provided.

<TABLE>
<CAPTION>
Services Provided                                 Application
-----------------                                 -----------
<S>                                <C>
Prevention  . . . . . . . . . .    Cholesterol testing and management; RiskScan computerized health risk analysis;
                                   Personalized health risk analysis; Health seminars; Stress management; Flu
                                   immunizations; Smoking cessation.

Medical Examinations  . . . . .    Examinations in compliance with both Occupational Safety and Health Administration
                                   and Department of Transportation standards; Computerized back examinations;
                                   Pre-employment examinations; Comprehensive executive/annual examinations; Asbestos
                                   and other medical surveillance examinations.

Treatment . . . . . . . . . . .    Physical examinations by occupational medicine specialists; Work-related injury
                                   treatment; Physical therapy services; X-rays; Laboratory facilities; Pharmacy.

Medical Screening
   and Testing  . . . . . . . .    Pulmonary function; HIV antibody screening; Treadmill stress test; Tuberculosis test;
                                   Hepatitis B screening; Audiometric screening; Heavy metals screening; Blood chemistry
                                   profile (SMA-24); Chest X-rays; Vision screening; Proctoscopic examinations.

Management Services . . . . . .    Cost/benefit management reports; Physician consultation; Safety, health and accident
                                   prevention services; Case control - loss management services via computerized injury
                                   tracking; Regulatory compliance information; Risk management information; Medical
                                   billing audits; Accident work status reports; Occupational medicine supplies;
                                   Physician summary reports to employers and employees.

Drug Testing  . . . . . . . . .    Consultation and program development; Medical review officer services; Collection
                                   facility in compliance with National Institute of Drug Abuse standards; Screening
                                   examinations.
</TABLE>





                                      -4-
<PAGE>   5
         The Preferred Employee Plan.  A majority of services are offered
pursuant to a "Preferred Employee Plan" or "PEP," a "capitated" plan which
allows employers to limit the costs they would otherwise pay for certain
services, a managed care approach to occupational medicine.  In return for a
prepaid monthly fee for each person employed by an employer client, ranging from
approximately $8.50 to $21 per person, the Company and The Physician Group
provide an agreed upon package of services.  One portion of the capitated fee
is for medical services provided by The Physician Group and the other portion
is for non-medical services provided by the Company.  Clients pay the same fee
for every employee, regardless of how many services are provided to any
particular employee in a given month.  All existing PEP agreements are
terminable by the employer client, the Company or The Physician Group on 30
days' prior written notice.

         The PEP is a variation on the use of in-house, captive medical
departments to control medical costs.  Advantages of the PEP over the use of an
in-house medical department are that (i) small companies and major corporations
have the same opportunities for cost containment, (ii) the more sophisticated,
in-depth physical examination provided under the PEP to screen individuals for
health problems and physical fitness aid earlier discovery of health concerns;
and (iii) extensive examinations can provide a more accurate picture of the
potential productivity of an individual employee and can identify certain
significant risks of future on-the-job injuries and other serious health
conditions, thereby assisting in cost containment.  These services are
specifically aimed at lowering the cost of employee benefits, improving
employee productivity, decreasing absenteeism and enhancing employer/employee
relations through use of wellness and prevention programs.

         Services provided under the PEP by the Company and/or The Physician
Group include:


<TABLE>
<CAPTION>
Services Provided                                Application
-----------------                                -----------
<S>                          <C>
Comprehensive pre-placement
  physical examinations .    RiskScan computerized health risk analysis with confidential individual analysis for each
                             prospective employee and detailed management reports on overall results; Medical and
                             occupational history for each prospective employee; Physician's examination; Audiometric
                             evaluation; Vision screening; Pulmonary function testing; Submaximal stress electro-
                             cardiogram; Computerized back testing utilizing Isotechnology B-200; Chest X-ray; Complete
                             blood count; Blood chemistry profile including 24 tests for the assessment of internal
                             organ function and coronary risk; Urinalysis.
Comprehensive annual
  physical examinations .    Given in the birth month of the employee, these are identical to the pre-placement physical
                             examinations.
Treatment of work related
  injuries  . . . . . . .    Necessary X-rays; Installation and removal of sutures and other physician diagnostic and
                             treatment services; Tetanus and other prophylactic vaccinations as required; Medications
                             (for pain, infection, etc.); Physical therapy as necessary.
Management analysis
  and reports . . . . . .    A cost-benefit analysis of the program; Projections of utilization of group health
                             benefits; Outpatient costs and associated costs of absenteeism and low productivity;
                             Mortality projections; Site analysis and recommendations for employee health; Public
                             liability and customer injury evaluation; Acute injury management and evaluation;
                             Management and review of occupational injuries; Management and statistical data for
                             occupational cases; Development of a health profile for the client company; Group summary
                             of health risks with comparisons of the client to national statistics.
</TABLE>





                                      -5-
<PAGE>   6
         The Company has developed and refined certain testing and evaluation
procedures that are effective in identifying conditions that indicate a
significant risk of on-the-job injuries and serious health concerns, thereby
avoiding likely high cost treatments attributable to preventable conditions.
The Company intends to continue to identify additional prevention strategies
and health management programs which will increase efficiencies without
compromising quality of care.

PHYSICIAN SERVICES, RECRUITMENT AND DUTIES

        The Company's operating strategy relies heavily upon The Physician Group
obtaining and retaining skilled physicians that have medical management
experience.  Dr. Angle, the President of both The Physician Group and the
Company, has over 16 years experience recruiting and retaining physicians to
staff hospital emergency departments and has operated and overseen one of the
Company's facilities since 1987.  The Physician Group is responsible for the
recruiting of qualified and experienced physicians who understand and will
implement the Company's cost containment strategy, all of whom perform services
for the Company through The Physician Group, but none of whom are employees of
the Company.

         Pursuant to a Practice Management Agreement, as amended, between the
Company and The Physician Group, professional medical services are provided by
physicians and licensed professionals employed by The Physician Group at the
facilities managed by the Company.  The Practice Management Agreement
specifically separates medical services performed by The Physician Group from
non-medical and management services of the Company and employees or independent
contractors of The Physician Group from employees of the Company in order to
comply with the Texas Medical Practice Act.  The Physician Group at all times
exercises full control over the medical services rendered at the facilities and
the Company performs non-medical functions including marketing, management and
administration.  The Physician Group does not delegate to the Company any of
the powers, duties and responsibilities vested in The Physician Group by law as
a professional association.

        Under the Practice Management Agreement, the Company is required to pay
The Physician Group a fee for its services based on certain costs of The
Physician Group.  These costs include any salaries, bonuses and benefits of the
physicians and other expenses excluded as clinic expenses as defined by the
Practice Management Agreement.  The minimum fee is $210,000 per region on an
annual basis.  The Practice Management Agreement does not establish a maximum
fee payable to The Physician Group.  For the year ended June 30, 1996, the
Physician Group generated approximately $2,866,000 of revenues and paid the
Company fees of approximately $1,150,000 for the existing two regions and for
the year ended June 30, 1997 (the "1997 fiscal year"), the Physician Group
generated revenues of approximately $9,005,000 and paid the Company fees of
approximately $3,602,000 for six regions.  Based upon calculations from
historical data and costs associated with administration and management of The
Physician Group, certain excess adjusted gross revenue is paid to the Company as
compensation for services provided under the Practice Management Agreement,
which includes management fees and ancillary revenues from non-medical services.
Based on the Company's own review of The Physician Group's financial statements
and review of all compensation paid by The Physician Group to physicians
affiliated with The Physician Group, the Company believes the arrangements with
The Physician Group are fair and reasonable. Although no independent third party
was retained by the Company to render an opinion as to the fairness and
reasonableness of the terms of the arrangements between the Company and The
Physician Group, such terms were approved by the disinterested directors of the
Company.  The Company anticipates that most, if not all, of its facilities will
be provided medical services by The Physician Group.

         The Practice Management Agreement may terminate under certain
circumstances including by written agreement of the parties; by written notice
given by either party at least 90 days prior to the expiration of the initial
20 year term or any subsequent five year renewal term; upon a change in
majority ownership of The Physician Group or upon the death or disability of
The Physician Group's majority





                                      -6-
<PAGE>   7
shareholder; at the option of one party if the other party becomes insolvent or
fails to perform under the Practice Management Agreement (and fails to cure the
same within a specified period after notice); by the Company if The Physician
Group ceases to legally qualify to provide medical services under the Practice
Management Agreement; or by The Physician Group if the Company fails to remit
any funds to which The Physician Group is entitled.

         The Company recognizes that its success depends on physicians'
delivery of quality medical services that meet or exceed the quality of care
expectations of employees and the expectations of value of the employer.  The
Physician Group has implemented procedures designed to provide cost effective
services to employees of its clients and keep employer clients informed
regarding their employee's progress.  The Physician Group is cognizant however,
that once an employee enters the workers' compensation system, the relationship
between the healthcare provider and the employee assumes paramount importance,
with employers entitled to only limited information and with providers then
being subject to confidentiality restrictions with respect to privileged
patient/physician information.  The Physician Group has implemented a policy
that the attending physician at his or her convenience will telephone the
employer the same day as the employee visit with the results of any
examinations and treatment and provide a report on the employee's physical
status.  A written report regarding the visit is sent to the employer no later
than the next business day following the visit.  The Physician Group requires
that its contracted physicians be available to speak to both the employer and
employee upon reasonable request.

INSURANCE AND INSURANCE RELATED OPERATIONS

         The Company entered the workers' compensation insurance market to
enhance the Company's overall profitability by integrating healthcare
management and insurance services.  The Company believes that market changes
underway in the occupational healthcare industry encourage workers'
compensation insurers to affiliate with healthcare providers and managers, such
as the Company, in an effort to contain costs and to fully align incentives
among healthcare providers, insurance firms, employers and employees.

        EGIG.  The Company previously implemented an arrangement with EGIG, a
subsidiary of Old Republic General Insurance Group, Inc., a company listed on
the New York Stock Exchange with an A+ rating from A.M. Best Company, to develop
and offer a fully-guaranteed cost product, known as Comp2000, that includes The
Physician Group's capitated preventive healthcare services and insurance
underwritten by Old Republic General Insurance Group.  EGIG test marketed the
Comp2000 product on a trial basis to prospective clients during the latter part
of the 1996 fiscal year, but no sales were made as a result of the test
marketing.  Under the Company's arrangement with EGIG with respect to the
Comp2000 product, as originally conceived and test marketed, The Physician Group
would have provided medical services and the Company would have provided other
non-medical services (e.g., ergonomic work site evaluations) while EGIG would
have provided risk management, claims administration and other administrative
services.  Each party would have maintained independent control of all financial
books and records, and neither party would have shared in the revenues
attributable to those services provided by the other.  Accordingly, the Company
would not have participated in the revenue stream generated by premiums charged
for workers' compensation insurance.

         RMAC.    The Company viewed the initial arrangement with EGIG as an
interim step to the acquisition and initiation of operations by an insurance
subsidiary, which would allow the Company to participate in the underwriting
risk of workers' compensation insurance and to share in premium revenues.
Effective June 30, 1996, the Company acquired all of the outstanding capital
stock of Montfort Insurance Company located in Lubbock, Texas for $687,010
cash.  The Company renamed the acquired subsidiary





                                      -7-
<PAGE>   8
Risk Management Assurance Corporation ("RMAC").  Prior to the acquisition, RMAC
was a dormant multi-line insurance company domiciled and licensed in Texas.

        Since its acquisition, RMAC has focused on establishing relationships
with established issuing carriers of workers' compensation insurance and
independent agents, including EGIG, to design insurance products which are
unique and respond to opportunities in the highly competitive insurance
marketplace.  By relying on companies, including EGIG, experienced in the
workers' compensation insurance market, RMAC may not be required to
independently estimate reserve requirements and, in this respect, will be in
effect relying upon the past claims experience of the issuing carrier.
Guaranteed cost workers' compensation insurance policies may be either (i)
policies whereby the employer purchases an insurance policy written by the
insurer and pays a premium based on the employer's aggregate payroll, and the
insurers (including RMAC, to the extent of its reinsurance) assume
responsibility for all indemnity and medical costs associated with injuries and
manage the employer's entire workers' compensation program, including all
expenses related to workplace injuries, or (ii) policies with a higher
deductible, under which the employer is responsible for all medical and
indemnity expenses up to a specific dollar amount, while the insurers are
responsible for medical and indemnity expenses over this level.  RMAC intends to
become a participant in the workers' compensation risk by reinsuring a layer of
losses corresponding to the medical and indemnity costs of a primary care level
of losses.  The policy issuing company will retain losses above the reinsurance
assumption by RMAC.

        Rigorous price competition for workers' compensation insurance products
has delayed RMAC's entry into the insurance market to date.  Management has
taken a conservative underwriting approach to a market in which inadequate
pricing on some classes of business is predicted.  RMAC is continuing to develop
a superior program which will be available when opportunities for its
introduction to the market appear.

AFFILIATIONS, JOINT VENTURES AND ACQUISITIONS

         In addition to establishing new facilities, the Company is expanding
geographically in areas contiguous to existing markets in order to increase its
market penetration and market share within areas in which a patient base is
currently served through affiliations, joint ventures and acquisitions.  To the
extent permitted by applicable law, the Company pursues affiliations, joint
ventures and acquisitions with physicians, hospitals and other providers which
have established occupational medicine practices or with patient bases which
can be served in an occupational medical setting.  In a typical transaction,
The Physician Group acquires the medical practice of a physician or group of
physicians (the "Physicians") and the Company acquires the physical assets of
the practice, including equipment and the facility, as well as the right to
manage the practice pursuant to the Practice Management Agreement.  See "Item
1.  Description of Business - Physician Services, Recruitment and Duties."

         During the year ended June 30, 1996 (the "1996 fiscal year"), the
Company and The Physician Group acquired the assets, or all outstanding capital
stock, of occupational medicine practices in Lancaster, Texas, a suburb of
Dallas, and Baytown, Texas, a suburb of Houston.  In the 1997 fiscal year, the
Company and The Physician Group acquired all of the outstanding capital stock
of an occupational and family medicine practice in El Paso, Texas and of an
occupational medicine and family medicine practice in Carrollton, Texas (a
suburb of Dallas) and also acquired the assets of a practice in Fort Worth,
Texas.  The Company and The Physician Group financed these transactions through
the issuance of the Company's Common Stock, options to purchase Common Stock,
payment of cash and/or delivery of secured promissory notes.  Simultaneously
with each transaction, the Company and The Physician Group entered into an
addendum to the Practice Management Agreement to provide that the Company has
the sole right to manage the newly acquired practices for a minimum of ten
years in accordance with the terms and conditions of the existing Practice
Management Agreement.  Each of the Physicians who





                                      -8-
<PAGE>   9
previously owned the acquired practices entered into a standard physician
employment agreement with The Physician Group to perform as a Staff Physician
for standard compensation rates and into the standard Regional Medical Director
employment agreement to serve as Regional Medical Director of the newly
acquired practice.  The Company has implemented its cost containment and other
methods of operation at all of its facilities, including these newly acquired
facilities.

         In June 1995, the Company and St. Vincent Infirmary Medical Center
("St. Vincent") established a facility to provide occupational medical services
in the Little Rock, Arkansas metropolitan area.  Under the agreement with St.
Vincent, the Company owns 50% of the ownership interest of a limited liability
company known as HealthFirst Center, L.L.C. ("HealthFirst") and receives a
monthly minimum management fee based upon a minimum number of hours for
management of the operations of HealthFirst's facility, together with a
specified percentage of gross and net revenues, which relate to the provision
of non-physician services and having no relation to any referral of employers.
St. Vincent owns the remaining 50% interest and is responsible for all costs of
operation of HealthFirst.  After repayment of the initial capitalization of
$500,000 which is being provided by St. Vincent, the Company and St. Vincent
will receive equal distributions of any profits generated by the joint venture.
The Company has no obligation to repay any portion of the $500,000 invested by
St. Vincent if the joint venture is unsuccessful.  At June 30, 1997, the
Company had outstanding a loan in the amount of $30,000 from St. Vincent to
purchase medical equipment and establish operations of the Little Rock facility
prior to the formation of HealthFirst and had receivables owed from HealthFirst
of $96,000 for management fees, $30,000 for the equipment provided and $49,000
for advances to assist in funding operations.

         In December 1994, the Company entered into a letter of intent with a
software development company to develop and market through a joint venture a
medical practice management information system, including a clinic management
system which would provide an electronic patient clinical record and enhanced
medical quality control functions.  The Company was granted a perpetual license
of software developed pursuant to the letter of intent, although the software
development company retained ownership thereof.  The Company is currently using
software developed pursuant to the letter of intent, but the parties are not
currently anticipating entering into a joint venture.

MARKETING AND SALES

         The Company currently targets employers that employ between 50 and
1,500 workers and either operate in industries with relatively high workers'
compensation costs, such as manufacturing, wholesale, healthcare or hospitality
firms, or have higher than average claims experience for their industries.
These target employers are often in state sponsored assigned risk pools or, in
the State of Texas, may be self-insured.  No one customer represents more than
5% of total revenues.

         The Company's officers and sales and marketing personnel are
principally responsible for marketing.  Sales and marketing personnel are
compensated through salaries plus commission based upon revenues generated by
corporate clients.  The Company's marketing is currently done on a direct basis
to employers and such efforts are frequently directed toward time periods
during which employers make decisions concerning renewal of existing
relationships with managed care providers, health maintenance organizations or
other competitors.

        Marketing efforts are continued after a client has retained the services
of the Company and the Physician Group.  The Physician Group requires its
physicians to engage in follow-up contacts with an employer on the same day of
an employee's visit and requires physicians to provide routine reports to
employers concerning an employee's medical status and availability for work.
The Company also monitors employee satisfaction concerning the services provided
through follow-up audits and questionnaires.





                                      -9-
<PAGE>   10
        The Company's arrangement with EGIG for the Comp2000 product is
representative of the proposed future marketing strategy for RMAC.  In the State
of Texas, EGIG markets its insurance products through in-house insurance
representatives and independent insurance agencies.  RMAC intends, at the time
operations commence to utilize the companion sales concept, with representatives
of EGIG selling the insurance product.  RMAC anticipates that other joint
marketing arrangements will be established with the issuing carriers in order to
expand the Company's existing customer base and thereby increase the number of
employees utilizing the Company's services.

COMPETITION

         The occupational and industrial healthcare market is highly
competitive, with a large number of competitors.  The Company competes with
numerous firms, including occupational healthcare firms and networks, national
and regional managed care providers, HMOs and in-house corporate medical
departments.  The Company also competes with numerous smaller firms, networks,
hospitals and providers which offer services on a local level.  Several large
workers' compensation insurance carriers offer managed care services for their
insurance customers either through the insurance carrier's own personnel or by
outsourcing various services to regional and national providers.  The Company
currently recognizes OccuSystems,Inc., CRA Managed Care, Inc., Atlantic Health
Group, U.S. Healthworks and Meridian, among others, as competitors in its
existing markets.

        With respect to recruiting physicians, nurses and therapists experienced
in occupational and industrial healthcare, The Physician Group and the Company,
as applicable, compete with the same entities listed above.  The Physician Group
has from time to time experienced difficulty in recruiting physicians with
experience in occupational and industrial healthcare.  The loss of existing
physicians, nurses or therapists, or the inability to attract similarly
qualified individuals, could adversely impact the Company's business.

        Once active, RMAC will compete with a wide variety of entities,
including large insurance companies, managed healthcare companies,
state-sponsored insurance pools and risk management consultants, and companies
in the occupational healthcare market who may enter the workers' compensation
insurance business. Changes in workers' compensation regulations, or increases
in permissible premium rates, may encourage entry of competitors into markets in
which RMAC will be active, which in turn may have a material adverse effect on
RMAC's operations.

