<PAGE>   1
                                   FORM 10-KSB

                       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,
         1996

                                       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
             (Exact name of registrant as specified 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, including Zip Code)

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

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

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

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

                                      NONE

Check whether the registrant (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 disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not 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 [X]

State issuer's revenues for its most recent fiscal year:  $4,193,906

As of September 26, 1996, 4,972,693 shares of the registrant's Common Stock were
outstanding. The aggregate market value of the 3,376,438 shares of Common Stock
held by non-affiliates was $29,965,887 as of September 26, 1996. For purposes of
the foregoing calculation only, each of the Registrant's officers and directors
is deemed to be an affiliate. The market value of the shares was calculated
based on the closing bid price of such shares on The Nasdaq SmallCap Market on
such date.

                      DOCUMENTS INCORPORATED BY REFERENCE:

THE INFORMATION REQUIRED BY PART III OF THIS ANNUAL REPORT IS INCORPORATED BY
REFERENCE TO THE REGISTRANT'S DEFINITIVE PROXY STATEMENT IF FILED WITH THE
COMMISSION ON OR BEFORE OCTOBER 28, 1996 OR, IF SUCH PROXY STATEMENT IS NOT
FILED, WILL BE FILED WITH THE COMMISSION AS AN AMENDMENT TO THIS FORM 10-KSB
UNDER COVER OF FORM 10-KSB/A, NOT LATER THAN OCTOBER 28, 1996.

Transitional Small Business Disclosure Format:  Yes      No  X
                                                    ---     ---
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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

         The Company Doctor manages the non-medical related portions of medical
practices within 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. With its
recent acquisitions, the Company currently manages eleven occupational and
industrial medicine facilities servicing over approximately 4,000 employers and
clients include 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 Practice Management Agreement with The Physician Group, P.A. (formerly
known as Donald F. Angle, M.D. P.A.), a Texas professional association of
physicians and other medical professionals (the "Physician Group"), 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
also receives a portion of its operating revenues from management of two
facilities outside the Physician Group. See "Item 1. Business - Physician
Services, Recruitment and Duties" and - "Affiliations, Joint Ventures and
Acquisitions". Healthcare provider reimbursement laws and regulations for
workers' compensation vary on a state-by-state basis, but the Company currently
operates in states which have a fee schedule pursuant to which the maximum
amounts that may be reimbursed to healthcare providers for a designated
procedure are fixed by regulation. See "Item l. Description of Business -
Regulation." The Company receives a management fee for the provision of
non-medical services, including marketing, management of the practice and the
facilities and provision of non-medical procedures and programs.

         At its 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 will be dependent on the Physician Group or
other professional associations of licensed professionals to render medical
services at the Company's facilities. The Practice Management Agreement between
the Company and the Physician Group is non-exclusive. The Physician Group
renders medical services at all of the Company's facilities in Texas and the
Company anticipates it will continue to contract with the Physician Group to
provide services at facilities which the Company acquires or opens 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 assets of $6.1
billion, surplus of $1.6 billion and an A+ rating from A.M. Best Company, to
develop and offer an insurance and occupational medicine product known

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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 intends to enter the workers' compensation insurance market by
participation in insurance policies with other workers' compensation insurers,
including EGIG, that will serve as the issuing carriers. RMAC expects to
participate in these workers' compensation insurance policies, which the Company
anticipates can be marketed to the Company's clients at premiums which are
comparable to or less than those offered by other workers' compensation
insurers. See "Item 1. Business - Insurance and Insurance Related Operations".

INDUSTRY OVERVIEW

         Occupational and industrial healthcare consists of two principal
components: (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 of
the fifty states 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 the
relevant 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 at least three states (Texas, New Jersey
and South Carolina), employers are not required to purchase such insurance, but
uninsured employers are then 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

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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 for employers with higher than
average claims experience in their industries.

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 clinics 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 1,400 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.

         Each of these facilities is staffed with at least one licensed
physician under contract to the Physician Group. Licensed physicians are
generally trained and experienced in occupational and industrial medicine or
have emergency or general medicine backgrounds. Each facility generally utilizes
a staff of between five and ten full-time persons (or their part-time
equivalents), including registered nurses, physical therapists and
administrative support personnel.

         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
to the Company's clients on a "fee-for-services" basis whereby employers pay the
Physician Group for each medical service rendered to employees as the service is
provided and pay the Company for all non-medical services rendered.