REGULATION

        General.  The Company's business is conducted within a highly regulated
environment, in both the insurance and healthcare areas.  The Company's
activities are regulated primarily at the state level, so the Company must
comply with differing regulatory requirements in each state in which it does
business.  The Company believes that its operations are in material compliance
with all applicable regulatory requirements.  However, there is no assurance
that any regulatory determinations or court decisions will not adversely impact
the operations of the Company, RMAC or The Physician Group or require the
Company to restructure its operations.  Moreover, violations of federal or state
statutes could result in the imposition of substantial civil and/or criminal
penalties on the Company or its officers.  Laws and regulations change
frequently and any change could negatively or positively affect demand for the
Company's services, could reduce revenues or may decrease the Company's ability
to compete effectively.

         Workers' Compensation Regulation.  Workers' compensation laws
establish an employee's right to compensation and benefits related to
work-caused injuries or disease and impose a wide range of





                                      -10-
<PAGE>   11
obligations upon employers.  Under these laws, employers are required to assume
financial responsibility for medical costs, a portion of lost wages and related
legal costs of work-related disease and injuries.  These laws also prohibit
employers from imposing co-payments or deductibles on employees and, in some
states, restrict the employers' rights to exclusively select healthcare
providers.  Workers' compensation laws typically establish the methods and
procedures which providers may employ in treatment programs and the maximum
fees charged by providers.  Management estimates approximately 38% of the
Company's revenues in the 1997 fiscal year were subject to state-mandated fee
schedules prescribing maximum reimbursable amounts for designated medical
procedures provided by The Physician Group.

         In several states, the number of workers' compensation claims and the
cost per claim have recently decreased, which has caused premium rate
reductions for workers' compensation insurance.  The Company believes that
these decreases are due principally to not only legislative reform, but to
better management and control of claim costs by insurance companies and other
payors, and improved risk management by employers.  If declines in workers'
compensation costs occur in states in which the Company conducts business and
persists over the long-term, such declines may have an adverse impact on
results of operations for the Company and RMAC, to the extent RMAC is actively
engaged in operations.

         Corporate Practice of Medicine and Other Laws.  Most states have
enacted laws limiting the practice of medicine to licensed individuals or
professional organizations comprised of licensed individuals.  Many states also
regulate the relationship between business entities such as the Company and
licensed professionals and professional associations or corporations, such as
The Physician Group, particularly with respect to fee-splitting between a
licensed individual and a non-licensed individual or entity.  These laws differ
widely from state to state as do interpretations by courts and regulatory
agencies.  Under the Texas Medical Practice Act, only physicians licensed by
the Texas State Board of Medical Examiners may practice medicine in Texas.
Texas law prohibits a person from aiding or abetting, directly or indirectly,
the practice of medicine by any person, partnership, association, or
corporation not duly licensed to practice medicine.  Accordingly, the Texas
courts have held that a corporation comprised of non-licensed individuals which
employs (or the practical equivalence of employment such as a contractual
relationship) licensed physicians to treat patients and which receives a fee is
unlawfully engaging in the practice of medicine.  For this reason, the Company
and Physician Group entered into the Practice Management Agreement, under which
the Company only provides non-medical services.  The Company has no right to
any portion of The Physician Group's profits derived from medical practice, no
right to trade and commercialize on any physician's license, and no right to
select medical staff in The Physician Group.  The Company cannot arrange for
the procurement of capitated physician services and cannot treat or diagnose
any medical condition.

         Anti-Referral and Fraud and Abuse Laws.  Both federal and state laws
have been enacted covering the payment of remuneration to induce or in return
for (i) referral of Medicare or state health program patients, (ii) patient
care opportunities, or (iii) the purchase, lease or order of items or services
covered by Medicare or state health programs.  The State of Texas has enacted
such a statute which applies to all payors, not just federal or state payors,
and which, to the Company's knowledge, has not yet been interpreted by any case
law.  Since The Physician Group receives no state or federal funds, it is not
subject to the federal laws; however, Texas state law nevertheless applies.
Although certain of the services provided by The Physician Group affiliated
with the Company may be subject to the Texas statute, the Company believes its
arrangements with The Physician Group in Texas and the employment agreement
with Dr. Angle will comply with the "personal services and management contract"
and/or employment agreement safe harbors promulgated under applicable federal
law.  More specifically, the Practice Management Agreement is in writing,
signed by the parties, and specifies the services to be provided by the
Company.  In addition, the term of the Practice Management Agreement is for at
least one year and the aggregate compensation paid to the Company over the term
of the Practice Management Agreement





                                      -11-
<PAGE>   12
is set in advance, is consistent with fair market value in arm's-length
transactions (as determined in the judgment of the disinterested directors of
the Company voting on the terms of the Practice Management Agreement) and is
not determined in a manner that takes into account the volume or value of any
referrals or business otherwise generated between the parties for which payment
may be made in whole or in part under Medicare or a state health care program
or any other circumstances.  The Company did not secure an independent
determination of the fairness and reasonableness of the terms of the Practice
Management Agreement.  Finally, the services performed under the Practice
Management Agreement do not involve the counseling or promotion of a business
arrangement or other activity that violates any state or federal law.  Dr.
Angle's employment contract is a legitimate bona fide employment relationship
wherein he provides services for a salary.  In January 1995, certain
anti-referral provisions became effective which prohibit physicians with an
ownership or financial interest (as defined) in an entity from engaging in
certain business with that entity or referring a patient to that entity for the
provision of certain designated medical services.  Several states are
considering similar legislation.  The State of Texas has adopted an
anti-referral law which provides that, if the Company refers a patient to an
entity in which the physicians affiliated with The Physician Group have an
interest, the Company could be subject to penalties associated with a Class A
misdemeanor which may include a fine of up to $4,000 and/or imprisonment of up
to one year for each violation.  The Company does not make referrals that
management considers would be subject to this prohibition.

        HMO Regulation.  A number of states have varying definitions of HMOs and
similar entities and different licensure requirements with respect to them. The
Company believes that its current operations in Texas and Arkansas do not
constitute it as an HMO under applicable state insurance laws or regulations. It
will be necessary for the Company to comply with the laws and regulations of
each state in which it has a facility with respect to HMOs.  In the event that a
state in which the Company has established operations should change its laws and
regulations or interpret such laws and regulations so as to constitute the
Company as an HMO, or should a state in which it has such operations assert that
the Company is an HMO under existing laws and regulations, the Company may be
unable to continue operations in that state unless and until it complies with
applicable laws and regulations, the cost of which could be prohibitive.

         A number of the Company's customers now utilize the Preferred Employee
Plan ("PEP"), a capitated plan under which a variety of services are provided
through The Physician Group.  At the time the Company entered into contracts
with its existing customers who utilize the PEP, the Company believed that
because it was substantially controlled by Dr. Angle and two former directors
of the Company who are also physicians, the PEP could be provided through the
Company.  The Company's healthcare counsel has recommended that the Company
amend its contracts with its PEP customers to clarify that all medical services
will be provided by The Physician Group and that The Physician Group enter into
and market capitated plans in the future.  The Company has not yet obtained
signed amendments from its PEP customers.  Failure to obtain any amendment
could result in a finding that the Company was offering or arranging for a
capitated plan, which in turn could cause the Company to be classified as an
HMO under Texas law.  The Company intends to obtain the necessary addendums to
its PEP contracts and expects it will be successful in so doing.  Nonetheless,
should the Company be classified as an HMO under Texas law, it could be subject
to fines, administrative regulation, additional licensing requirements and
substantial additional costs of operation.

         Healthcare Reform.  Although no national healthcare reform proposal
has been enacted to date, increasing healthcare costs have precipitated various
proposals for reform of the healthcare industry.  One such proposal involves
combining traditional employer-sponsored health plans with workers'
compensation coverage to provide a single insurance plan for work related and
non-work related healthcare.  While the Company's development of the joint
marketing arrangement with EGIG and the acquisition of RMAC





                                      -12-
<PAGE>   13
were undertaken to address the changing occupational and industrial healthcare
market, there is no assurance the Company will be successful in developing
products and services which will address market requirements or that healthcare
reform will not adversely affect the Company's operations.

         Many states are considering, or have recently enacted, legislation
reforming workers' compensation laws.  Such reforms include the ability of
employers to designate health plans such as HMOs and PPOs to cover workers'
compensation claimants and provisions to control medical costs associated with
workers' compensation claims.  The federal government and at least one state
currently provide for a "reasonableness" review of medical costs paid or
reimbursed by workers' compensation.

         Environmental.  The Company is subject to various federal, state and
local statutes and ordinances regarding the disposal of infectious waste.
Violations of applicable infectious waste laws may result in the imposition of
penalties and fines or the closure of a facility.  As with other regulatory
issues, the Company believes it is in compliance with applicable law.

         Insurance Industry Laws.  RMAC must comply with state insurance laws
and regulations in each state in which it becomes licensed.  Currently, it is
subject to the Texas insurance laws and regulations, which are administered by
the Texas Department of Insurance and the Texas Workers' Compensation
Commission.  All state regulatory agencies have broad administrative power with
respect to insurance operations, including the establishment of premium rates,
benefit levels, preparation of policy forms, dividend payments, capital
adequacy and the amount and type of investments.  In Texas, the State Board of
Insurance ("Board") must approve all rates charged by RMAC and regulates RMAC's
insurance plans and policy forms.  As a reinsurer, however, many of the Board's
regulations do not apply to RMAC.  Further, Texas law requires a workers'
compensation insurer to maintain minimum capital reserves and to provide year
end reports of the calculation of the minimum capital reserves for review by
the Board.  Under Texas law, the maximum amount of dividends that can be paid
by RMAC to the Company without authorization by the Commissioner of Insurance
of Texas in any year is equal to the greater of (i) 10% of RMAC's statutory
surplus as of the 31st day of December next preceding or (ii) the statutory net
income from operations of RMAC for the 12-month period ending the 31st day of
December next preceding, but shall not include pro-rata distributions of any
class of RMAC's own securities.

EMPLOYEES

        The Company had 103 full-time and 20 part-time employees as of June 30,
1997, all of whom provided non-physician services.  Of the Company's employees,
approximately 53 are administrative staff, 54 are paramedical staff, four are
sales and marketing personnel and 12 are corporate personnel.  Additionally, as
of June 30, 1997, the Company was contracting through The Physician Group for
the services of 12 full-time and 32 part-time physicians.  None of the Company's
employees are subject to collective bargaining agreements.  The Company believes
its employee relations are good.

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

         The statements contained in this report that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
statements regarding the Company's expectations, hopes, intentions or
strategies regarding the future.  All forward-looking statements included
herein are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements.  It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements.  Among the
factors that could cause actual results to differ materially are the risk





                                      -13-
<PAGE>   14
factors which may be listed from time to time in the Company's reports on Form
10-QSB, 10-KSB and registration statements filed under the Securities Act.
Forward-looking statements encompass the (i) expectation that the Company can
secure additional capital, (ii) expected initiation of operations of RMAC and
its ability to enter into quota sharing arrangements with issuing carriers,
(iii) continued expansion of the Company's operations through joint ventures and
acquisitions, (iv) success of existing and new marketing initiatives undertaken
by the Company, (v) retention of physicians through The Physician Group and
success in generating revenue increases through the retention of such physicians
and an increase in their practices, (vi) success of the Company, in cooperation
with The Physician Group, in concluding acquisitions at prices which permit the
Company to achieve reasonable rates of return on such acquisitions, (vii)
success in expanding service to regional and national customers which can be
serviced through existing facilities or additional facilities, and (viii)
success in controlling the cost of services provided and general administrative
expenses as a percentage of revenues.

         The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties.  These
forward-looking statements were based on assumptions that the Company would
continue to expand, that capital will be available to fund the Company's growth
at a reasonable cost, that competitive conditions within the industry would not
change materially or adversely, that demand for the Company's services would
remain strong, that there would be no material adverse change in the Company's
operations or business, and that changes in laws and regulations or court
decisions will not adversely or significantly alter the operations of the
Company.  Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive, regulatory and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of
the Company.  Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
information will prove to be accurate.  In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.





                                      -14-
<PAGE>   15
ITEM 2.  DESCRIPTION OF PROPERTY

         The Company currently manages a facility in Little Rock, Arkansas,
which is owned by HealthFirst, a joint venture with St. Vincent.  The space for
the facility is provided by St. Vincent and the Company currently has no lease
obligation.  The following tabulates certain information with respect to the
other facilities currently leased by the Company.

<TABLE>
<CAPTION>
                                                          Current
                                             Square       Monthly                                    Lease
         Location                            Footage       Rental              Lessor               Expiration
----------------------------                 -------     ---------         --------------           ----------
<S>                                       <C>                        <C>                              <C>
Executive Offices                             3,172     $  4,433     Dominion Oil & Gas               02/28/99
  5215 North O'Connor, Ste. 1800                                     Corporation (1)
  Irving, Texas 75039

Accounting Offices                            2,890     $  2,047     Westwood Crown Partners,         10/31/99
  1850 Crown Drive, Suite #1114                                      Ltd.
  Farmers Branch, Texas  75234

  9500 Forest Lane, Ste. 110                  5,701     $  6,012     Dallas Forest Park               12/31/00
  Dallas (Garland), Texas 75243                                      Corporation

  8585 Stemmons Freeway                       8,163     $ 10,221     Twin Towers Investment           01/31/02
                                                                                                              
  Dallas, Texas 75247                                                Partnership

  1200 East Copeland, Ste. 100                7,352     $  7,757     AGF Stadium Place, Ltd.          7/30/00
  Arlington, Texas 76011

  2205 E. 70th Street, Suite 200              4,844     $  4,440     Dr. Nabil A. Mouffarej and       6/30/98
  Shreveport, Louisiana                                              and Hanan T. Mouffarej

  4308 Garth Road                             4,943     $  4,943     San Jacinto Methodist            12/31/99
  Baytown (Houston), Texas 77521                                     Hospital (1)

  2700 W. Pleasant Run Road                   2,976     $  3,472     Columbia HCA Hospital            8/31/00
  Lancaster (Dallas), Texas 75146

  1865 Lee Trevino(2)                         4,100     $  5,788     Francisco J. Guerra, M.D./       8/20/06
  El Paso, Texas 79936                                               Henry H. Calderoni. M.D.

  4775 S. Felix Street                        4,385     $  4,020     HCT Management &                 3/31/01
  Fort Worth, Texas 76115                                            Ventures Company

  2100 N. Main Street, Suite 300              6,800     $  5,000     Rudd Properties                  3/14/03
  Fort Worth, Texas 76106

  3604 Beltline Road                         10,000     $  8,743     Quad Corners Investments,        9/30/06
  Dallas, Texas 75234                                                Ltd., a Texas Limited
                                                                     Partnership
</TABLE>
_________________________
(1) Subleased from the named party.
(2) The physicians from whom this practice was acquired are contractually
    obligated to enlarge these facilities at their own expense and the Company
    has committed to lease the additional facilities at an initial rate
    calculated to provide an internal rate of return on investment of 15% to
    the Physicians, but not less than $16.00 per square foot.  The Company will
    have final approval of the design and scope of the improvements, the
    contractor retained and the cost of the improvements.





                                      -15-
<PAGE>   16
ITEM 3.  LEGAL PROCEEDINGS

         No material legal proceedings to which the Company (or any of its
directors and officers in their capacities as such) is party or to which
property of the Company is subject is pending and no such material proceeding
is known by management of the Company to be contemplated.



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

        No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the 1997
fiscal year.





                                      -16-
<PAGE>   17
                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company's Common Stock and Warrants have been quoted on The Nasdaq
SmallCap Market under the trading symbols CDOC and on the Boston Stock Exchange
under the symbol CDR since the Company's initial public offering in February
1996.  The following table sets forth the range of high and low closing prices
of the Company's Common Stock and Warrants, as reported by The Nasdaq Stock
Market, from February 7, 1996 through March 31, 1997.  The prices set forth
below reflect interdealer quotations, without retail markups, markdowns or
commissions, and do not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                                      COMMON STOCK                WARRANTS    
                                                                     ------------------       ---------------- 
        1996 FISCAL YEAR:                                             HIGH         LOW         HIGH       LOW
                                                                     ------       -----       ------    ------
        <S>                                                          <C>          <C>         <C>       <C>
         Third Quarter (commencing February 7, 1996)  . . . . . .    $ 10.25      $ 8.50      $ 3.50     $2.25
         Fourth Quarter   . . . . . . . . . . . . . . . . . . . .      10.87        9.37        4.25      3.00

        1997 FISCAL YEAR:
        First Quarter   . . . . . . . . . . . . . . . . . . . . .    $ 10.00      $ 8.87      $ 4.00    $ 3.12
        Second Quarter  . . . . . . . . . . . . . . . . . . . . .       8.87        5.87        3.12      1.50
        Third Quarter   . . . . . . . . . . . . . . . . . . . . .       6.50        5.50        1.62      1.00
        Fourth Quarter  . . . . . . . . . . . . . . . . . . . . .       6.00        3.50        1.00       .50
</TABLE>

         The last reported sale price of the Common Stock on September 23, 1997
was $3.69 per share.  The last reported sale price of the Warrants on September
23, 1997 was $.44 per Warrant.  The number of record holders of the Company's
Common Stock was approximately 93 on September 23, 1997.

         Holders of Common Stock are entitled to receive such dividends as may
be declared by the Company's Board of Directors.  No dividends on the Common
Stock have been paid by the Company, nor does the Company anticipate that
dividends will be paid in the foreseeable future.

         As reflected in the price quotations above, there have been
significant price fluctuations in the Company's Common Stock and the Warrants.
Factors that may have caused or can cause market prices to fluctuate include
any purchase or sale of a significant number of securities during a relatively
short time period, quarterly fluctuations in results of operations,
announcements of new facilities, issuance of additional securities,
registration of securities and entrance of such securities into the public
float, market conditions specific to the Company's industry and market
conditions in general.  In addition, in recent years the stock market in
general has experienced significant price and volume fluctuations.  These
fluctuations, which may be unrelated to the operating performance of specific
companies, have had a substantial effect on the market price for many small
capitalization companies such as the Company.  Factors such as those cited
above, as well as other factors that may be unrelated to the operating
performance of the Company, may adversely affect the price of the Common Stock
and the Warrants.

        During the 1997 fiscal year, the Company filed two registration
statements under the Securities Act.  One registration statement, effective
April 10, 1997, covered 502,227 shares of Common Stock.  The other registration
statement, effective August 12, 1997, covered 400,000 redeemable Warrants to
purchase Common Stock (the "Warrants") and the 400,000 shares of Common Stock
(the "Warrant Shares") issuable upon exercise of the Warrants.  One of the
registration statements was primarily for the benefit of the Physicians who
acquired an aggregate of 498,417 shares of Common Stock in connection with the
sale





                                      -17-
<PAGE>   18
of their medical practices to The Physician Group and the addition of such
practices to the management portfolio of the Company.  To reduce the volatility
that the sale of a significant number of shares in a relatively short time
period could have on the market, each Physician agreed to restrict the number
of shares he would sell in any given month until February 28, 1998, at which
time the restriction will terminate.  As a result of such restrictions, sales
by the Physicians during any month from April 10, 1997 to February 28, 1998
should not exceed approximately 41,000 shares.  The Warrants were issued to
HealthCare Financial Partners-Funding II, L.P. ("HCFP") in April 1997 in
connection with certain credit facilities made available by an affiliate of
HCFP to the Company and were issued on terms and conditions which are identical
to the redeemable Common Stock purchase warrants which were issued in the
Company's initial public offering in February 1996.  There are no restrictions
on the sale of the HCFP Warrants.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion should be read in conjunction with the Financial
Statements and notes thereto.

OVERVIEW

        The Company derives its revenues primarily from the management of
eleven physician practices engaged in the diagnosis and treatment of
work-related injuries and illnesses and from non-injury related services such
as employment- related physical examinations, drug and alcohol testing,
functional capacity testing and other related programs.  During the 1997 fiscal
year, the Company derived approximately 41% of its revenues from management of
eleven practices which were providing services for work-related injuries and
illnesses.  The remaining 59% of the Company's revenues were derived from
management of practices which were providing non-injury related medical
services.  The Company's consolidated results of operations reflect the
revenues generated by The Physician Group and the costs associated with the
delivery of the Company's management services, including physician fees,
benefits and malpractice insurance premiums, and the expenses of RMAC.  See
"Item 7. Financial Statements, Note 8."

        The Physician Group currently acts as the primary caregiver providing
quality healthcare in an efficient and cost-effective manner and the Company
serves as the gatekeeper for the majority of claims experienced by its employer
clients.  At such time as RMAC enters the workers' compensation insurance market
by participation as a reinsurer of insurance policies issued by other workers'
compensation insurers, the Company's concept of unity of the health care
delivery system will be complete.  This concept is based upon the Physician
Group providing medical services, the Company providing management of the
practices and facilities, while RMAC and/or the issuing carrier will provide
risk management, claims administration and other insurance related services.

RESULTS OF OPERATIONS

        In February and May of 1996, the Company and The Physician Group
acquired a practice in Lancaster, Texas and one in Baytown (Houston), Texas,
respectively.  In June of 1996, the Company acquired an insurance subsidiary
now known as RMAC.  In July of 1996 the Company and The Physician Group
acquired practices in El Paso, Texas and the Dallas Beltline clinic.  The
Company's Central Fort Worth, Texas clinic was acquired in August of 1996.  The
table on the following page sets forth certain consolidated financial data as a
percentage of total revenues for each of the two years ended June 30, 1996 and
1997.





                                      -18-
<PAGE>   19
<TABLE>
<CAPTION>
                                              PERCENTAGE OF REVENUES
                                                  FOR THE YEARS
                                                  ENDED JUNE 30,      
                                              ----------------------- 
                                                1996           1997  
                                              --------       --------
<S>                                           <C>            <C>
Revenues  . . . . . . . . . . . . . . .        100.0%          100.0%

Cost of services provided . . . . . . .         34.2            49.5
General and administrative  . . . . . .         60.5            54.1
Marketing expenses  . . . . . . . . . .          2.3             2.7
Development/acquisition costs . . . . .          4.8             2.8
                                                                   
                                              ------          ------
  Total costs and expenses  . . . . . .        101.8           109.1
                                              ------          ------
Income (loss) from operations . . . . .         (1.8)           (9.1)
Other income (expense)  . . . . . . . .
  Interest income . . . . . . . . . . .          3.3             2.7
  Interest expense  . . . . . . . . . .         (1.9)           (4.4)
                                              -------         ------
Net income (loss) pre-tax . . . . . . .         ( .4)%         (10.8)%
                                              =======         ====== 
Income tax benefit (expense)  . . . . .          2.4            (1.2)
Net income (loss) . . . . . . . . . . .          2.0%          (12.0)%
                                              ======          ====== 
</TABLE>

Comparison of Fiscal Years Ended June 30, 1996 and 1997.

        Revenues.  Revenues increased $6,840,000 or 163.1%, from $4,194,000 in
the 1996 fiscal year to $11,034,000 in the 1997 fiscal year.  This growth is
attributable primarily to four major factors:  (i) improved marketing efforts to
capture additional market share, resulting in new clients at both the
established and new practices, (ii) marketing of additional services at several
of the facilities, (iii) development of existing practices, and (iv) the
addition of new practices to its management portfolio in the 1997 fiscal year.
The five acquired practices collectively generated revenues of $6,124,000, or
55.5% of the total revenues in the 1997 fiscal year and $372,000, or 8.9% of
revenues in the 1996 fiscal year.  For "same-store" comparison practices,
revenues increased 31.0% at the Dallas practice, 24.7% at the Shreveport
practice and 4.3% at the Arlington practice, but decreased 3.4% at the Garland
practice, from the 1996 fiscal year to the 1997 fiscal year.  The Company opened
a clinic in South Fort Worth, Texas in April, 1996 with nominal revenues from
that clinic in the 1996 fiscal year and revenues of $578,000 in the 1997 fiscal
year.  Assuming that the three new practices acquired in 1997 had been managed
by the Company during the 1996 fiscal year, unaudited proforma information
indicates that revenues for the 1996 fiscal year would have been $9,145,000 as
compared to $11,034,000 of actual revenues of the Company in the 1997 fiscal
year.

        Cost of Services.  Cost of services provided increased 281.1% from
$1,433,000 in the 1996 fiscal year to $5,461,000 in the 1997 fiscal year, with
cost of services provided as a percentage of revenues increasing from 34.2% in
the 1996 fiscal year to 49.5% in the 1997 fiscal year.  The cost of services
includes approximately $2,688,000 compensation paid to physicians under the
Practice Management Agreement and other medical personnel costs and expenses
such as pharmacy costs, physical therapy costs, lab fees, and medical supplies.
The increase was primarily due to minimum compensation guarantees for selling
physicians, increased physical therapy costs, additional staff physician
requirements, and a change in the cost structure related to the addition of a
family practice revenue component.  During the third quarter of the 1997 fiscal
year, the Company instituted a cost reduction plan.  One specific goal was to
reduce the cost of services provided as a percentage of revenues.  Accordingly,
the plan included restructuring by The Physician Group of several physician
contracts and consolidation of the Company's vendor relationships.  The five
newly acquired medical practices accounted for $3,064,000, or 56.1% of the cost 
of services provided in the 1997 fiscal year, which as a percentage of revenues 
was 27.8% in the 1997 fiscal year.





                                      -19-
<PAGE>   20
        General and Administrative Expense.  General and administrative expense
increased 134.7% from $2,537,000 in the 1996 fiscal year to $5,954,000 in the
1997 fiscal year.  The general and administrative expenses as a percentage of
revenues decreased 6.5%, from 60.5% of revenues in the 1996 fiscal year to
54.0% of revenues in the 1997 fiscal year.  This decrease was due primarily to
an improved ratio of administrative salaries relative to revenue.  Total
general and administrative payroll was $1,305,000 or 31.1% of revenue in the
1996 fiscal year compared to $1,729,000 or 15.7% of revenue in the fiscal year
ended 1997.  In addition to the improvement in salaries, other general and
administrative expenses targeted to be reduced in the Company's cost reduction
program include, but are not necessarily limited to, computer expenses,
consulting fees, payroll, printing, outside services, and travel.

        Marketing.  Marketing expenses increased from $95,000 in the 1996
fiscal year to $299,000 in the 1997 fiscal year, and increased as a percentage
of revenues from 2.3% to 2.7 %. The rise in marketing expense is attributed to
the Company's expansion into new markets and is expected to continue to rise in
future periods as the Company expands in both its existing and new markets,
begins marketing insurance products, and expands the services provided in its
practices.

        Development and Acquisition Costs.  The Company had $202,000 in
development and acquisition costs late in the 1996 fiscal year as compared to $
313,000 in the 1997 fiscal year, or 4.8% of revenues in the 1996 fiscal year
and 2.8 % of  revenues in the 1997 fiscal year.  These costs were attributable
to the search for physicians with established occupational medicine practices
or patient bases which could be served in an occupational medical setting, the
negotiations to add such practices to the Company's management portfolio and
the development of RMAC.  As part of the cost reduction program, the Company
eliminated several staff positions in the business development area and in RMAC
in an effort to better align costs with near term opportunities.

        Interest Expense and Interest Income.  Interest expense increased
478.3% from $83,000 in  the 1996 fiscal year to $480,000 in the 1997 fiscal
year.  As a percentage of revenues, interest expense was 1.9% in the 1996
fiscal year and 4.4 % in the 1997 fiscal year.  A significant amount of the
Company's indebtedness was incurred late in the 1996 fiscal year and early in
the 1997 fiscal year in connection with the addition of five practices to its
management portfolio and the interest payable in connection with notes issued
as partial consideration for these practices.  The Physicians received as
partial consideration an aggregate of $2,144,000 in cash and $3,694,000 in
principal amount of promissory notes with interest ranging from 8.5 % to 9.5 %,
the principal of which was due at dates ranging from April 15, 1997 to May 15,
1998.  The majority of the debt to the Physicians was refinanced with the
proceeds of the HCFP financing completed on April 15, 1997.  See - "Liquidity
and Capital Resources".  The Company had $139,000 of interest income in the
1996 fiscal year and $300,000 of interest income in the 1997 fiscal year.
Interest income during both fiscal years was primarily attributable to
investment of proceeds of the Company's initial public offering in
interest-bearing obligations and the interest bearing investments held by RMAC.
As the Physicians connected with the five new practices received a portion of
their consideration in cash, the Company's investment income declined.  As a
percentage of revenues, interest income was 3.3% in the 1996 fiscal year and
2.7% in the 1997 fiscal year.

        Net Income or Loss.  As a result of the factors described above, the
Company had a net loss before income tax of approximately $1,173,000 in the 1997
fiscal year as compared to a net loss before income tax of $17,000 in the 1996
fiscal year.  In the 1997 fiscal year, net loss after income tax expense (which
included a $275,000 impairment of the deferred tax asset and a total income tax
expense of $127,000) was $1,300,000 as compared to net income of $83,000 after
the income tax benefit of $100,000 in the 1996 fiscal year.  At June 30, 1997,
the Company had approximately $2,300,000 of net operating loss carryforwards
(for income tax reporting purposes) which expire in the





                                      -20-
<PAGE>   21
years 2008 through 2012.  However, the use of net operating loss carryforward
may be limited or reduced due to a change in ownership as a result of the
Company's initial public offering, and, accordingly, the Company may be able to
utilize only a portion of its net operating loss carryforwards.  The impairment
of the tax benefit as a result of the net operating loss carryforwards was
increased by $275,000 in the 1997 fiscal year due to uncertainty as to their
ultimate utilization as a result of the fiscal 1997 loss.  See "Note 9 to
Consolidated Financial Statements."

LIQUIDITY AND CAPITAL RESOURCES

        Liquidity.  As of June 30, 1997, the Company's principal sources of
liquidity included cash and cash equivalents of $414,000, $350,000 of 
short-term investments and other current assets totaling $2,297,000, resulting
in total current assets of  $3,061,000. Current liabilities were $3,560,000
which resulted  in a net working capital deficit of $499,000 at June 30, 1997.

        During the 1997 fiscal year, the Company's liquidity decreased
significantly, primarily due to the cost of the five new practices added to the
Company's management portfolio, and also due to the acquisition and
capitalization of RMAC.  During the 1996 fiscal year, the Company added a clinic
in Lancaster, Texas for 51,846 shares of Common Stock and a clinic in Baytown
for 33,334 shares of Common Stock, $300,000 cash, a note for $750,000 and an
obligation to issue additional shares of Common Stock valued on February 28,
1997 at $350,000 (resulting in the issuance of 54,902 shares in March 1997).
The Company also acquired RMAC for $687,000 cash.  Even though such transactions
were finalized in the 1996 fiscal year, all of the cash used for these
transactions was paid subsequent to the end of the 1996 fiscal year. During the
1997 fiscal year, the Company added to its management portfolio a clinic in El
Paso, Texas for 226,752 shares of Common Stock, $700,000 cash and promissory
notes in the principal amount of $1.9 million; a clinic in Central Fort Worth
for 48,205 shares of Common Stock, $300,000 cash and a promissory note in the
principal amount of $200,000; and another clinic in Dallas for 63,380 shares of
Common Stock, an option to be granted each year for so long as the selling
physician is employed by The Physician Group to purchase that number of shares
of Common Stock of the Company which has a market value of $100,000, cash of
$843,750, and a promissory note in the principal amount of $843,750.  In
accordance with their respective agreements entered into in connection with the
foregoing transactions, certain Physicians demanded registration of their shares
under the Securities Act, on or before February 28, 1997.  When the registration
statement was not declared effective by the Securities and Exchange Commission
by such date, the Physicians became entitled to sell their shares back to the
Company at a price calculated pursuant to an agreed upon formula (the "Sale
Right").  Three of the Physicians notified the Company of exercise of their Sale
Right, then each of them subsequently rescinded such exercise and agreed to
extend the registration deadline.  In partial consideration of such extension
agreements, the Company issued an aggregate of 19,998 additional shares of
Common Stock to those three Physicians and agreed to pay certain expenses
incurred by the Physicians in connection with such extension agreements.  The
Company was also obligated to pay the expenses of registering the Physicians'
shares pursuant to the registration rights agreements.  An aggregate of 498,417
shares issued to the Physicians and an additional 3,810 shares to be issued by
the Company upon exercise of outstanding options held by a consultant were
registered on April 10, 1997 and the expense of such registration, together with
the additional expenses assumed by the Company in connection with negotiating
the extension, was approximately $50,000.

        During the 1997 fiscal year, the Company also made several investments
in its information systems including the continuing development of its practice
management system, a marketing and clinical management software suite and its
accounting system.  The Company has also continued to acquire equipment for its
facilities, including equipment to introduce therapy services as a new service
in several of its facilities.





                                      -21-
<PAGE>   22
        Cash Flow.  The Company's operating activities used cash of $947,000
during the 1996 fiscal year and $666,000 during the 1997 fiscal year.  The
principal components in cash used in operating activities included depreciation
and amortization ($164,000 and $752,000 in the 1996 fiscal year and the 1997
fiscal year, respectively), deferred tax asset of $100,000 in the 1996 fiscal
year and a deferred tax impairment of $100,000 in the 1997 fiscal year, accounts
receivable (an increase of $385,000 in the 1996 fiscal year and an increase of
$166,000 in the 1997 fiscal year), accounts payable and accrued expenses
($501,000 decrease in the 1996 fiscal year and a $212,000 increase in the 1997
fiscal year), prepaid expenses ($78,000 in  the 1996 fiscal year and an increase
of $ 28,000 in the 1997 fiscal year), other assets ($111,000 in the 1996 fiscal
year and $247,000 in the 1997 fiscal year), and compensation for options granted
to an unrelated third party (none in the 1996 fiscal year and $10,000 in the
1997 fiscal year).  The increase in depreciation and amortization reflects the
increase in property and equipment of the Company and goodwill from the five
acquisitions.  The change in accounts payable indicates the cash flow
difficulties created by the aggressive expansion program undertaken by the
Company in the 1997 fiscal year and the short-term seller financing entered into
in connection with that expansion.  The change in other assets and prepaid
expenses relates to deposits and insurance costs related to adding five new
clinics since late fiscal 1996.

        Cash used in investing activities totaled $825,000 in the 1997 fiscal
year, which was accounted for principally by cash acquired of $283,000, net
redemptions of investments of $230,000 offset by purchases of property and
equipment of $581,000, the purchase of intangibles of $637,000 (consisting
primarily of goodwill and loan costs), and restrictions on cash and short-term
investments of $119,000.

        Cash used in investing activities totaled $1.823 million in the 1996
fiscal year, which was accounted for principally by cash acquired,
predominantly from the acquisition of RMAC, of $1.139 million, offset by
purchases of property and equipment of $483,000, purchase of investments of
$1.881 million, increase in restricted cash of $500,000 as collateral for a
secured bank loan and purchase of intangibles of $97,000.

        Cash used in financing activities totaled $3,730,000 in the 1997 fiscal
year, which was principally attributed to payments on the line of credit and
notes payable, including those to the Physicians, and payments on equipment
leases totaling $6,401,000, offset by net proceeds from HCFP financing of
$2,779,000. In the 1996 fiscal year, cash provided by financing activities was
$8.4 million, primarily attributable to the net proceeds of $8.3 million from
the equity offerings undertaken in that fiscal year and proceeds of $506,000
from a note payable, offset by payments on equipment leases totaling $371,000
and payments on notes payable of $33,000.

        Financing.  Historically, the Company has utilized a combination of
debt and equity financing to fund working capital and capital expenditure
requirements.  The equity financing has involved one private offering and one
public offering.  In November 1995, the Company raised $500,000 of gross
proceeds ($397,500 in net proceeds) by the sale of 400,000 shares of Series A
Convertible Preferred Stock, which automatically converted into one share of
the Company's Common Stock on the completion of the Company's initial public
offering.  In February 1996, the Company completed its initial public offering
of 1,840,000 units, each unit consisting of one share of Common Stock and one
warrant to purchase one share of Common Stock.  The Company realized net
proceeds from the public offering of approximately $7.5 million after deducting
stock offering costs of approximately $2.1 million.

        Debt financing has been obtained from a variety of sources.  In January
1995, the Company entered into a promissory note for a line of credit in the
principal amount of $50,000 with Regions Bank of Louisiana.  The $50,000 line
of credit accrued interest at the bank's prime rate and required quarterly
payments with unpaid interest and principal due on demand.  The note was
collateralized by all of the





                                      -22-
<PAGE>   23
equipment of Andicare, a wholly owned subsidiary of the Company.  The balance
outstanding under the line of credit was paid in full prior to June 30, 1996.

        In June 1995, the Company and St. Vincent established a facility, now
owned by HealthFirst, to provide occupational medical services in the Little
Rock, Arkansas metropolitan area.  Under the joint venture agreement the
Company holds 50% of the ownership interest of HealthFirst, a limited liability
company, and manages the operations of HealthFirst, and St. Vincent owns the
remaining 50% interest.  After repayment of the initial capitalization of
$500,000 provided by St. Vincent, the Company and St. Vincent will receive
equal distributions of any profits generated by the joint venture.  The Company
has no obligation to repay any portion of the $500,000 invested by St. Vincent
if the joint venture is unsuccessful.  The Company borrowed $30,000 from St.
Vincent to purchase medical equipment and establish operations of the Little
Rock facility prior to the formation of HealthFirst and is owed $30,000 by
HealthFirst for such equipment.

        Subsequent to September 1995, the Company borrowed $53,000 from
Regions Bank of Louisiana for a six-month term with principal and interest
payable at maturity.  The $53,000 loan accrued interest at the Regions Bank of
Louisiana prime rate, was secured by certificates of deposit pledged by all of
the directors of the Company and the personal guarantee of Dr. Angle, and was
repaid in November 1995 from the proceeds of the private placement described
above.  Proceeds of this loan were used to pay overdue withholding taxes the
payment of which had been deferred because of cash flow difficulties in the
last nine months of the 1995 fiscal year.  Management attributes the cash flow
difficulties to the startup of operations in the Garland and Arlington
practices in mid-1994 and the failure of the management of those practices to
effectively implement the Company's marketing plan, which caused revenues to
fall below expectations and which required the Company to fund operating
expenses from working capital.  In the 1995 fiscal year, the Company changed
administration and management for these two practices and implemented a new
marketing plan which resulted in significant revenue increases in these
practices.

        In May 1996, the Company obtained a $491,000 bank loan from BankOne and
used the proceeds to pay the outstanding balance of certain then existing
capital lease obligations which carried interest rates ranging from 10.83% to
20% per annum, resulting in future minimum lease payments for the remaining
terms of the leases being reduced from $504,000 to $132,000.  The loan accrued
interest at 6.75%, payable monthly, matured in November, 1996, and was
collateralized by a $500,000 certificate of deposit.  During fiscal 1997, the
note was paid in full.

        To fund the rapid growth in the number of practices managed by the
Company and growth in the number of client employees served, as well as to
reduce shorter maturity debt to the Physicians, the Company obtained in April
1997 two credit facilities from HCFP Funding, Inc., a wholly owned subsidiary
of HealthCare Financial Partners II, L.P. ("HCFP").  The facilities include a
$5 million revolving line of credit secured by a first lien on all accounts
receivable (the "Accounts Receivable Facility") and a $1.5 million term loan
secured by all of the Company's assets, including an assignment of the
Company's Practice Management Agreement (the "Term Loan").  The Accounts
Receivable Facility allows the Company to borrow up to 80% of the eligible
receivables at an interest rate of prime plus 2%, and obligates the Company to
pay a .083% monthly collateral management fee.  The Term Loan bears interest at
the rate of prime plus 4%.  The Accounts Receivable Facility had a $25,000
commitment fee, and the Term Loan required a 2% commitment fee and issuance of
warrants (the "HCFP Warrants") bearing registration rights.  Both facilities
have a two-year final maturity.  The Company borrowed $2.9 million under the
HCFP credit facilities at the time of closing and used $2.7 million to
refinance the Physicians' promissory notes, $100,000 for transaction expenses
and $100,000 for working capital





                                      -23-
<PAGE>   24
purposes.  As of June 30, 1997, borrowings in the aggregate amount of $2.779
million were outstanding under the HCFP credit facilities.