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     SERVICES PROVIDED                                 APPLICATION

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.

         The Preferred Employee Plan. A majority of services are offered
pursuant to a "Preferred Employee Plan" or "PEP," a "capitated" plan which
allows businesses 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 a 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 contracted directly with and arranged by the Physician
Group and the other portion is for non-medical services contracted directly with
and arranged by the Company. Clients pay the same fee for every employee,
regardless of how many services actually are provided to any particular employee
in a given month. All existing PEP agreements are terminable by the client, the
Company or the Physician Group on 30 days' prior written notice.

         The PEP is a variation on the approach of using in-house, captive
medical departments to control medical costs. Advantages of the PEP over the
in-house medical department approach are that (i) small companies can have the
same opportunities for cost containment as major corporations have, (ii) the
more

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sophisticated, in-depth physical examinations provided under the PEP to screen
potential or existing employees 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 existing and
prospective employees 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 the following:

      SERVICES PROVIDED                               APPLICATION

Comprehensive pre-placement
  physical examinations.............          RiskScan computerized health risk
                                              analysis with confidential
                                              individual analysis for each
                                              prospective employee and detailed
                                              management reports on the overall
                                              results; A medical and
                                              occupational history for each
                                              prospective employee; Physician's
                                              examination; Audiometric
                                              evaluation; Vision screening;
                                              Pulmonary function testing;
                                              Submaximal stress
                                              electrocardiogram; Computerized
                                              back testing utilizing the
                                              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 all work related
  injuries including................          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 including.................          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.

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.

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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 13 years experience recruiting and retaining physicians to
staff hospital emergency departments and has operated 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. Two of the eleven facilities currently managed by the Company were
acquired from Dr. Angle and certain other stockholders of the Company.

         In November 1995, the Company entered into the Practice Management
Agreement with the Physician Group, whereby the Company agreed to coordinate,
fund and manage the expansion of the professional medical services of the
Physician Group and the Physician Group agreed to provide medical services at
the facilities managed by the Company. All of the Texas facilities operated by
the Company are included in the Practice Management Agreement. 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 of the professional medical services of
the Physician Group. 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. The Physician Group authorizes the Company to
negotiate on the Physician Group's behalf with clients and potential clients,
for the purposes of establishing fees for individual and bundled medical
services within guidelines established by the Physician Group. The Practice
Management Agreement provides for mutual indemnification. The Practice
Management Agreement specifically separates medical services 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.

         Under the Practice Management Agreement, the Company is responsible for
organizing start-up operations and providing or securing funds in support of
start-up operations for all facilities. The Physician Group retains a portion of
adjusted gross revenues to cover monthly expenses, including amounts to pay
physicians and their benefits, licenses and certifications. 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. In the State of Texas, as required by statute, the Company
only retains net ancillary revenues, such as revenues derived from non-medical
services. Additionally, the Company receives management fees computed for each
of the facilities included in the Practice Management Agreement as follows: for
the first $400,000 of annual base facility revenues, each month the greater of
$4,000 or an amount equal to 10% of the base facility revenues and 15% of the
net Physician Group practice revenues accrued during the prior month; for annual
base facility revenues in excess of $400,000, each month the greater of $10,000
or an amount equal to the sum of 20% of base facility revenues and 30% of net
Physician Group practice revenues accrued during the prior month. The Company
also receives as compensation for centralized marketing services an amount equal
to 5% of monthly gross revenues from each facility. All of these fees were
calculated based upon reasonable costs for providing services and upon review of
historical data directly relating to the costs of the Physician Group.

         The Practice Management Agreement may be terminated under certain
circumstances including by written agreement of the parties after the one year
anniversary date of the Practice Management Agreement; expiration of 20 years
unless renewed; without notice, by either party if either party becomes
insolvent; the breach or default in performance under the Practice Management
Agreement provided that

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such breach or default continues for a period of 30 days after written notice;
receipt by either party of a final order of any governmental agency or court of
competent jurisdiction concerning the business, affairs or the practice of
either of the parties which requires such termination; or the termination of the
Physician Group practice of medicine in any state in which the Physician Group
is providing medical services under the Practice Management Agreement.