        The Company anticipates that its working capital needs and capital
expenditures will continue to increase as the Company continues its expansion.
The expense of opening of new facilities, which may include the leasing or
purchase of capital equipment including office, computer and medical equipment,
can be substantial.  The Company estimates that each of the facilities it
manages requires a minimum of $80,000 of medical equipment.  To the extent
capital equipment can be leased at a reasonable cost the Company anticipates
leasing such capital equipment in order to conserve working capital.
Conversely, if the interest expense associated with the leasing of capital
equipment is unacceptable to the Company, the Company may purchase such
equipment from the funds allocated to the opening of new facilities.  The
Company may also acquire equipment in connection with the addition of existing
practices to its management portfolio.  The Company will continue to seek
additional practices for its management portfolio, and will continue to explore
potential sources and arrangements to obtain growth capital.

PREVIOUSLY DISCLOSED POTENTIAL NON-CASH CHARGE

        As a condition to the public offering, the representative of the
several underwriters required the Company's stockholders to deposit an
aggregate of 150,000 shares of Common Stock of the Company in an escrow
account.  The Common Stock deposited in the escrow account was subject to
release to such stockholders only in the event the Company's earnings per share
for the calendar year ending December 31, 1996 were equal to or exceeded $.25
per share.  In reports previously filed, the Company disclosed that if the
Company attained the pre-determined earnings target, the market value of the
escrowed shares held by officers, employees and consultants at the time the
escrowed shares were released would be deemed to be additional compensation
expense to the Company, and the Company would be required to recognize what
could be a significant charge to income, and which could reduce or eliminate
earnings, if any.  Such 150,000 shares have been cancelled as a result of the
Company's failure to satisfy the earnings test and accordingly, no compensation
expense for the escrowed shares has been or will be required to be recognized.

SEASONALITY

        The Company's business exhibits some seasonality.  From November
through January, factors such as plant closings, vacations and holidays result
in fewer occupational injuries and illnesses.  In addition, employers generally
hire fewer employees during the last three months of the year, thereby reducing
the number of pre-hiring physical examinations and drug and alcohol tests
during this period.  Patient visits also decline in summer months due to plant
closings, vacations and fewer illnesses related to adverse weather.
Accordingly, results of operations during the Company's second and fourth
fiscal quarters of each year will tend to be somewhat lower than the remaining
quarters of the fiscal year.  The Company anticipates that this seasonality
will continue for the foreseeable future.

INFLATION

        When faced with increases in operating costs due to inflation, the
Company has implemented cost control measures intended to contain or reduce its
expenses.  However, the Company cannot predict its ability to control future
cost increases or to increase its charges for certain management services
covered by state and federal workers' compensation laws.





                                      -24-
<PAGE>   25
INVESTMENT BANKING RELATIONSHIPS

        In early 1997, the Company engaged Southcoast Capital Corporation to
assist the Company in exploring strategic alternatives for increasing
shareholder value.  The Company is continuing to work with these investment
bankers for such purposes.

ITEM 7. FINANCIAL STATEMENTS

        The financial statements are included beginning at F-2.  See page F-1
for the Index to the Financial Statements.


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

        None





                                      -25-
<PAGE>   26
                                    PART III

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

        The following material contains information concerning the directors,
including their recent employment, positions with the Company, other
directorships and age as of the date of this Form 10-KSB.

<TABLE>
<CAPTION>
                                                               CAPACITIES IN                   DIRECTOR OR
            NAME                       AGE                     WHICH SERVED                   OFFICER SINCE  
----------------------------           ---             ----------------------------         -----------------
<S>                                      <C>          <C>                                         <C>
Donald F. Angle, M.D.                    42           Chairman of the Board, President,           1992
                                                      Secretary and Treasurer

Carl S. Luikart, M.D.(1)(2)              43           Director                                    1992

John P. Kennedy                          47           Director                                    1992

Dale W. Willetts(1)(2)                   46           Director                                    1995

W. Howard Haun                           65           Director                                    1996

Stephen W. Cavanaugh                     46           Director                                    1996

Fred G. Parrish                          40           Chief Financial and Operating Officer       1993

Robert Kenneth Aiken                     41           Vice President - Business Development       1996
</TABLE>

---------------------------- 
(1)  Member of the Compensation Committee. 
(2)  Member of the Audit Committee.

          Donald F. Angle, M.D. has been the Chairman of the Board, President,
Secretary and Treasurer of the Company since its inception.  He serves as
President of Andicare, Inc., which he founded in 1987, and President of EOPS,
which he co-founded in 1990, both wholly-owned subsidiaries of the Company.  In
1994, Dr. Angle founded Donald F. Angle, M.D.  P.A., now renamed as The
Physician Group, P.A. ("The Physician Group") with which the Company contracts
for physicians services.  Dr. Angle is the sole stockholder of the Physician
Group.  He also served as Medical Director for the Emergency Department of
Highland Hospital in Shreveport, Louisiana from 1989 to 1992.  Dr. Angle was the
Medical Director for Operations at Louisiana Downs in Bossier City, Louisiana
from 1982 to 1992 and was the Medical Director in the Emergency Department of
Riverside Community Hospital in Bossier City from 1982 to 1991.  Dr. Angle has
been certified as an Emergency Medicine Physician by the American Board of
Emergency Medicine.  He is licensed to practice medicine in Louisiana, Texas and
Arkansas.  Dr.  Angle received his M.D. degree from the Louisiana State
University School of Medicine in 1980.

          Carl S. Luikart, M.D. currently serves as Chief of the Section of
Cardiovascular Disease at Our Lady of the Lake Regional Medical Center in Baton
Rouge, Louisiana.  He is also Chief of the Cardiology Section at the Earl K.
Long Memorial Hospital in Baton Rouge.  Dr. Luikart is a member of the Board of
Directors of Louisiana Blue Cross and Blue Shield.  He has engaged in the
practice of cardiology medicine since 1985.  Dr. Luikart received his M.D.
degree from the Louisiana State University School of Medicine in 1980.

         John P. Kennedy is the President of Corporate International Services,
Venice, California, an investment advisory firm that he founded in 1986 to
provide private investment banking services to





                                      -26-
<PAGE>   27
companies in the United States and Canada.  Mr. Kennedy received a Bachelor of
Arts degree from California State University in 1974.

         Dale W. Willetts has been president of Magnum Industries, Huntington
Beach, California, a lease financing company and broker of capital equipment
leases to various financial sources, since 1987.  In 1992, Mr. Willetts became
a registered investment advisor.  In this capacity, Mr. Willetts advises public
and private companies with respect to finance, business and marketing
strategies.

         W. Howard Haun is currently the President of RMAC, the Company's
insurance subsidiary.  He served as a consultant to Employers General Insurance
Group and its predecessor, Employers Insurance of Texas, from 1993 until
assuming his current position with RMAC.  From 1953 through 1993, Mr. Haun was
employed in various capacities by Employers Insurance of Texas.  Employers
Insurance of Texas was placed in conservatorship in 1992 and thereafter into
receivership in 1994.  Mr. Haun is a certified Life Underwriter, a certified
Property and Casualty Underwriter, a past president of the Dallas chapter of
the Society of Property and Casualty Underwriters, a past president of the
Underwriting Executives Counsel and former chairman of the Texas Automobile
Assigned Risk Plan.

         Stephen W. Cavanaugh is the president and chief executive officer of
Louisiana Workers' Compensation Corporation, a private domestic mutual insurer,
and has served in that capacity since December 1991.  From January 1988 to
December 1991, he was the Assistant Secretary of the Louisiana Department of
Employment and Training, Director of the Office of Workers' Compensation, a
position to which he was appointed by the Governor of Louisiana.  Mr. Cavanaugh
received a Bachelor of Arts degree from Northwestern State University in
Natchitoches, Louisiana and his Juris Doctor degree from the Louisiana State
University School of Law in Baton Rouge, Louisiana.

         Fred G. Parrish has been the chief operating officer of the Company
since July 1993 and has been chief financial officer from July 1993 through
December 1996 and again from July 1997 to the present.  He is responsible for
operational and financial management aspects of the Company and its
subsidiaries.  From 1991 to 1993, Mr. Parrish served as a management consultant
to several firms in the United States and Canada, specializing in development
and implementation of strategies related to corporate structure, domestic and
international joint venture opportunities, business policy, resource allocation,
and business operations.  From 1980 to 1992, Mr. Parrish held a series of
management positions including Vice President of Finance, Executive Vice
President, and President and Chief Executive Officer of Composite Technology,
Inc., an international aerospace company headquartered in Dallas, Texas.  Mr.
Parrish received a Bachelor of Science degree from Slippery Rock University in
Slippery Rock, Pennsylvania in 1979.

         Robert Ken Aiken is the Vice-President of Business Development and
also serves as the director of information systems.  He joined the Company in
1993 and was named to his present position in 1996.  Prior to joining the
Company, Mr. Aiken served in various active duty assignments with the United
States Marine Corps, with emphasis on developing new operational capabilities
and organizations.  Mr. Aiken graduated from the United States Naval Academy
and has completed numerous Department of Defense and civilian training courses.

         Each director holds office until the next annual meeting of
shareholders or until a successor has been duly elected and qualified.  There
is currently a vacancy on the board of directors.  The Board is seeking a
qualified nominee to fill the vacancy and anticipates that the nominee will be
presented to shareholders at the Company's next annual meeting.  Officers are
appointed by and serve at the discretion of the Board of Directors.  All of the
Company's officers devote full-time to the Company's business and affairs.





                                      -27-
<PAGE>   28
COMMITTEES OF THE BOARD

         The Board of Directors has delegated certain of its authority to a
Compensation Committee and an Audit Committee.  The members of both the
Compensation Committee and Audit Committee are Messrs. Luikart and Willetts.
Neither of these members is a former or current officer or employee of the
Company.  There is currently a vacancy on both of these committees.  The Board
expects to fill such vacancies after it has filled the vacancy on the Board of
Directors.

         The Compensation Committee held two meetings in the 1997 fiscal year.
The primary function of the Compensation Committee is to review and make
recommendations to the Board with respect to the compensation, including
bonuses, of the Company's officers and to administer the Company's Option Plan.

         The Audit Committee held two meetings in the 1997 fiscal year. The
function of the Audit Committee is to review and approve the scope of audit
procedures employed by the Company's independent auditors, to review and approve
the audit reports rendered by both the Company's independent auditors and to
approve the audit fee charged by the independent auditors.  The Audit Committee
reports to the Board of Directors with respect to such matters and recommends
the selection of independent auditors.

BOARD AND COMMITTEE ATTENDANCE

         In the 1997 fiscal year, the Board of Directors held four meetings.
All directors attended more than 75% of the aggregate of board and committee
meetings held during the 1997 fiscal year.

ITEM 10.    EXECUTIVE COMPENSATION

        Summary Compensation Table.  The following table sets forth the annual
and long-term compensation for services in all capacities to the Company for
the 1995, 1996 and 1997 fiscal years of Donald F. Angle, M.D., Chairman of the
Board and President of the Company (the "Named Officer").  No other officer of
the Company received total annual salary and bonus in excess of $100,000 during
the year ended June 30, 1997.

<TABLE>
<CAPTION>
                                                                         LONG TERM
                                                                        COMPENSATION
                                             ANNUAL COMPENSATION           AWARDS                       
                                 FISCAL     --------------------     ------------------      ALL OTHER
NAME AND PRINCIPAL POSITION       YEAR       SALARY(1)     BONUS     OPTIONS(SHARES)(2)    COMPENSATION(3)
---------------------------      ------     ----------     -----     ------------------    ---------------
<S>                               <C>       <C>              <C>            <C>                <C>
Donald F. Angle, M.D.,            1997      $ 189,742        --              12,500            $16,338
 Chairman of the Board and        1996        143,692        --             107,500            $13,420
 President                        1995        160,196        --               ---                -0-
</TABLE>                    

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

(1)  Includes all compensation received as a physician through The Physician
     Group and as President of the Company.  In
     the 1997, 1996 and 1995 fiscal years, compensation received by Dr. Angle
     for his services as a contract physician through The Physician Group
     totalled $9,742, $27,730 and $7,666, respectively.  See "Item 12. -
     Certain Relationships and Related Transactions" and "Item 1. Description
     of Business - Physician Services, Recruitment and Duties."
(2)  Options were granted under the 1995 Omnibus Stock Option Plan.
(3)  Consists of automobile lease payments and related expenses, disability
     insurance premiums and, in the 1997 fiscal year, contributions by the
     Company to the Company's 401(k) Plan for Dr. Angle's account.





                                      -28-
<PAGE>   29
     Option Grants Table.  The following table sets forth information on grants
of stock options made to the Named Officer pursuant to the Company's 1995
Omnibus Stock Option Plan during the 1997 fiscal year.

<TABLE>
<CAPTION>
                                                    % OF TOTAL
                                                  OPTIONS GRANTED        EXERCISE OR
                                 OPTIONS          TO EMPLOYEES IN         BASE PRICE
        NAME                GRANTED (SHARES)        FISCAL YEAR          ($/SHARE)        EXPIRATION DATE 
--------------------        ----------------     -----------------     ---------------   -----------------
<S>                             <C>                    <C>                <C>                 <C>
Donald F. Angle, M.D.           12,500(1)              100%               $ 5.78              7/14/02
</TABLE>
       
---------------
(1)  On July 15, 1997, the right to purchase 9,722 of such shares vested and
     the right to purchase the remaining shares
     vests at a rate of 694 options per month thereafter.

         Fiscal Year-End Options/Option Values Table.

<TABLE>
<CAPTION>
                                            NUMBER OF SECURITIES UNDER-           VALUE OF UNEXERCISED IN-
                                             LYING UNEXERCISED OPTIONS              THE-MONEY OPTIONS AT
                                           OPTIONS AT FISCAL YEAR-END(#)             FISCAL YEAR-END($)(1)    
                                           -----------------------------         ----------------------------
NAME                                        EXERCISABLE   UNEXERCISABLE          EXERCISABLE    UNEXERCISABLE
----                                       ------------   --------------         -----------    -------------
<S>                                        <C>            <C>                     <C>              <C>
Donald F. Angle . . . . . . . . . . . . .      99,166             20,834            -0-              -0-
</TABLE>

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

(1)  The dollar values are calculated by determining the difference between the
     exercise price of the options ($5.78)
     and the closing bid price for the Common Stock of $3.94 on June 30, 1997,
     the last trading day of the 1997 fiscal year.

        No employee of the Company receives any additional compensation for his
services as a director.  Non-management directors receive no salary for their
services as such, but are entitled to receive reasonable travel or other
out-of- pocket expenses incurred by non-management directors in attending
meetings of the Board of Directors and a fee of $500 per meeting attended.

        The Company has no retirement, pension or profit sharing program for
the benefit of its directors, officers or other employees other than the
Company's Option Plan and a 401(k) Plan recently adopted, but the Board of
Directors may recommend one or more such programs for adoption in the future.

        Employment Agreement.  The Company has entered into an employment
agreement with Dr. Angle which provides for a five-year term that commenced
January 1, 1996, with a right on the part of the Company to extend the agreement
for additional one-year periods.  The employment agreement calls for Dr. Angle
to receive a salary of a minimum of $135,000 in the first year of employment,
$180,000 in the second year of employment, and $180,000 in each year thereafter,
subject to increase upon agreement of the Compensation Committee of the Board of
Directors.  Effective July 1, 1996, the Board of Directors increased Dr. Angle's
compensation to $180,000.  The employment agreement for Dr. Angle also contains
bonus provisions which empower the Compensation Committee to grant bonuses to
Dr. Angle based upon his performance, the overall performance of the Company and
its financial condition.  In addition, as of July 1, 1997, Dr. Angle became
eligible to receive a one-time bonus of $45,000.  The agreement requires him to
devote his full business time to the Company, may be terminated by the Company
for "cause" (as defined in the agreement), and prohibits him from competing with
the Company for two years following termination of the agreement.





                                      -29-
<PAGE>   30
        The employment agreement for Dr. Angle contains provisions which
provide that, upon the occurrence of a "triggering event" (defined to include a
change in ownership of 80% or more of the outstanding shares of the Company, a
merger of the Company into another corporation, or a liquidation of the
Company) during the period that he is acting as an officer of the Company or
for up to one year after acting in such capacity, Dr. Angle will receive a lump
sum payment equal to 2.9 times the last year's base pay in the event of
termination other than for just cause.

STOCK OPTION PLAN

        The Company's 1995 Omnibus Stock Option Plan (the "Plan") was adopted
effective January 1, 1995 and amended effective December 1, 1995 and March 10,
1997.  The Plan provides for the granting of incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), nonqualified stock options and
stock appreciation rights ("SARs"), up to a maximum number of 1,040,875 shares.
Nonqualified stock options may be granted to employees, directors and advisors
of the Company, while Incentive Stock Options may be granted only to employees.
No options may be granted under the Option Plan subsequent to December 31,
2004.

        The Option Plan is administered by the Compensation Committee of the
Board of Directors, which determines the terms and conditions of the options
and SARs granted under the Option Plan, including the exercise price, number of
shares subject to the option and the exercisability thereof.  Messrs. Luikart
and Willetts are currently the members of the Compensation Committee.

        The exercise price of all Incentive Stock Options granted under the
Option Plan must be at least equal to the fair market value of the Common Stock
of the Company on the date of grant.  In the case of an optionee who owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company, the exercise price of Incentive Stock Options
shall be not less than 110% of the fair market value of the Common Stock on the
date of grant.  The exercise price of all nonqualified stock options granted
under the Option Plan shall be determined by the Compensation Committee, but
shall not be less than 85% of the fair market value of the Common Stock.  The
term of all nonqualified stock options granted under the Option Plan may not
exceed ten years and the term of all incentive stock options may not exceed
five years.  The Option Plan may be amended or terminated by the Board of
Directors, but no such action may impair the rights of a participant under a
previously granted option.

        The Option Plan provides the Board of Directors or the Compensation
Committee the discretion to determine when options granted thereunder shall
become exercisable and the vesting period of such options.  Upon termination of
a participant's employment or consulting relationship with the Company, all
unvested options terminate and are no longer exercisable.  Vested options shall
remain exercisable for a specified period of time following the termination
date.  The length of such extended exercise period generally ranges from 60
days to one year, depending on the nature and circumstances of the termination.

        The Option Plan provides that, in the event the Company enters into an
agreement providing for the merger of the Company into another corporation or
the sale of substantially all of the Company's assets, any outstanding
unexercised option shall become exercisable at any time prior to the effective
date of such agreement.  Upon the consummation of the merger or sale of assets,
such options shall terminate unless they are assumed or another option is
substituted therefor by the successor corporation.

        The Option Plan provides the Board of Directors or the Compensation
Committee discretion to grant SARs in connection with any grant of options.
Upon the exercise of a SAR, the holder shall be entitled to receive a cash
payment in an amount equal to the difference between the exercise price per





                                      -30-
<PAGE>   31
share of options then exercised by him and the fair market value of the Common
Stock as of the exercise date.  The holder is required to exercise options
covering twice the number of shares which are subject to the SAR so exercised.
SARs are not exercisable during the first six months after the date of grant,
and may be transferred only by will or the laws of descent and distribution.