         The Company recognizes that its long-term success and viability depends
upon the delivery by physicians of quality medical services that meet or exceed
the quality of care expectations of employees and the expectations of value of
the business community. The Physician Group has implemented procedures designed
to provide cost effective services to employees and keep employers 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

         In the fiscal year ended June 30, 1996 (the "1996 Fiscal Year"),
management determined the Company would enter the workers' compensation
insurance market for the purpose of participating in insurance premium revenues
and enhancing 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. As the first step to entering into the workers' compensation
insurance market was to implement an arrangement with EGIG, a subsidiary of Old
Republic General Insurance Group, Inc., a company listed on the New York Stock
Exchange with assets of $6.1 billion, surplus of $1.6 billion and 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 Fiscal Year 1996, 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

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Company located in Lubbock, Texas for $687,010 cash. The Company renamed the
acquired subsidiary Risk Management Assurance Corporation ("RMAC"). Prior to the
acquisition, RMAC was a dormant multi-line insurance company domiciled and
licensed in Texas.

         RMAC is currently negotiating various affiliations with established
issuing carriers of workers' compensation insurance and is working with EGIG to
redesign the Comp2000 product so that the RMAC can participate in premiums and
risk with EGIG. 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 quota share or 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 expects 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.

         Certain insurance carriers that write umbrella policies will not
provide coverage to an employer if any portion of the employer's underlying
insurance policy, such as the workers' compensation portion, is issued by an
unrated carrier. Accordingly, the Company will endeavor to affiliate with
insurers carrying ratings which range from very good to superior, as determined
by a nationally-recognized insurance rating organization. Ratings are based on a
comparative analysis of the financial condition and operating performance of
insurance companies. RMAC was not rated prior to its acquisition by the Company
and will not be eligible to obtain a rating until it has five years of operating
experience.

AFFILIATIONS, JOINT VENTURES AND ACQUISITIONS

         In addition to establishing new clinics, 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.

         During 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. Subsequent to the end of the 1996 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 and also acquired the assets
of a practice in Fort Worth, Texas. The Company and the Physician Group financed
these acquisitions 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 acquisition, 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 previously owned the
acquired practices entered into a standard physician employment agreement with
the Physician Group to perform as a Staff Physician

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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, 1996, 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
$52,000 for management fees and $30,000 for the equipment provided.

         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 the 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 services.
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.

                                      -10-
<PAGE>   11
         The Company's arrangement with EGIG for the Comp2000 product is
representative of 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 will 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
and fragmented, 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 views OccuSystems, Inc. and to a lesser extent CRA Managed Care, Inc.
as its principal competition in its existing markets. OccuSystems is the
nation's largest physician practice management company focusing on occupational
healthcare and is active in a number of states, including Texas. CRA Managed
Care, Inc. is a field case management and specialized cost containment firm
which is active in all of the Company's markets.

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

         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. RMAC may also be subject to competition in recruiting personnel with
experience in workers' compensation insurance.

REGULATION

         General. The Company's business is conducted within a highly regulated
environment. 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, many
aspects of business operations conducted by entities having a relationship such
as that between the Company and the Physician Group have not been the subject of
state or federal court or regulatory agency interpretation. 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. And finally, laws and
regulations change

                                      -11-

<PAGE>   12
frequently and any change could negatively or positively affect demand for the
Company's services, could reduce revenues or decrease the Company's ability to
compete effectively.

         Workers' Compensation Legislation. 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 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 charge by providers.

         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.

         In several states, the number of workers' compensation claims and the
cost per claim have recently deceased, 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.

         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 can not arrange for the procurement of
capitated physician services and can not 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

                                      -12-

<PAGE>   13
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 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.

         Insurance Industry Laws. RMAC will be subject to 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.

         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 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.

                                      -13-

<PAGE>   14
         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.

EMPLOYEES

         The Company had 60 full-time employees as of June 30, 1996, all of whom
provided non-physician services. Of the Company's employees, approximately 19
are administrative staff, 22 are paramedical staff, six are sales and marketing
personnel and 13 are corporate personnel. Additionally, as of June 30, 1996, the
Company was contracting through the Physician Group for the services of nine
physicians. Due to its recent practice acquisitions, the Company currently has
118 full-time employees, of whom approximately 45 are administrative staff, 49
are paramedical staff, five are sales and marketing personnel and 13 are
corporate personnel. Additionally, the Company currently contracts through the
Physician Group for the services of 21 physicians. None of the Company's
employees are subject to collective bargaining agreements. The Company believes
its employee relations are good.