        As of June 30, 1997, a total of 351,481 nonqualified and Incentive
Stock Options were outstanding, each with an exercise price of $5.25 (except in
the case of Dr. Angle, whose exercise price is $5.78).  Also as of June 30,
1997, there were no SARs outstanding.  All such options vest over a period of
18 months commencing generally two to six months from the date of grant.

401(k) PLAN

        Effective January 1, 1997, the Company adopted a defined contribution
savings plan (the "401(k) Plan") to provide retirement income to employees of
the Company.  The 401(k) Plan is intended to conform to and qualify under
Sections 401 and 501 of the Internal Revenue Code of 1986, as amended.  The
401(k) Plan covers all employees who are at least age 18 and have been employed
at least six months.  It is funded by voluntary pre-tax contributions from
employees up to a maximum amount equal to 15% of annual compensation and
through matching contributions by the Company of up to 100% of the initial
$1,000 of an employee's contributions and thereafter 25% of such contributions
up to 6% of the employee's annual compensation.  Upon leaving the Company, each
participant is 100% vested with respect to the participant's contributions and
is vested based on years of service with respect to the Company's matching
contributions.  Contributions are invested as directed by the participant in
investment funds available under the 401(k) Plan.  Full retirement benefits are
payable to each participant in a single payment following the participant's
retirement.  Because the 401(k) Plan was not in effect prior to January 1,
1997, the Company incurred no administrative expense and made no contributions
prior to such time on behalf of employees of the Company.

            SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than ten
percent of the Company's Common Stock are required to report their initial
ownership of the Company's Common Stock and any subsequent changes in that
ownership to the Commission, The Nasdaq Stock Market, Inc. and the Company.
Specific due dates for these reports have been established and the Company is
required to disclose any failure to file, or late filing, of such reports.
Based solely on the Company's review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company and written representations with respect to filing of
such Forms, the Company is aware that a Form 3 to report his initial ownership
of 174 shares and 22,500 options was not timely filed by R. Kenneth Aiken upon
his appointment as an executive officer of the Company and that a Form 5 to
report the cancellation of 5,493 escrow shares was filed one day late by Dr.
Carl Luikart.  Mr. Aiken's Form 3 was filed with the Securities and Exchange
Commission as soon as he became aware of the omission.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding beneficial
ownership of Common Stock as of September 23, 1997 by (i) each person known by
the Company to own beneficially more than 5% of the outstanding Common Stock,
(ii) each director, and (iii) all executive officers and directors as a group.
Each person has sole voting and sole investment or dispositive power with
respect to the shares shown except as noted.





                                      -31-
<PAGE>   32
<TABLE>
<CAPTION>
                                                                                   SHAREHOLDINGS ON
                                                                                  SEPTEMBER 23, 1997        
                                                                             ------------------------------
                                                                              NUMBER OF          PERCENT OF
     NAME AND ADDRESS (1)                                                     SHARES (2)           CLASS    
-------------------------------                                              -----------       ------------
<S>                                                                           <C>               <C>
Donald F. Angle, M.D. (3)(4)  . . . . . . . . . . . . . . . . . . . . .       1,298,255             25.8%
Carl S. Luikart, M.D. (3)(5)  . . . . . . . . . . . . . . . . . . . . .         107,560              2.2%
Jack P. Kennedy (3)(5)  . . . . . . . . . . . . . . . . . . . . . . . .         148,578              3.0%
Dale W. Willetts (3)(5) . . . . . . . . . . . . . . . . . . . . . . . .         143,539              2.9%
W. Howard Haun (6)  . . . . . . . . . . . . . . . . . . . . . . . . . .          12,500              *
Stephen W. Cavanaugh  . . . . . . . . . . . . . . . . . . . . . . . . .              --              *
All directors and executive officers as a group
  (nine persons) (3)(7) . . . . . . . . . . . . . . . . . . . . . . . .       1,765,606             34.1%
</TABLE>

-----------------
*   Less than 1% of the class.  
(1) The address for Messrs. Angle and Haun is Suite 1800, 5215 North O'Connor 
    Boulevard, Irving, Texas 75039; the address for Dr. Luikart is 5228 Dijon,
    Baton Rouge, Louisiana 70808; the address for Mr. Kennedy is 878
    Commonwealth Avenue, Venice, California 90291; the address for Mr. Willetts
    is 19581 Pompano Lane, #103, Huntington Beach, California 92648; and the
    address for Mr. Cavanaugh is 3252 Emily Drive, Brusly, Louisiana 70764.
(2) Ownership includes both outstanding Common Stock and shares issuable upon
    exercise of options that are currently exercisable or will become
    exercisable within 60 days after the date hereof.
(3) Shares exclude a prorata share of an aggregate of 150,000 shares of Common
    Stock held in escrow and cancelled when the Company failed to reach certain
    performance objectives as of December 31, 1996.
(4) Includes 120,000 shares of Common Stock under options which are currently
    exercisable or will become exercisable within 60 days.
(5) Includes 28,269 shares of Common Stock under options which are currently
    exercisable or will become exercisable within 60 days.
(6) Consists solely of shares of Common Stock under options which are currently
    exercisable or will become exercisable within 60 days.
(7) Includes 272,307 shares of Common Stock under options which are currently
    exercisable or will become exercisable within 60 days.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        In connection with the transactions described below, the Company did
not secure an independent determination of the fairness and reasonableness of
such transactions and arrangements with affiliates of the Company.  However, in
each instance described below, the disinterested directors reviewed and
unanimously approved the fairness and reasonableness of the terms of the
transactions.  The Company believes that the transactions described below were
fair and reasonable to the Company on the basis that such transactions were on
terms at least as favorable as could have been obtained from unaffiliated third
parties.  The transactions between officers and directors of the Company, on
the one hand, and the Company, on the other, have inherent conflicts of
interest.

        The Company was incorporated in June 1992 and commenced operations
after acquiring all of the outstanding stock of Andicare and EOPS, which had
been operating since 1987 and 1990, respectively.  Prior to their acquisition
by the Company, all of the outstanding shares of capital stock of EOPS were
owned equally by Donald F. Angle, M.D., Chairman of the Board and President,
Jan Kohout, M.D., then a director and stockholder of the Company, and Dennis M.
Sullivan, M.D., a stockholder of the Company.  Pursuant to the terms of an
Exchange Agreement (the "EOPS Exchange Agreement") entered into in July 1992 by
and among the Company, Dr. Angle, EOPS and Drs. Kohout and Sullivan, each of
the latter two individuals exchanged all of the shares of EOPS held by him for
(i) 67,827 shares of Common Stock of the Company, (ii) the right to payment to
him of an aggregate of $80,000, constituting the payment of $48,000 of
outstanding indebtedness from EOPS and a bonus of $32,000, (iii) the right to a
grant (the





                                      -32-
<PAGE>   33
"Contingent Stock Grant") of 4,239 shares of Common Stock of the Company each
time a new facility is opened by the Company in Dallas/Fort Worth metroplex,
and (iv) the right to 2.5% of gross revenues from facility services rendered in
all Dallas/Fort Worth metroplex Company facilities or $8,000 per month,
whichever is greater (the "Contingent Revenue Payment").  The right to
Contingent Stock Grants terminated by its terms on the date of the Company's
public offering.  The right to Contingent Revenue Payments payable to Drs.
Kohout and Sullivan ceased in August 1994 and March 1995, respectively,
pursuant to the terms of the EOPS Exchange Agreement.  The Company paid Drs.
Kohout and Sullivan the Contingent Revenue Payment due in the amount of $60,000
in the 1996 fiscal year, and issued 16,957 shares of Common Stock required to
satisfy the Contingent Stock Grants.  No Contingent Revenue Payments nor
Contingent Stock Grants were due or paid in the 1997 fiscal year.

        John P. Kennedy, a director and stockholder of the Company, entered
into a consulting agreement with EOPS in March 1992, which agreement was
subsequently assumed by the Company, pursuant to which Mr. Kennedy provided
investment banking services to the Company for a three year term.  Under the
consulting agreement, Mr. Kennedy was entitled to receive $14,000 upon
completion of a private offering for four months of consulting services
rendered prior to that time and was to receive $3,500 per month through
November 1995, the termination date of the consulting agreement pursuant to its
terms.  Through February 1996, Mr. Kennedy was owed $84,500 in consulting fees
which were paid in the 1996 fiscal year.  The consulting agreement has expired
and no amounts were paid to Mr. Kennedy in the 1997 fiscal year.

        In March 1992, Messrs. Kennedy and Willetts entered into an agreement,
as amended (the "Capital Agreement") with EOPS, pursuant to which they were
required to assist the Company in raising equity capital in a 1992 private
offering, which was concluded in July 1993.  Pursuant to the terms of the
Capital Agreement, Messrs. Kennedy and Willetts purchased an aggregate of
355,074 shares of Common Stock and were granted certain anti-dilution rights.
In November 1995, the Company and Messrs. Kennedy and Willetts executed an
amendment to the Capital Agreement pursuant to which each of Messrs. Kennedy
and Willetts agreed to the issuance of 53,356 shares of Common Stock of the
Company (or an aggregate of 106,712 shares of Common Stock) as a full
satisfaction of the shares of Common Stock issuable to such persons pursuant to
the terms of the anti-dilution provisions of the Capital Agreement.

        In November 1995, the Company entered into the Practice Management
Agreement with The Physician Group, a Texas professional association.  Dr.
Angle was the founder, and is the sole stockholder, of The Physician Group and
is the President, Chairman of the Board of Directors and owns approximately 24%
of the Company's outstanding Common Stock.  See "Item 1. Business - Physician
Services, Recruitment and Duties."

        In July 1991, the Company entered into a lease agreement with Rockford
Industries for the lease of certain office, computer and medical equipment.
Dr. Angle personally guaranteed payments on the equipment lease and, upon its
modification in January 1995, again guaranteed the payments under the lease as
modified.  Dr. Angle received no compensation from the Company for providing
such guarantees.  All of these leases were paid in the 1996 fiscal year.

        In September 1995, the Company entered into a loan agreement with
Regions Bank of Louisiana, for borrowings in the amount of $53,000.  This loan
accrued interest at the Regions Bank of Louisiana prime rate, and required
payment of principal and interest in six months.  This loan was secured by
certificates of deposit pledged by all of the directors of the Company and the
personal guarantee of Dr. Angle.  The directors and Dr. Angle were not
compensated by the Company for providing such security.  The loan was repaid in
November 1995.

        At June 30, 1997, Dr. Angle was indebted to the Company in the amount
of approximately $28,000.  This indebtedness represents amounts advanced in the
normal course of business for travel and related costs.





                                      -33-
<PAGE>   34
        The Company has adopted a policy that future transactions between the
Company and its officers, directors and 5% or more stockholders are subject to
approval by a majority of the disinterested directors of the Company.  Any such
transactions will be on terms believed to be no less favorable than could be
obtained from unaffiliated parties.


ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K

        (a)  EXHIBITS

        The following documents are filed herewith or have been included as
exhibits to previous filings with the Commission and are incorporated herein by
this reference:

EXHIBIT NO.     DOCUMENT
-----------     --------
  #    2.2      Stock Purchase Agreement by and between Rubus Realty Company
                and the Company.

  ##   2.3      Asset Purchase Agreement by and between C.A. Riser, M.D. and
                the Company.

  ##   2.4      Asset Purchase Agreement by and between C.A. Riser, M.D. and
                Donald F. Angle, M.D., P.A.

  +    2.5.1    Stock Purchase Agreement by and among Doctors' Inn,
                Incorporated, Henry H. Calderoni, Francisco J. Guerra and the
                Company.

  oo   2.5.2    Amendment to Stock Purchase Agreement by and among Doctors'
                Inn, Incorporated, Henry H. Calderoni, Francisco J. Guerra and
                the Company.

  +    2.6      Stock Purchase Agreement by and among Francisco J. Guerra,
                M.D., P.A., Francisco J. Guerra, M.D. and Donald F. Angle,
                M.D., P.A.

  +    2.7      Stock Purchase Agreement by and between Henry H. Calderoni,
                M.D., P.A., Henry H. Calderoni, M.D. and Donald F. Angle, M.D.,
                P.A.

  ++   2.8      Asset Purchase Agreement by and among Northside Family Medical
                Clinic Professional Association, J. W. Czewski, D.O., and The
                Company Doctor.

  ++   2.9      Stock Purchase Agreement by and among Northside Family Medical
                Clinic Professional Association, J. W.  Czewski, D.O., and
                Donald F. Angle, M.D., P.A.

  **   2.10     Stock Purchase Agreement by and among Robert G. Duchouquette,
                M.D., P.A., Robert G. Duchouquette, M.D. and The Physician
                Group, P.A.

  **   2.11     Stock Option Agreement by and between Robert G. Duchouquette,
                M.D. and the Company.

  **   2.12     Registration Rights Agreement by and between Robert G.
                Duchouquette, M.D. and the Company.

  *    3.1.1    Certificate of Incorporation of the Company as filed on June 4,
                1992 with the Secretary of State of the State of Delaware.

  *    3.1.2    Certificate of Amendment to Certificate of Incorporation of the
                Company as filed on October 5, 1995 with the Secretary of State
                of the State of Delaware.

  *    3.2.1    Amended and Restated By-Laws of the Company.





                                      -34-
<PAGE>   35
EXHIBIT NO.     DOCUMENT
-----------     --------

  *    4.1      Form of specimen certificate for Common Stock of the Company.

  *    4.2      Form of specimen certificate for Warrants of the Company.

  *    4.4      Form of Unit Purchase Option issued by the Company to Royce
                Investment Group, Inc.

  *    4.5.1    Form of Warrant Agreement by and among the Company, Continental
                Stock Transfer & Trust Company and Royce Investment Group, Inc.

  x    4.5.2    Amendment to Warrant Agreement by and among the Company,
                Continental Stock Transfer & Trust Company and Royce Investment
                Group, Inc.

  xx   4.6      Letter Agreement, dated April 15, 1997, by and between the
                Company and HealthCare Financial Partners - Funding II, L.P.

  *    10.1.1   Employment Agreement by and between Donald F. Angle and the
                Company.

  *    10.1.2   Employment Agreement by and between Fred G. Parrish and the
                Company.

 ***   10.2     Amended and Restated Omnibus Stock Plan, effective January 1,
                1995, as amended on March 10, 1997.

  *    10.3.1   Lease Agreement, dated June 21, 1991, by and between Twin
                Towers Investment Partnership and Emergency Occupational
                Physician's Services, Inc. and Addendum Number One, dated
                September 30, 1993.

  *    10.3.2   Lease Agreement, dated September 30, 1993, by and between
                Dallas Forest Park Corporation and Emergency Occupational
                Physician's Services Incorporated.

  *    10.3.3   Lease Agreement, dated June 19, 1993, by and between AGF
                Stadium Place, Ltd. and the Company.

  **   10.3.4   Commercial Real Estate Lease, dated October 1, 1996, by and
                among Quad Corners Investments, Ltd., a Texas Limited
                Partnership, The Physician Group, P.A., and the Company.

  o    10.3.5   Sublease Agreement, dated April 23, 1996, by and between
                Dominion Oil and Gas Corporation and the Company.

  o    10.3.6   Sublease Agreement, dated on or about January 1, 1992, by and
                between San Jacinto Methodist Hospital and Dr. C. A. Riser (as
                predecessor in interest to the Company).

  o    10.3.7   Lease and Addendum, dated December 15, 1991 and December 30,
                1991, respectively, by and between Dr. Jim W. Czewski (as
                predecessor in interest to the Company) and John D. Willbanks,
                et al.

  o    10.3.9   Lease Agreement, dated April 1, 1996, by and between HCT
                Management & Ventures Company and the Company.

  x    10.3.10  Lease Agreement, dated February 20, 1997, by and between Rudd
                Properties and the Company.




                                      -35-
<PAGE>   36

EXHIBIT NO.     DOCUMENT

  x    10.3.11  Lease Agreement, dated June 11, 1997, by and between Dr. Nabil
                A. Mouffarej, M.D. and Hanan T. Mouffarej and Andicare
                Incorporated, a wholly owned subsidiary of the Company.

  x    10.3.12  Lease Agreement, dated September 18, 1996, by and between
                Westwood Crown Partners, Ltd. and Emergency Occupational
                Physicians Services, Inc., a wholly owned subsidiary of the
                Company.

  x    10.3.13  Second Amendment to Lease Agreement, dated December 18, 1996,
                by and between Twin Towers Investment Partnership and Emergency
                Occupational Physician's Services, Inc., a wholly owned
                subsidiary.

  *    10.5     Joint Marketing Agreement, dated March 23, 1995, by and between
                Employers General Insurance Group and the Company.

  *    10.6.1   Practice Management, Consulting and Clinic Services Agreement,
                dated November 1, 1995, by and between Donald F. Angle, M.D.
                P.A. and the Company.

  x    10.6.2   Amendment to Practice Management, Consulting and Clinic
                Services Agreement, dated November 1, 1995, by and between
                Donald F. Angle, M.D. P.A. and the Company.

  *    10.7.1   Practice Management Agreement, dated April 1, 1995, by and
                between Doyle L. Sharp, M.D. P.A. and the Company.

  *    10.7.2   Addendum to Practice Management Agreement, effective December
                19, 1995, by and among the Company, Doyle Sharp M.D. P.A. and
                Donald F. Angle, M.D. P.A.

  *    10.8.1   Operating Agreement of HealthFirst Center, L.L.C., by and among
                HealthFirst Center, L.L.C., St. Vincent Infirmary Medical
                Center and the Company.

  *    10.8.2   MSO Management Agreement by and between HealthFirst Center,
                L.L.C. and the Company.

  *    10.8.3   Loan and Security Agreement, dated July 27, 1995, by and
                between St. Vincent Infirmary Medical Center and HealthFirst
                Center, L.L.C.

  *    10.8.4   Form of Secured Promissory Note from HealthFirst Center, L.L.C.
                to St. Vincent Infirmary Medical Center.

  *    10.8.5   Practice Management Agreement by and between HealthFirst
                Center, L.L.C. and Donald F. Angle, M.D. P.A.

  *    10.9     Form of Preferred Employee Plan agreement between various
                employer customers and the Company.

  *    10.9.1   Form of Amendment to Letter of Agreement between Preferred
                Employee Plan customers, the Company and Donald F. Angle, M.D.
                P.A.

  *    10.10.1  Equity Capital Formation Letter Agreement, dated March 10,
                1992, among EOPS, Dale Willetts and Jack P.  Kennedy.

  *    10.10.2  Amendment No. 1 to Equity Capital Formation Letter Agreement,
                dated August 24, 1992, among EOPS, Dale Willetts and Jack P.
                Kennedy.

  *    10.10.3  Memorandum of Understanding, dated June 22, 1994, by and among
                Dale W. Willetts, John P. Kennedy and the Company.





                                      -36-
<PAGE>   37

EXHIBIT NO.     DOCUMENT

  *    10.10.4  Amendment No. 2 to Letter Agreement, dated November 1, 1995,
                among the Company, John P. Kennedy and Dale W. Willetts.

  *    10.11    Consulting Agreement, dated March 10, 1992, between Jack P.
                Kennedy and EOPS.

  *    10.12.1  Exchange Agreement, dated July 24, 1992, by and among EOPS,
                Andicare, Donald F. Angle, M.D. and the Company.

  *    10.12.2  Exchange Agreement, dated July 20, 1992, by and among Andicare,
                Donald F. Angle, M.D., Carl S. Luikart, M.D., Ann Angle and the
                Company.

  *    10.12.3  Exchange Agreement, dated July 24, 1992, by and among EOPS,
                Donald F. Angle, M.D., Jan Kohout, M.D., Dennis Sullivan and
                the Company; Settlement Agreement, dated September 26, 1995, by
                and between Dennis M. Sullivan, M.D. and the Company; and
                Settlement Agreement, dated September 26, 1995, by and between
                Jan Kohout, M.D. and the Company.

  o    10.13    Promissory Note, dated May 6, 1996, from the Company to 
                BankOne, Texas, N.A.

  x    10.14.1  Loan and Security Agreement, dated April 15997, by and between
                The Company, Andicare, Inc., Emergency Occupational Physician's
                Services, Inc., (collectively, the "Borrower"), and HCFP
                Funding, Inc.

  x    10.14.2  Amendment to Loan and Security Agreement, dated April 15997, by
                and between The Company, Andicare, Inc., Emergency Occupational
                Physician's Services, Inc., (collectively, the "Borrower"), and
                HCFP Funding, Inc.

  *    21       Subsidiaries of the Company.

  x    23       Consent of Ehrhardt Keefe Steiner & Hottman PC, independent
                certified public accountants for the Company.

  x    27       Financial Data Schedule

----------------
x    Filed herewith.
*    Incorporated by reference from the issuer's Registration Statement on Form
     SB-2 (S.E.C. File No. 33-74876-D) as declared effective on February 6,
     1996.
#    Incorporated by reference from the Issuer's Form 8-K for event date of
     July 9, 1996.
##   Incorporated by reference from the Issuer's Form 8-K for event date of
     August 15, 1996.  
+    Incorporated by reference from the Issuer's Form 8-K for event date of 
     August 21, 1996.  
++   Incorporated by reference from the Issuer's Form 8-K for event date of 
     August 28, 1996.  
**   Incorporated by reference from the Issuer's Form 8-K for event date of 
     September 20, 1996.  
o    Incorporated by reference from the Issuer's Form 10-KSB for the fiscal year
     ended June 30, 1996.  
xx   Incorporated by reference from the Issuer's Form S-3 Registration 
     Statement (S.E.C. File No. 333-30977).  
xxx  Incorporated by reference from the Issuer's Form S-8 Registration 
     Statement (S.E.C. File No. 333-32305).  
oo   Incorporated by reference from the Issuer's Form S-3 Registration 
     Statement (S.E.C. File No. 333-21705).

    (b)  REPORTS ON FORM 8-K

    The Company did not file any reports on Form 8-K during the last quarter of
the 1997 fiscal year.





                                      -37-
<PAGE>   38
                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                    THE COMPANY DOCTOR


                                     By:  /s/  Donald F. Angle                
                                        --------------------------------------
                                          Donald F. Angle, M.D., Chairman of 
                                          the Board and President

                                     Date:  September 26, 1997                
                                          ------------------------------------


         In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>                               
      SIGNATURE                                        TITLE                                DATE
-------------------------------           ----------------------------------      ---------------------------
<S>                                       <C>                                       <C>
/s/  Donald F. Angle                      Chairman of the Board, President              September 26, 1997
-------------------------------           (Principal Executive Officer) and
     Donald F. Angle                      Treasurer
                                         
/s/  Fred G. Parrish                      Principal Financial and Operating             September 26, 1997
-------------------------------           Officer
     Fred G. Parrish                                         

/s/  Carl S. Luikart                      Director                                      September 26, 1997
-------------------------------           
     Carl S. Luikart                        
                                             
                                             
/s/  John P. Kennedy                      Director                                      September 26, 1997
------------------------------- 
     John P. Kennedy                        
                                             
                                             
/s/  Dale W. Willetts                     Director                                      September 26, 1997
-------------------------------
     Dale W. Willetts                       
                                             
                                             
/s/  W. Howard Haun                       Director                                      September 26, 1997
-------------------------------                                                                             
     W. Howard Haun                         
                                             
                                             
                                           Director                                    
-------------------------------                                                                            
     Stephen W. Cavanaugh                   
</TABLE>                                     
                                             
                                             
<PAGE>   39
                      THE COMPANY DOCTOR AND SUBSIDIARIES



                               TABLE OF CONTENTS
<TABLE>
<S>                                                                                      <C>
Independent Auditors' Report.............................................................F - 2

Financial Statements

    Consolidated Balance Sheet - June 30, 1997...........................................F - 3

    Consolidated Statements of Operations - Years Ended June 30, 1997 and 1996...........F - 4

    Consolidated Statement of Changes in Stockholders' Equity -
     Years Ended June 30, 1997 and 1996..................................................F - 5

    Consolidated Statements of Cash Flows - Years Ended June 30, 1997 and 1996...........F - 7

Notes to Consolidated Financial Statements...............................................F - 9
</TABLE>



                                      F-1
<PAGE>   40








                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders
The Company Doctor and Subsidiaries
Irving, Texas


We have audited the accompanying consolidated balance sheet of The Company
Doctor (a Delaware corporation) and Subsidiaries as of June 30, 1997, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years ended June 30, 1997 and 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Company Doctor and Subsidiaries as of June 30, 1997, and the consolidated
results of their operations and their cash flows for the years ended June 30,
1997 and 1996, in conformity with generally accepted accounting principles.





                                            Ehrhardt Keefe Steiner & Hottman PC

August 8, 1997
Denver, Colorado



                                      F-2
<PAGE>   41
                      THE COMPANY DOCTOR AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                 JUNE 30, 1997
<TABLE>

                                                   ASSETS (NOTE 6)
Current assets
<S>                                                                                          <C>         
       Cash and cash equivalents (Notes 2 and 11)                                            $    414,422
       Short-term investments (Notes 3, 10 and 11)                                                350,000
       Accounts receivable
             Trade, less allowance for doubtful accounts of $210,000 (Note 2)                   1,920,719
             Related parties (Note 8)                                                             215,189
             Other                                                                                 16,932
       Prepaid expenses (Note 2)                                                                  144,034
                        Total current assets                                                    3,061,296

Property and equipment (Notes 2, 4, and 7)                                                      2,549,493
       Less accumulated depreciation and amortization                                            (939,935)
                                                                                                1,609,558
Other assets
       Restricted cash (Note 11)                                                                  618,881
       Restricted short-term investments (Notes 3, 10, and 11)                                    400,768
       Intangibles, net (Notes 2, 5 and 12)                                                     9,528,963
       Other assets (Notes 5 and 9)                                                               386,300
       Investments (Notes 3, 10 and 11)                                                         1,900,114
                                                                                             ------------
                        Total other assets                                                     12,835,026

Total assets                                                                                 $ 17,505,880
                                                                                             ============

                                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
       Current portion of long-term debt (Notes 2 and 6)                                     $  2,049,744
       Current maturities of capital lease obligations (Note 7)                                   121,913
       Accounts payable and accrued expenses                                                    1,152,043
       Claims payable (Note 10)                                                                   236,796
                                                                                             ------------
                        Total current liabilities                                               3,560,496

Claims payable (Note 10)                                                                        1,065,962
Long-term debt (Notes 2 and 6)                                                                  1,375,000
Capital lease obligations, net of current maturities (Note 7)                                     182,209
                                                                                             ------------

                        Total liabilities                                                       6,183,667

Commitments and contingency (Notes 8, 11 and 13)

Stockholders' equity (Notes 2, 11, and 12)
       Preferred stock, $.01 par value, 5,000,000 shares authorized
           Series A convertible, no shares issued                                                    --
       Common stock; $.01 par value; 25,000,000 shares authorized; 4,906,949 shares issued
        and outstanding at June 30, 1997                                                           49,070
       Additional paid-in capital                                                              13,807,152
       Accumulated deficit                                                                     (2,534,009)
                                                                                             ------------
                        Total stockholders' equity                                             11,322,213

Total liabilities and stockholders' equity                                                   $ 17,505,880
                                                                                             ============
</TABLE>


                See notes to consolidated financial statements.



                                      F-3
<PAGE>   42



                      THE COMPANY DOCTOR AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                             For the Year Ended June 30,
                                             ---------------------------
                                                 1997            1996
                                             ------------    -----------
<S>                                          <C>             <C>         
Revenues                                     $ 11,034,467    $  4,193,906

Cost of services provided                       5,460,919       1,433,170
General and administrative expenses             5,954,044       2,536,751
Marketing expenses                                299,307          94,964
Development and acquisition costs                 313,015         202,468
                                             ------------    ------------
                                               12,027,285       4,267,353
                                             ------------    ------------

Loss from operations                             (992,818)        (73,447)

Other (expense) income
       Interest income                            300,097         139,082
       Interest expense                          (480,488)        (82,665)
                                             ------------    ------------
                                                 (180,391)         56,417
                                             ------------    ------------

Net loss before income tax (expense) 
  benefit                                      (1,173,209)        (17,030)

Income tax (expense) benefit (Note 9)            (127,000)        100,000
                                             ------------    ------------

Net (loss) income                            $ (1,300,209)   $     82,970
                                             ============    ============

Net (loss) income per common share           $       (.27)   $        .02
                                             ============    ============

Weighted average common shares outstanding      4,765,004       4,091,775
                                             ============    ============
</TABLE>


                See notes to consolidated financial statements.



                                      F-4
<PAGE>   43





                      THE COMPANY DOCTOR AND SUBSIDIARIES

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                  Common Stock
                                                                       Preferred Stock       ----------------------
                                                                           Series A            Number                   Additional
                                                                    --------------------         of           Par           of
                                                                      Shares      Value        Shares        Value       Capital
                                                                    ---------  ---------     -----------  ---------   -------------
<S>                                                                 <C>         <C>          <C>          <C>         <C>
Balance at June 30, 1995                                                --      $   --        2,208,443   $  22,085   $  1,003,009

Stock issued for services in conjunction with a private
  placement completed in 1993, valued at $5.50 (Note 12)                --          --          106,712       1,067         (1,067)

Issuance of preferred, Series A at $1.25 per share net of
  $102,500 of offering costs (Note 12)                               400,000       4,000           --          --          393,500

Issuance of common stock net of $2,126,569 of offering costs
  (Note 12)                                                             --          --        1,840,000      18,400      7,570,031

Imputed costs associated with stock options granted to
  underwriter in conjunction with initial public offering                                                                          
  (Note 12)                                                             --          --             --       312,245           --   
  
Conversion of preferred, Series A to common stock in
  conjunction with the initial public offering (Note 12)            (400,000)    400,000          4,000        --             --   

Exercise of stock options and warrants (Note 12)                        --          --            1,200          12          6,638

Issuance of stock in conjunction with acquisitions of medical
  practices, valued at $5.25 and $10.25 per share (Note 2)              --          --          120,139       1,201        970,990

Net income                                                              --          --             --          --             --   
                                                                ------------    --------   ------------   ---------   ------------

Balance at June 30, 1996                                                --          --        4,676,494      46,765     10,255,346

<CAPTION>
                                                                Accumulated      Stockholders'
                                                                   Deficit           Equity
                                                               --------------    -------------
<S>                                                            <C>               <C>          
Balance at June 30, 1995                                        $ (1,316,770)   $   (291,676)

Stock issued for services in conjunction with a private
  placement completed in 1993, valued at $5.50 (Note 12)                --              --

Issuance of preferred, Series A at $1.25 per share net of
  $102,500 of offering costs (Note 12)                                  --           397,500

Issuance of common stock net of $2,126,569 of offering costs
  (Note 12)                                                             --         7,588,431

Imputed costs associated with stock options granted to
  underwriter in conjunction with initial public offering                                   
  (Note 12)                                                             --           312,245

Conversion of preferred, Series A to common stock in
  conjunction with the initial public offering (Note 12)                --              --

Exercise of stock options and warrants (Note 12)                        --             6,650

Issuance of stock in conjunction with acquisitions of medical
  practices, valued at $5.25 and $10.25 per share (Note 2)              --           972,191

Net income                                                            82,970          82,970
                                                                ------------    ------------

Balance at June 30, 1996                                          (1,233,800)      9,068,311
</TABLE>


Continued on the following page


                See notes to consolidated financial statements.





                                      F-5
<PAGE>   44

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY


Continued from previous page.
<TABLE>
<CAPTION>
                                                                    Preferred Stock           Common Stock
                                                                       Series A          ---------------------
                                                                   -----------------       Number                   Additional
                                                                   Number of   Par          of          Par           Paid-in
                                                                    Shares    Value        Shares      Value         Capital
                                                                   ---------  ------     ----------  ---------     ------------

<S>                                                                 <C>        <C>       <C>           <C>         <C>
Balance at June 30, 1996                                                 --     --        4,676,494     46,765      10,255,346

Escrow shares returned (Note 12)                                         --     --         (150,000)    (1,500)          1,500

Imputed value of stock options and warrants granted for
  consulting services and debt acquisition (Note 12)                     --     --             --         --           259,982

Issuance of stock in conjunction with acquisitions of medical
  practices, valued at $9.75, $9.92 and $8.87 per share (Note 2)         --     --          338,337      3,384       3,278,616

Additional shares issued in conjunction with acquisition of 
  medical practice to adjust $350,000 of stock to $6.38 per 
  share which was originally valued at an estimated $10.25 per
  share at the acquisition date (Note 2)                                 --     --           19,943        199            (199)

Exercise of stock options and warrants (Note 12)                         --     --            2,177         22          12,107

Additional shares issued to extend registration rights related
  to stock issued in conjunction with acquisitions (Note 2)              --     --           19,998        200            (200)

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

                                                                         --   $ --        4,906,949   $ 49,070     $ 13,807,152
                                                                      =====   =====       =========   ========     ============

<CAPTION>
                                                                                  Accumulated     Stockholder's
                                                                                    Deficit          Equity
                                                                                  ------------    ------------
<S>                                                                               <C>              <C>    
Balance at June 30, 1996                                                            (1,233,800)      9,068,311

Escrow shares returned (Note 12)                                                          --              --

Imputed value of stock options and warrants granted for
  consulting services and debt acquisition (Note 12)                                      --           259,982

Issuance of stock in conjunction with acquisitions of medical
  practices, valued at $9.75, $9.92 and $8.87 per share (Note 2)                          --         3,282,000

Additional shares issued in conjunction with acquisition of 
  medical practice to adjust $350,000 of stock to $6.38 per 
  share which was originally valued at an estimated $10.25 per
  share at the acquisition date (Note 2)                                                  --              --

Exercise of stock options and warrants (Note 12)                                          --            12,129

Additional shares issued to extend registration rights related
  to stock issued in conjunction with acquisitions (Note 2)                               --              --

Net loss                                                                            (1,300,209)     (1,300,209)
                                                                                  ------------    ------------

                                                                                  $ (2,534,009)   $ 11,322,213
                                                                                  ============    =---=========
</TABLE>


                See notes to consolidated financial statements.



                                      F-6
<PAGE>   45

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                    For the Years Ended
                                                                                           June 30,
                                                                                  --------------------------
                                                                                      1997          1996
                                                                                  -----------    -----------
<S>                                                                               <C>            <C>
Cash flows from operating activities
     Net (loss) income                                                            $(1,300,209)   $    82,970
                                                                                  -----------    -----------
     Adjustments to reconcile net (loss) income to net cash used in
      operating activities
         Depreciation and amortization                                                752,484        163,620
         Deferred taxes                                                               100,000       (100,000)
         Imputed value of options granted for services                                  9,982           --
         Change in assets and liabilities
              Accounts receivable                                                    (165,506)      (385,711)
              Prepaid expenses                                                        (28,001)       (77,517)
              Other assets                                                           (247,057)      (110,958)
              Checks written in excess of bank balance                                   --          (18,265)
              Accounts payable and accrued expenses                                   211,913       (501,117)
                                                                                  -----------    -----------
                                                                                      633,815     (1,029,948)
                                                                                  -----------    -----------
                  Net cash used in operating activities                              (666,394)      (946,978)
                                                                                  -----------    -----------

Cash flows from investing activities
     Cash acquired from medical practices                                             282,802      1,139,056
     Purchases of property and equipment                                             (581,740)      (482,825)
     Redemption (purchase) of investments                                             229,928     (1,881,469)
     Change in restricted cash                                                       (118,881)      (500,000)
     Purchase of intangibles                                                         (637,276)       (97,863)
                                                                                  -----------    -----------
                  Net cash used in investing activities                              (825,167)    (1,823,101)
                                                                                  -----------    -----------

Cash flows from financing activities
     Payments on notes payable to sellers                                          (2,831,010)          --
     Payments from notes payable                                                   (3,569,684)       506,250
     Net proceeds from sales of stock                                                  12,129      8,304,826
     Proceeds on notes payable                                                      2,779,071        (33,143)
     Payments on equipment leases                                                    (120,956)      (371,421)
                                                                                  -----------    -----------
                  Net cash (used in) provided by financing activities              (3,730,450)     8,406,512
                                                                                  -----------    -----------

Cash and cash equivalents (decrease) increase                                      (5,222,011)     5,636,433
Cash and cash equivalents at beginning of period                                    5,636,433           --
                                                                                  -----------    -----------

Cash and cash equivalents at end of period                                        $   414,422    $ 5,636,433
                                                                                  ===========    ===========
</TABLE>

Supplemental disclosures of interest paid:
         Interest paid on borrowings for the years ended June 30, 1997 and 1996
         was $454,446 and $95,528, respectively 

Supplemental disclosures of noncash investing and financing activities:
        Purchases of medical equipment through capital leases for the year
        ended June 30, 1997 and 1996 was $292,933 and $0, respectively 

Continued on next page 


                See notes to consolidated financial statements.




                                      F-7
<PAGE>   46



                      THE COMPANY DOCTOR AND SUBSIDIARIES


                     CONSOLIDATED STATEMENTS OF CASH FLOWS


Continued from previous page.

        During the year ended June 30, 1997, the Company acquired three medical
        practices located in Dallas, El Paso and Fort Worth, Texas (Note 2).
        The combined aggregate purchase price of $8,070,000 was paid in 358,335
        shares of common stock valued at $3,282,000, $1,844,000 cash and notes
        payable totaling $2,944,0000.
        The assets acquired were as follows:

<TABLE>
<CAPTION>
                                               Total
                                            -----------
<S>                                         <C>        
Assets acquired

    Cash                                    $   283,000
    Accounts receivable                         692,000
    Fixed assets                                139,000
    Other                                        18,000
                                            -----------
                                              1,132,000
Liabilities assumed
    Accounts payable and accrued expenses
                                               (162,000)
    Net assets acquired                         970,000
Aggregate purchase price                      8,070,000

    Goodwill                                $ 7,100,000
                                            ===========
</TABLE>


During 1997, the Company granted 400,000 warrants to a financing company in
connection with obtaining debt financing. The imputed value of the warrants at
the date of grant was recorded as loan costs with a corresponding increase in
paid-in-capital.


                See notes to consolidated financial statements.



                                      F-8
<PAGE>   47




                      THE COMPANY DOCTOR AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Organization

The Company Doctor (TCD) was incorporated in the state of Delaware in June 1992
for the purpose of managing and providing industrial/occupational medical and
related services exclusively to the employees and prospective employees of
subscribing businesses.

Andicare, Inc. (Andicare), Emergency Occupational Physician's Services, Inc.
(EOPS), and Risk Management Assurance Corporation ("RMAC") are wholly owned
subsidiaries of TCD and are in the business of providing services identical to
TCD, except for RMAC which is in the business of providing insurance. Andicare
services its patients from one clinic in Louisiana, EOPS from six clinics in
the Dallas/Fort Worth Metroplex, one in Lancaster, Baytown and El Paso Texas.

RMAC underwrote a workers' compensation policy for its former stockholder and
its affiliates from approximately July 1, 1987 to January 1, 1992 when the
company became inactive. Currently, the only operations of RMAC are the payment
on approximately 60 outstanding claims filed prior to December 31, 1991.

Principles of Consolidation

The accompanying consolidated financial statements contain the accounts of TCD,
Andicare, EOPS, and RMAC. All significant intercompany transactions and
balances have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all cash on hand and in banks, certificates of deposit
and other highly-liquid investments with maturities of three months or less,
when purchased, to be cash and cash equivalents for cash flow purposes.

Accounts and Notes Receivable

In the normal course of business, the Company extends unsecured credit to
virtually all of its customers related to providing industrial/occupational
medical and related services. All customers are located in close proximity to
the Company's clinics which are located in the Dallas/Fort Worth Metroplex,
Shreveport, Louisiana, Baytown and El Paso Texas and Little Rock, Arkansas
areas.

Because of the credit risk involved, management has provided an allowance for
doubtful accounts which reflects its opinion of amounts which will eventually
become uncollectible. In the event of complete non-performance by the Company's
customers, the maximum exposure to the Company is the outstanding accounts
receivable balance at the date of non-performance.



                                      F-9
<PAGE>   48
                      THE COMPANY DOCTOR AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investments

The Company invests in long-term and short-term certificates of deposit,
T-bills, and U.S. Treasury notes which are classified as held-to-maturity or
available-for-sale. The investments are held with financial institutions. The
Company performs periodic reviews of its investments and the financial
institutions in order to limit credit risk.

Investments which are held-to-maturity are recorded at amortized cost while
available-for-sale investments are recorded at fair value. During fiscal 1997,
there were no material unrealized gains or losses on available-for-sale
investments.

Property and Equipment

Property and equipment are stated at cost; equipment under capital lease is
stated at the lower of fair market value or net present value of minimum lease
payments at inception of the lease. Depreciation is computed on the
straight-line method over the estimated useful lives of the assets which is
five to ten years.

Intangibles

Goodwill is recorded at the difference between net asset acquired and the
purchase price and is amortized over the estimated useful life of twenty years.

Loan Origination Fees

Direct costs incurred for the origination of loans are deferred and amortized
to expense on a straight-line basis over the contractual terms of the loans.

Claims Payable

Unpaid claims are based on estimates of reported claims. While management
believes the reserve for claims is adequate, the reserve is continually
reviewed and as adjustments become necessary, they are reflected in current
operations.



                                     F-10
<PAGE>   49

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Physicians Group

Due to legislative requirements concerning the practice of medicine in the
state of Texas, the Company has entered into an agreement with the Physicians
Group (a company owned 100% by a stockholder of the Company) for the services
of physicians.

The Physicians Group employs doctors who provide medical services to third
parties and after covering the costs associated with the physicians, remit
proceeds to the Company for management services. The structure of the agreement
between the Company for its Texas clinics and the Physicians Group requires
that all income be paid to the Company for management services or to the
physicians for compensation and performance bonuses. The accompanying
consolidated financial statements reflect transactions with the Physicians
Group on a basis as if the Company and Physicians Group were "combined" or
"consolidated" as revenue reflects all Texas clinic revenue billed to patients
and expenses reflect compensation paid to the Physicians Group doctors.

Total revenue billed to third parties and compensation paid associated with the
Physicians Group is as follows: 

<TABLE>
<CAPTION>
                                         June 30,
                                  ----------------------
                                     1997         1996
                                  ----------   ----------
<S>                               <C>          <C>       
Revenue billed to third parties   $9,005,279   $2,865,602
                                  ==========   ==========

Compensation to doctors           $2,507,502   $  534,674
                                  ==========   ==========
</TABLE>


Investment in Limited Liability Company

In June 1995, the Company, along with St. Vincent Infirmary Medical Center (St.
Vincent), formed a business called HealthFirst to provide medical services. The
Company owns 50% of the outstanding stock of the limited liability company
(LLC) and manages the operations of HealthFirst; St. Vincent owns the other 50%
and has agreed to provide up to $500,000 of the initial capitalization of the
LLC. Under the terms of the agreement, the Company and St. Vincent will split
profits based on ownership after the initial capitalization of $500,000 has
been repaid to St. Vincent. If the new LLC is not successful, the Company has
no obligation to repay any portion of the $500,000 initial capitalization. The
Company receives a $4,000 per month fee to manage the facility and has loaned
$30,000 at June 30, 1997 to start operations which is to be repaid out of the
$500,000 capitalization (Note 6). The Company accounts for its 50% investment
in HealthFirst using the equity method of accounting. The Company's total
investment of $1,000 was fully used by its share of the June 30, 1995 net
operating loss of HealthFirst and the Company has recorded a liability for
approximately $30,000 for its share of losses exceeding the $500,000 of initial
capitalization which arose in fiscal 1997.





                                     F-11
<PAGE>   50

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

The Company calculates and records the amount of taxes payable or refundable
currently or in future years for temporary differences between the financial
statement basis and income tax basis based on the current enacted tax laws.

Temporary differences are differences between the tax basis of assets and
liabilities and their reported amounts in the consolidated financial statements
that will result in taxable or deductible amounts in future years. The
Company's temporary differences result primarily from the allowance for bad
debts and net operating loss carryforwards.

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash
equivalents, restricted cash, receivables, accounts payable, notes payable and
accrued expenses approximated fair value as of June 30, 1997 because of the
relatively short maturity of these instruments.

It is not applicable to estimate the fair value of the receivables from related
parties due to the inability to estimate fair value without incurring excessive
costs.

The fair value of held-to-maturity investments approximated fair value at June
30, 1997. As noted above, available-for-sale investments are recorded at fair
value.

Use of Estimates

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

The Company has recorded approximately $1,300,000 of claims payable (Note 10)
for the estimated liability related to unpaid losses from workers' compensation
claims. Such reserves are continually reviewed based upon changes in the nature
of the claims outstanding. Accordingly, the reserve is subject to changes due
to circumstances not presently known.

Net (Loss) Income Per Common Share

Net (loss) income per common share has been computed based on the weighted
average number of common shares outstanding during each year. Common stock
equivalents are included in weighted average number of common shares
outstanding unless they are anti-dilutive.



                                     F-12
<PAGE>   51
                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reclassification

Certain amounts in the June 30, 1996 consolidated financial statements have
been reclassified to conform with the June 30, 1997 presentation.


NOTE 2 - ACQUISITIONS

In August of 1996, the Company entered into agreements to purchase Doctor's Inn
(Dr. Inn) in El Paso, Texas and Northside Family Medical Clinic, P.A.
(Northside) in Fort Worth, Texas and in September of 1996, the Company entered
into an agreement to purchase Beltline North Medical Clinic (Beltline) in
Dallas, Texas.

The accompanying consolidated financial statements includes the results of
operations from the effective date of the acquisitions, or July 1, 1996 for Dr.
Inn and Beltline and from August 21, 1996 for Northside.

The acquisitions are accounted for under the purchase method of accounting
applying the provisions of Accounting Principles Board Opinion No. 16 ("APB
16"). Pursuant to the requirements of APB 16, the aggregate purchase price,
based on fair values, will be allocated to the tangible and intangible assets
and liabilities assumed based on their estimated fair value at the date of the
acquisitions. Goodwill is amortized over its estimated useful life of 20 years.

The aggregate purchase price allocated to the assets acquired and liabilities
assumed which are included in the consolidated financial statements consists
of:

<TABLE>
<S>                                              <C>
     Asset acquired
         Cash                                    $   283,000
         Accounts receivable                         692,000
         Fixed assets and other                      157,000
                                                 -----------
                                                   1,132,000
     Liabilities assumed:
         Accounts payable and accrued expenses      (162,000)

Net assets acquired                                  970,000

Costs associated with acquisition                    558,000
Fair value of common stock issued                  3,282,000
Notes payable incurred                             2,944,000
Cash                                               1,844,000
                                                 -----------

Goodwill                                         $ 7,658,000
                                                 ===========
</TABLE>




                                     F-13
<PAGE>   52
                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 - ACQUISITIONS (CONTINUED)

The common stock issued in the acquisitions of Drs. Inn, Northside and Beltline
were recorded at the market value of the stock at the date of the individual
acquisition which was $9.72, $9.75 and $8.87, respectively.

Pursuant to the Acquisition Agreements described above, the Company was
obligated to give registration rights on the related common stock issued. As
the registration rights were not completed by the agreed upon date, the Company
was required to issue 19,998 additional shares in exchange for an extension. As
of June 30, 1997, all related common stock had been registered.

In fiscal year 1996, the Company entered into agreements to purchase Doyle M.
Sharp, M.D. (Sharp) in Lancaster, C.A. Riser MD, d/b/a Occupational and Family
Medicine (OFM) in Baytown, and RMAC for approximately $2,709,000 including
120,139 shares of common stock.

Per the acquisition document for the Baytown clinic, the seller was to receive
33,334 of stock upon closing and an estimated 34,959 additional shares in
February 1997 equal to $350,000. To account for a change in the market value of
the stock from the date of grant to the issuance date, an additional 19,943
shares were issued.

Pro Forma Statement of Operations

As the acquisition date was near or at the beginning of fiscal year 1997 for
Dr. Inn, Beltline and Northside, respectively, the pro forma results of
operations for the year ended June 30, 1997 are not presented.

The unaudited pro forma results of operations had the Company acquired Dr. Inn,
Beltline and Northside, Inc. as of July 1, 1995 are as follows for the year
ended June 30, 1996:

<TABLE>
<S>                           <C>       
Revenues                      $9,145,000
                              ==========

Net income                    $  541,000
                              ==========

Net income per common stock          .12
</TABLE>



                                     F-14
<PAGE>   53

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - INVESTMENTS

The following is a summary of investments at June 30, 1997:

<TABLE>
<CAPTION>
                                Amortized Cost or Fair Value*
                             ------------------------------------
                              Current     Long-Term       Total
                             ----------   ----------   ----------
<S>                          <C>          <C>          <C>       
U.S. treasury notes          $  350,382   $1,900,114   $2,250,496
Municipal and agency bonds      400,386         --        400,386
                             ----------   ----------   ----------

                             $  750,768   $1,900,114   $2,650,882
                             ==========   ==========   ==========
</TABLE>

*  As the cost or amortized cost approximates fair value of all investments at 
   June 30, 1997, there were no material unrealized gains or losses during 
   fiscal 1997.

The amortized cost and fair value of held-to-maturity and available-for-sale
fixed maturities at June 30, 1997, by contractual maturity, are shown below:

<TABLE>
<S>                                      <C>       
Due in one year or less                  $  750,768
Due after one year through five years     1,550,114
Due after five years through ten years      350,000
                                         ----------

                                         $2,650,882
                                         ==========
</TABLE>

There were no sales of available-for-sale investments during fiscal 1997 and
therefore there were no proceeds from sales or realized gains or losses.


NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following at June 30, 1997:

<TABLE>
<S>                                        <C>       
Medical equipment                          $1,427,886
Furniture, fixtures and office equipment      976,265
Leasehold improvements                        145,342
                                           ----------
                                            2,549,493
  Less accumulated depreciation and 
    amortization                             (939,935)
                                           ----------

                                           $1,609,558
                                           ==========
</TABLE>



                                     F-15
<PAGE>   54
                      THE COMPANY DOCTOR AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - INTANGIBLES AND OTHER ASSETS

Intangibles consist of the following at June 30, 1997:

<TABLE>
<CAPTION>
                                      Cost
                                  -----------
<S>                               <C>      
Goodwill                          $ 9,635,313
Loan origination fees (Note 12)       390,097
Accumulated amortization             (496,447)
                                  -----------

                                  $ 9,528,963
                                  ===========

Other assets consist of the
 following at June 30, 1997 

Prepaid tax deposit               $   324,163
Other                                  62,137
                                  -----------

                                  $   386,300
                                  ===========
</TABLE>


The State of Texas has established an assessment under the provisions of the
Texas Property and Casualty Insurance Guaranty Act whereby a company makes
contributions to the Texas Property and Casualty Insurance Guaranty Association
and can use these contributed funds as a credit against future premium tax
liabilities. As of June 30, 1997, the Company has deposited $324,163 of
contributions, net of credits used in 1989 to 1991. No impairment is necessary
as the Company anticipates generating premium income in future years from
underwriting new workers' compensation insurance policies.


NOTE 6 - LONG-TERM DEBT

Long-term debt consists of the following at June 30, 1997:

$5,000,000 revolving loan with a finance company, principal 
and interest payable monthly based on collections of accounts 
receivable - trade; interest is at bank prime (8.50% at June 30, 
1997) plus 2%. Borrowings are limited to 80% of eligible 
receivables as defined in the agreement. The loan matures
April 1999 and is collateralized by trade receivables.
                                                                      $1,279,321

Note payable - finance company, interest at bank prime 
  (8.50% at June 30, 1997) plus 4%. Interest only payments 
  through March 1998 at which time monthly principal payments
  of $41,667 plus accrued interest commence. The note matures
  April 1999 and is collateralized by substantially all assets 
  of the Company.
                                                                       1,500,000



                                     F-16
<PAGE>   55

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - LONG-TERM DEBT (CONTINUED)


Note payable - sellers, interest at 9.5%, due in monthly 
installments of $25,000 including interest through June 1998
when unpaid principal and interest are due. Collateralized by
the assets of the El Paso clinic with a net book value of 
approximately $525,000.                                                 523,354

Note payable - seller, interest at 9.5%, due in monthly 
installments of $11,965, plus accrued interest through February
1998 when unpaid principal and interest are due. Collateralized 
by the assets of the Fort Worth Clinic with a net book value of 
approximately $217,000.                                                  92,069

Note payable to a limited liability affiliate (Note 1), interest 
at 9%. The note is collateralized by the equipment of HealthFirst.       30,000
                                                                     ----------
                                                                      3,424,744
Less current portion                                                 (2,049,744)
                                                                     ----------

                                                                     $1,375,000
                                                                     ==========

Installments due on long-term debt subsequent to June 30, 1997 are as follows:

<TABLE>
<CAPTION>
                  Year Ending June 30,
                  --------------------
<S>                                            <C>         
                            1998                $  2,049,744
                            1999                   1,375,000
                                                ------------

                                                $  3,424,744
                                                ============
</TABLE>


The Company is subject to various financial and restrictive covenants on
long-term notes to the finance company.


NOTE 7 - CAPITAL LEASES

The Company leases medical and office equipment under capital leases which
require monthly payments ranging from $112 to $1,947 including interest and
expire between September 1997 and October 2001. The following is a summary of
assets under capital leases at June 30, 1997:

<TABLE>
<S>                        <C>      
Medical equipment          $ 171,531
Office equipment             313,718
Accumulated amortization    (114,254)
                           ---------

                           $ 370,995
                           =========
</TABLE>


                                     F-17
<PAGE>   56


                      THE COMPANY DOCTOR AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 7 - CAPITAL LEASES (CONTINUED)

Future minimum lease payments for capital lease obligations are as follows at
June 30, 1997:

<TABLE>
<CAPTION>
         Year ending June 30,
         --------------------
         <S>                                                              <C>
         1998                                                             $  158,339
         1999                                                                110,960
         2000                                                                 58,921
         2001                                                                 43,825
         2002                                                                  6,759
                                                                          ----------
         Total minimum lease payments                                        378,804
         Less amounts representing interest                                  (74,682)
                                                                          ---------- 
         Present value of minimum lease payments                             304,122
         Less current maturities                                            (121,913)
                                                                          ---------- 

                                                                          $  182,209
                                                                          ==========
</TABLE>


NOTE 8 - RELATED PARTY TRANSACTIONS

Related Party Receivables

At June 30, 1997, the Company had advanced funds to four shareholders in the
normal course of business for travel and other related costs totaling
approximately $80,000. Additionally, the Company has receivables due from
HealthFirst of approximately $79,000 for advances to assist in funding
operations and $96,000 for management fees.

Lease Financing

A director and stockholder of the Company has assisted the Company in procuring
lease financing to obtain medical equipment and has received commissions from
providers of capital leasing funds as compensation for these services. The
director and stockholder will continue to offer similar services to the Company
in the future and will receive commissions from providers of such funding in
the amount of between 5% and 10% of the amount of each transaction. No amounts
have been paid by the Company under this agreement.



                                     F-18
<PAGE>   57

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 - INCOME TAXES

The Company has the following temporary differences which result in deferred
tax asset or liabilities at June 30, 1997:

<TABLE>
<S>                               <C>      
Allowance for credit loss         $  77,000
Net operating loss carryforward     736,000
                                  ---------
                                    813,000
Valuation allowance                (813,000)
                                  ---------

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


At June 30, 1996, the Company has approximately $2,164,000 of net operating
loss carryforwards for income tax reporting purposes which expire in 2008
through 2012. The valuation allowance related to the deferred tax asset has
been increased $275,000 in the current year due to the current year operating
losses.


NOTE 10 - CLAIMS PAYABLE

The consolidated financial statements include the estimated liability for
unpaid losses from workers' compensation claims of approximately $1,300,000 at
June 30, 1997. The liabilities for losses are determined using case-basis
evaluations and represent estimates of the ultimate net cost of all unpaid
losses as of June 30, 1997. These estimates are continually reviewed and, as
experience develops and new information becomes known, the liability is
adjusted as necessary. The Company anticipates the liability in fiscal 1998
could increase if it begins to underwrite new policies. Such adjustments will
be reflected in current operations.


NOTE 11 - COMMITMENTS AND CONTINGENCY

Leases

The Company leases office and clinic space and equipment under noncancellable
operating leases, expiring through October 2006.



                                     F-19
<PAGE>   58



NOTE 11 - COMMITMENTS AND CONTINGENCY

Leases (continued)

Future minimum lease payments for the remaining terms of the leases are as
follows:

<TABLE>
<CAPTION>
Year ending June 30,
--------------------
<S>                       <C>
      1998                 $  717,376
      1999                    636,936
      2000                    594,734
      2001                    417,002
      2002                    287,729
Thereafter                    753,561
                           ----------

                           $3,407,338
                           ==========
</TABLE>

Rent expense for the years ended June 30, 1997 and 1996 was $711,552 and
$291,887, respectively.

Marketing Agreement

The Company previously entered into a five year joint marketing program with an
insurance carrier to market a worker's compensation insurance product under the
name "Comp 2000". Expenses of the program are to be approved by the Company and
insurance carrier prior to their expenditure or they are an expense to the
party which incurred them.

Employment Agreement

The Company has entered into an employment agreement with its majority
stockholder and officer of the Company. The agreement provides for a five-year
term, with a right on the part of the Company to extend the agreement from year
to year on written notice to the stockholder/officer given not less than 90
days prior to expiration of the initial term and any extension, as applicable.
The employment agreement calls for the stockholder/officer to receive a salary
of $135,000 in the first year of employment, $180,000 in the second year of
employment, and a minimum of $180,000 in each year thereafter, subject to
increase upon agreement of the Compensation Committee of the Board of
Directors. The employment agreement also contains bonus provisions which
empower the Compensation Committee to grant bonuses to the stockholder/officer
based upon his performance, the overall performance of the Company and its
financial condition.



                                     F-20
<PAGE>   59



                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - COMMITMENTS AND CONTINGENCY (CONTINUED)

Employment Agreement (continued)

The employment agreement contains provisions which provide that, upon the
occurrence of a "triggering event" (defined to include a change in ownership of
80% or more of the outstanding shares of the Company, a merger of the Company
into another corporation, or a liquidation of the Company) during the period
that the stockholder/officer is acting as an officer of the Company or for up
to one year after acting in such capacity, the stockholder/officer will receive
a lump sum payment equal to 2.9 times the last year's base pay in the event of
termination other than for just cause.

Statutory Reporting, Capital Requirements, and Dividend and Retained Earnings
Restrictions

Insurance companies are required to prepare statutory financial statements in
conformity with practices prescribed or permitted by their state of domicile.
Prescribed statutory accounting practices include a variety of publications of
the National Association of Insurance Commissioners, as well as state laws,
regulations, and general administrative rules. Permitted statutory accounting
practices are used when prescribed statutory practices do not address the
accounting for transactions.

The State of Texas imposes certain capital requirements of insurance companies
on a statutory basis. Under the applicable regulations, RMAC is required to
maintain minimum capital stock of $1,000,000 and minimum surplus of $1,000,000
at June 30, 1997. Additionally, cash and short-term investments in excess of
the current claims payable of $236,796 are restricted in their use and cannot
be used in any Company operations other than RMAC's operations.


NOTE 12 - STOCKHOLDERS' EQUITY

Public Offering

In February 1996, the Company completed a public offering of 1,840,000 units,
each unit consisting of one share of common stock and one warrant to purchase
one share of common stock at $7.00 per share, at $5.25. The proceeds of the
offering were $7,588,431, net of offering costs of $2,126,569.

Additionally, the Company issued options to the underwriter to purchase
1,660,000 units at $8.14. Compensation expense related to the options has been
recorded in the accompanying consolidated financial statements as deferred
offering costs related to the initial public offering.



                                     F-21
<PAGE>   60

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - STOCKHOLDERS' EQUITY (CONTINUED)

Public Offering (continued)

In conjunction with the public offering, the Company's stockholders were
required by the underwriter to deposit an aggregate of 150,000 shares of common
stock of the Company in an escrow account. The release of the shares was
subject to the Company meeting certain earnings per share amounts for the
period ending December 31, 1996. The earnings requirement was not met and the
related escrowed shares were returned and canceled. This transaction is
reflected as a reduction in common stock and additional paid-in-capital during
the year ended June 30, 1997 in the accompanying consolidated financial
statements.

Equity Agreement

During 1993, the Company entered into an agreement with two unrelated
individuals to raise equity for the Company. Under the terms of the agreement,
the individuals received a non-diluted 5% interest each in the Company if they
were successful in raising $1,000,000 in financing. The 5% was to increase to
7.5% each if the Company did not reach certain performance criteria by January
1995. In connection with the agreement, the Company issued 355,074 shares in
1993 upon the completion of the private placement. The Company did not meet the
performance criteria and issued an additional 106,712 shares in 1995. Since the
issuance of the 106,712 shares results from a contract to raise equity
financing, the value of the shares has been reflected as "offering costs"
associated with the 1993 private placement and accordingly charged to
additional paid-in capital.

Sale of Stock in a Private Offering

During November 1995, the Company sold 400,000 shares of its Series A preferred
stock at $1.25 per share. The Series A preferred stock automatically converted
into common stock in February 1996 upon completion of the initial public
offering. The proceeds of this offering were $397,500, net of offering costs of
$102,500.

Stock Option Plan

Effective January 1, 1995, the Company adopted a Stock Option Plan that
provides incentive for qualified and non-qualified options. The plan covers an
aggregate of 1,040,875 shares. The plan is administered by a committee
appointed by the Board of Directors (Committee). Options must be granted at an
exercise price of 100% of the fair value of the common stock of the Company on
the date of the grant. Incentive options granted to stockholders who possess
more than 10% of the outstanding common stock have a required exercise price of
the greater of 110% of fair value of the common stock on the date of grant. The
incentive options are exercisable six months after the date of grant and expire
up to ten years from date of grant or up to five years from the date of grant
for incentive options to stockholders who possess more than 10% of the
outstanding common stock.



                                     F-22
<PAGE>   61
                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - STOCKHOLDERS' EQUITY (CONTINUED)

Stock Option Plan (continued)

Non-Qualified options may be granted at exercise prices not less than 85% of
the fair value of the common stock of the Company on the date of grant. The
Non-Qualified options become exercisable six months from the date of grant and
expire ten years from the date of grant.

Additionally, the Committee can grant stock appreciation rights in tandem with
a stock option, in addition to a stock option, or free-standing and unrelated
to a stock option. A stock appreciation right entitles the participant to
receive from the Company an amount equal to the positive difference between (i)
the fair market value of common stock on the date of exercise of the stock
appreciation right and (ii) the grant price or some other amount as the
Committee may determine at the time of grant and may only be exercised during a
period which (i) begins on the third business day following a date when the
Company's quarterly summary statement of sales and earnings is released to the
public and (ii) ends on the 12th business day following such date (iii) or
automatically on the date when a related stock option expires. Stock
appreciation rights are payable in cash, shares of common stock or a
combination of both. No stock appreciation rights have been granted.

The Committee may grant Restricted Stock in exchange for consideration in an
amount determined by the Committee to be paid in cash, or at the discretion of
the Committee, in the form of a promissory note, or delivery of common stock
already owned by the participant for at least six months and valued at its fair
value, or any combination thereon, provided no less than the par value of the
common stock is paid in cash. The Restricted Shares can be awarded to a
participant who has rendered no less than three months of services and are
subject to such restrictions as the Committee imposes. No Restricted Stock has
been granted.

The Committee can award Performance Units or Performance Shares to participants
who attain certain objectives as set forth by the Committee and are payable in
cash, common stock, or a combination of both. Performance Units or Performance
Shares do not entitle the holder to voting rights and at the Committee's
discretion, a dividend equivalent can be attached. No Performance Units or
Performance Shares have been awarded.





                                     F-23
<PAGE>   62

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - STOCKHOLDERS' EQUITY (CONTINUED)

Stock Option Plan (continued)

The following is a summary of options and warrants at June 30, 1997:
<TABLE>
<CAPTION>
                                                                       Weighted
                                                                        Average
                                                        Exercise       Exercise
                                                        Price Per      Price Per
                            Options       Warrants        Share          Share
                          -----------   -----------    -----------     ---------
<S>                       <C>           <C>            <C>            <C>
Balance - June 30, 1995          --             --     $      --        $   --

Granted                       560,500      2,000,000   $5.25-$8.14      $ 6.71

Exercised                      (1,000)          (200)  $      5.25      $ 5.25
                          -----------    -----------   -----------      ------

Balance - June 30, 1996       559,500      1,999,800   $5.25-$8.14      $ 6.71

Granted                        16,310        400,000   $5.25-$7.00      $ 6.85

Exercised                      (1,777)          (400)  $5.25-$7.00      $(5.57)

Canceled                      (59,742)          --     $      5.25      $(5.25)
                          -----------    -----------   -----------      ------

Balance - June 30, 1997       514,291    $ 2,399,400   $5.25-$8.14      $ 6.76
                          ===========    ===========   ===========      ======
</TABLE>

Stock Options and Warrants

The Corporation has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" for options and warrants granted to employees. Accordingly, no
compensation cost has been recognized for the stock option plans.

Had compensation cost for the Corporation's two stock option plans been
determined based on the fair value at the grant date for awards in 1997 and
1996 consistent with the provisions of SFAS No. 123, the Corporation's net
earnings and earnings per share would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                  June 30,
                                        ---------------------------
                                            1997             1996
                                        -------------    ----------
<S>                                     <C>              <C>       
Net (loss) income - as reported         $  (1,300,209)   $   82,970
Net loss - pro forma                    $  (1,329,436)   $  (68,073)
(Loss) income per share - as reported   $        (.27)   $      .02
Loss per share - pro forma              $        (.28)   $     (.02)
</TABLE>



                                     F-24
<PAGE>   63

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - STOCKHOLDERS' EQUITY (CONTINUED)

Stock Options and Warrants (continued)

Options and warrants granted to non-employees for services and loan fees
resulted in the Company recording compensation expense of $9,982 and loan costs
of $250,000 which are being amortized over a two year term of the notes.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants: dividend yield of 0%; expected volatility of
34.82%; discount rate of 10.00%; and expected lives of 5 to 10 years.


NOTE 13 - PROFIT SHARING PLAN

Effective January 1, 1997, the Company adopted a 401(k) plan. Under this plan,
all employees are eligible to participate in the 401(k) plan following their
six month anniversary of employment on specified entry dates and upon attaining
age 18.

Employer contributions for each participant is a matching contribution up to
100% of the initial $1,000 of salary deferral and thereafter equal to 25% of
the participants eligible contributions for the year which does not exceed 6%
of compensation. Employees may contribute through salary reductions up to 15%
of their compensation. Employer contributions become 100% vested with an
employee reaching the age of 65.

Prior to this date, the contributions become vested as follows:

<TABLE>
<CAPTION>
                                   Percent of
                                 Nonforfeitable
         Years of Service          Interest
         ----------------        --------------
<S>             <C>                    <C>
                1                      0%
                2                      20%
                3                      40%
                4                      60%
                5                      80%
                6 or more             100%
</TABLE>


Contributions of approximately $49,000 were accrued to the 401(k) plan for the
year ended June 30, 1997.  Matching employer contributions are satisfied with
the Company's common stock.



                                     F-25
<PAGE>   64

                      THE COMPANY DOCTOR AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - PROFIT SHARING PLAN (CONTINUED)

The Company also has a Profit Sharing Trust with the same eligibility and
vesting requirements as the 401(k) plan. Employer contributions are at the sole
discretion of the Company's Board of Directors. Contributions are allocated to
participants based on their eligible compensation. No contributions were
allocated to the profit sharing trust for the year ended June 30, 1997.





                                     F-26
<PAGE>   65
                                EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT NO      DESCRIPTION
----------      -----------
<S>             <C>
  #    2.2      Stock Purchase Agreement by and between Rubus Realty Company
                and the Company.

  ##   2.3      Asset Purchase Agreement by and between C.A. Riser, M.D. and
                the Company.

  ##   2.4      Asset Purchase Agreement by and between C.A. Riser, M.D. and
                Donald F. Angle, M.D., P.A.

  +    2.5.1    Stock Purchase Agreement by and among Doctors' Inn,
                Incorporated, Henry H. Calderoni, Francisco J. Guerra and the
                Company.

  oo   2.5.2    Amendment to Stock Purchase Agreement by and among Doctors'
                Inn, Incorporated, Henry H. Calderoni, Francisco J. Guerra and
                the Company.

  +    2.6      Stock Purchase Agreement by and among Francisco J. Guerra,
                M.D., P.A., Francisco J. Guerra, M.D. and Donald F. Angle,
                M.D., P.A.

  +    2.7      Stock Purchase Agreement by and between Henry H. Calderoni,
                M.D., P.A., Henry H. Calderoni, M.D. and Donald F. Angle, M.D.,
                P.A.

  ++   2.8      Asset Purchase Agreement by and among Northside Family Medical
                Clinic Professional Association, J.W. Czewski, D.O., and The
                Company Doctor.

  ++   2.9      Stock Purchase Agreement by and among Northside Family Medical
                Clinic Professional Association, J.W. Czewski, D.O., and
                Donald F. Angle, M.D., P.A.

  **   2.10     Stock Purchase Agreement by and among Robert G. Duchouquette,
                M.D., P.A., Robert G. Duchouquette, M.D. and The Physician
                Group, P.A.

  **   2.11     Stock Option Agreement by and between Robert G. Duchouquette,
                M.D. and the Company.

  **   2.12     Registration Rights Agreement by and between Robert G.
                Duchouquette, M.D. and the Company.

  *    3.1.1    Certificate of Incorporation of the Company as filed on June 4,
                1992 with the Secretary of State of the State of Delaware.

  *    3.1.2    Certificate of Amendment to Certificate of Incorporation of the
                Company as filed on October 5, 1995 with the Secretary of State
                of the State of Delaware.

  *    3.2.1    Amended and Restated By-Laws of the Company.

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<PAGE>   66

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EXHIBIT NO.     DOCUMENT
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  *    4.1      Form of specimen certificate for Common Stock of the Company.

  *    4.2      Form of specimen certificate for Warrants of the Company.

  *    4.4      Form of Unit Purchase Option issued by the Company to Royce
                Investment Group, Inc.

  *    4.5.1    Form of Warrant Agreement by and among the Company, Continental
                Stock Transfer & Trust Company and Royce Investment Group, Inc.

  x    4.5.2    Amendment to Warrant Agreement by and among the Company,
                Continental Stock Transfer & Trust Company and Royce Investment
                Group, Inc.

  xx   4.6      Letter Agreement, dated April 15, 1997, by and between the
                Company and HealthCare Financial Partners - Funding II, L.P.

  *    10.1.1   Employment Agreement by and between Donald F. Angle and the
                Company.

  *    10.1.2   Employment Agreement by and between Fred G. Parrish and the
                Company.

 ***   10.2     Amended and Restated Omnibus Stock Plan, effective January 1,
                1995, as amended on March 10, 1997.

  *    10.3.1   Lease Agreement, dated June 21, 1991, by and between Twin
                Towers Investment Partnership and Emergency Occupational
                Physician's Services, Inc. and Addendum Number One, dated
                September 30, 1993.

  *    10.3.2   Lease Agreement, dated September 30, 1993, by and between
                Dallas Forest Park Corporation and Emergency Occupational
                Physician's Services Incorporated.

  *    10.3.3   Lease Agreement, dated June 19, 1993, by and between AGF
                Stadium Place, Ltd. and the Company.

  **   10.3.4   Commercial Real Estate Lease, dated October 1, 1996, by and
                among Quad Corners Investments, Ltd., a Texas Limited
                Partnership, The Physician Group, P.A., and the Company.

  o    10.3.5   Sublease Agreement, dated April 23, 1996, by and between
                Dominion Oil and Gas Corporation and the Company.

  o    10.3.6   Sublease Agreement, dated on or about January 1, 1992, by and
                between San Jacinto Methodist Hospital and Dr. C. A. Riser (as
                predecessor in interest to the Company).

  o    10.3.7   Lease and Addendum, dated December 15, 1991 and December 30,
                1991, respectively, by and between Dr. Jim W. Czewski (as
                predecessor in interest to the Company) and John D. Willbanks,
                et al.

  o    10.3.9   Lease Agreement, dated April 1, 1996, by and between HCT
                Management & Ventures Company and the Company.

  x    10.3.10  Lease Agreement, dated February 20, 1997, by and between Rudd
                Properties and the Company.


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<PAGE>   67

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<CAPTION>
EXHIBIT NO.     DOCUMENT
-----------     --------
<S>             <C>
  x    10.3.11  Lease Agreement, dated June 11, 1997, by and between Dr. Nabil
                A. Mouffarej, M.D. and Hanan T. Mouffarej and Andicare
                Incorporated, a wholly owned subsidiary of the Company.

  x    10.3.12  Lease Agreement, dated September 18, 1996, by and between
                Westwood Crown Partners, Ltd. and Emergency Occupational
                Physicians Services, Inc., a wholly owned subsidiary of the
                Company.

  x    10.3.13  Second Amendment to Lease Agreement, dated December 18, 1996,
                by and between Twin Towers Investment Partnership and Emergency
                Occupational Physician's Services, Inc., a wholly owned
                subsidiary.

  *    10.5     Joint Marketing Agreement, dated March 23, 1995, by and between
                Employers General Insurance Group and the Company.

  *    10.6.1   Practice Management, Consulting and Clinic Services Agreement,
                dated November 1, 1995, by and between Donald F. Angle, M.D.
                P.A. and the Company.

  x    10.6.2   Amendment to Practice Management, Consulting and Clinic
                Services Agreement, dated November 1, 1995, by and between
                Donald F. Angle, M.D. P.A. and the Company.

  *    10.7.1   Practice Management Agreement, dated April 1, 1995, by and
                between Doyle L. Sharp, M.D. P.A. and the Company.

  *    10.7.2   Addendum to Practice Management Agreement, effective December
                19, 1995, by and among the Company, Doyle Sharp M.D. P.A. and
                Donald F. Angle, M.D. P.A.

  *    10.8.1   Operating Agreement of HealthFirst Center, L.L.C., by and among
                HealthFirst Center, L.L.C., St. Vincent Infirmary Medical
                Center and the Company.

  *    10.8.2   MSO Management Agreement by and between HealthFirst Center,
                L.L.C. and the Company.

  *    10.8.3   Loan and Security Agreement, dated July 27, 1995, by and
                between St. Vincent Infirmary Medical Center and HealthFirst
                Center, L.L.C.

  *    10.8.4   Form of Secured Promissory Note from HealthFirst Center, L.L.C.
                to St. Vincent Infirmary Medical Center.

  *    10.8.5   Practice Management Agreement by and between HealthFirst
                Center, L.L.C. and Donald F. Angle, M.D. P.A.

  *    10.9     Form of Preferred Employee Plan agreement between various
                employer customers and the Company.

  *    10.9.1   Form of Amendment to Letter of Agreement between Preferred
                Employee Plan customers, the Company and Donald F. Angle, M.D.
                P.A.

  *    10.10.1  Equity Capital Formation Letter Agreement, dated March 10,
                1992, among EOPS, Dale Willetts and Jack P.  Kennedy.

  *    10.10.2  Amendment No. 1 to Equity Capital Formation Letter Agreement,
                dated August 24, 1992, among EOPS, Dale Willetts and Jack P.
                Kennedy.

  *    10.10.3  Memorandum of Understanding, dated June 22, 1994, by and among
                Dale W. Willetts, John P. Kennedy and the Company.


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<PAGE>   68
<TABLE>
<CAPTION>
EXHIBIT NO.     DOCUMENT
----------      --------
<S>             <C>
  *    10.10.4  Amendment No. 2 to Letter Agreement, dated November 1, 1995,
                among the Company, John P. Kennedy and Dale W. Willetts.

  *    10.11    Consulting Agreement, dated March 10, 1992, between Jack P.
                Kennedy and EOPS.

  *    10.12.1  Exchange Agreement, dated July 24, 1992, by and among EOPS,
                Andicare, Donald F. Angle, M.D. and the Company.

  *    10.12.2  Exchange Agreement, dated July 20, 1992, by and among Andicare,
                Donald F. Angle, M.D., Carl S. Luikart, M.D., Ann Angle and the
                Company.

  *    10.12.3  Exchange Agreement, dated July 24, 1992, by and among EOPS,
                Donald F. Angle, M.D., Jan Kohout, M.D., Dennis Sullivan and
                the Company; Settlement Agreement, dated September 26, 1995, by
                and between Dennis M. Sullivan, M.D. and the Company; and
                Settlement Agreement, dated September 26, 1995, by and between
                Jan Kohout, M.D. and the Company.

  o    10.13    Promissory Note, dated May 6, 1996, from the Company to 
                BankOne, Texas, N.A.

  x    10.14.1  Loan and Security Agreement, dated April 15997, by and between
                The Company, Andicare, Inc., Emergency Occupational Physician's
                Services, Inc., (collectively, the "Borrower"), and HCFP
                Funding, Inc.

  x    10.14.2  Amendment to Loan and Security Agreement, dated April 15997, by
                and between The Company, Andicare, Inc., Emergency Occupational
                Physician's Services, Inc., (collectively, the "Borrower"), and
                HCFP Funding, Inc.

  *    21       Subsidiaries of the Company.

  x    23       Consent of Ehrhardt Keefe Steiner & Hottman PC, independent
                certified public accountants for the Company.

  x    27       Financial Data Schedule

</TABLE>

----------------
x    Filed herewith.
*    Incorporated by reference from the issuer's Registration Statement on Form
     SB-2 (S.E.C. File No. 33-74876-D) as declared effective on February 6,
     1996.
#    Incorporated by reference from the Issuer's Form 8-K for event date of
     July 9, 1996.
##   Incorporated by reference from the Issuer's Form 8-K for event date of
     August 15, 1996.  
+    Incorporated by reference from the Issuer's Form 8-K for event date of 
     August 21, 1996.  
++   Incorporated by reference from the Issuer's Form 8-K for event date of 
     August 28, 1996.  
**   Incorporated by reference from the Issuer's Form 8-K for event date of 
     September 20, 1996.  
o    Incorporated by reference from the Issuer's Form 10-KSB for the fiscal year
     ended June 30, 1996.  
xx   Incorporated by reference from the Issuer's Form S-3 Registration 
     Statement (S.E.C. File No. 333-30977).  
xxx  Incorporated by reference from the Issuer's Form S-8 Registration 
     Statement (S.E.C. File No. 333-32305).  
oo   Incorporated by reference from the Issuer's Form S-3 Registration 
     Statement (S.E.C. File No. 333-21705).

    (b)  REPORTS ON FORM 8-K

    The Company did not file any reports on Form 8-K during the last quarter of
the 1997 fiscal year.