                                      -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. During the 1996 Fiscal Year, the Company moved its executive offices
to Suite 1800, 5215 North O'Connor, Irving, Texas 75039. The following tabulates
certain information with respect to the facilities currently leased by the
Company.

<TABLE>
<CAPTION>
                                                             Current
                                                Square       Monthly                                     Lease
         Location                               Footage       Rental              Lessor                Expiration
----------------------------                    -------     ---------         --------------            ----------
<S>                                              <C>       <C>           <C>                             <C>
Irving (Executive Offices)                       3,172     $   4,126     Dominion Oil & Gas               02/28/99
  5215 North O'Connor, Ste. 1800                                         Corporation (1)
  Irving, Texas 75039

  9500 Forest Lane, Ste. 110                     5,701     $   5,345     Dallas Forest Park               12/31/00
  Dallas, Texas 75243                                                    Corporation

  8585 Stemmons Freeway                          6,107     $   7,379     Twin Towers Investment
  Dallas, Texas 75247                                                    Partnership                      7/22/96

  1200 East Copeland, Ste. 100                   7,352     $   7,505     AGF Stadium Place, Ltd.          7/30/00
  Arlington, Texas 76011

  1666 E. Bert Kouns Street, Ste. 100            5,137     $   3,847     Sale Commercial                  (2)
  Shreveport, Louisiana                                                  Properties

  4308 Garth Road                                4,784     $   2,870     San Jacinto Methodist            (2)
  Baytown (Houston), Texas 77521                                         Hospital (1)

  2700 W. Pleasant Run Road                      1,385     $   1,847     Healthtrust Inc.                 3/31/01
  Lancaster (Dallas), Texas 75146

  1865 Lee Trevino(3)                            4,100     $   5,466     Francisco J. Guerra, M.D./       (3)
  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

  301 W. Central Avenue                          2,200     $   2,000     John D. Willbanks, et al         3/31/97
  Fort Worth, Texas 76106

  3604 Beltline Road                            10,000     $   8,000     Quad Corners Investments,        9/30/06
  Dallas, Texas 75234                                                    Ltd., a Texas Limited
                                                                         Partnership
</TABLE>

------------------
(1)  Subleased from the named party.
(2)  Currently leased or subleased on a month-to-month basis.
(3)  The physicians from whom this practice was acquired intend to enlarge the
     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. This space is being leased on a month-to-month basis pending
     execution of a lease agreement and expansion of the space.



                                      -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 during the fourth quarter of the fiscal year
covered by this Form 10-KSB to a vote of security holders through the
solicitation of proxies or otherwise.


                                      -16-

<PAGE>   17
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock has 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 bid prices, as
reported by The Nasdaq Stock Market, from February 7, 1996 through June 30,
1996. 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
                                                    ------------              --------
         FISCAL YEAR 1996                         HIGH          LOW          HIGH         LOW
         ----------------                         ----          ---          ----         ---

<S>                                             <C>           <C>           <C>         <C>  
          Third Quarter (commencing 2/7/96)      $10.25        $8.50         $3.50       $2.25
          Fourth Quarter                          10.87         9.37          4.25        3.00

</TABLE>

         On September 26, 1996, the closing bid price of the Common Stock was
$8.87 and the number of record holders of the Company's Common Stock was
approximately 75.

         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.


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
physician practices engaged in the diagnosis, treatment and management 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 1996 Fiscal Year, the
Company derived 33% of its revenues from management of practices which were
providing services for work-related injuries and illnesses. The remaining 67% 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, malpractice insurance premiums and other
related expenses. See "Item 7. Financial Statements, Note 8."

         The Company's concept and business strategy combine the management of
quality healthcare by the Physician Group in an efficient and cost-effective
manner with the Company's preventive healthcare program. The Company now
operates eleven occupational medicine facilities servicing approximately 4,000
employers. The Physician Group currently acts as the primary caregiver and the
Company serves as the gatekeeper for the majority of claims experienced by its
employer clients. The Company has entered into an arrangement with EGIG and is
revising a plan to market a fully guaranteed cost workers'

                                      -17-

<PAGE>   18
compensation insurance policy that includes the Physician Group's capitated
preventive healthcare services and insurance offered by EGIG's parent, Old
Republic General Insurance Group, Inc. and RMAC. The Company acquired RMAC,
effective June 30, 1996, and intends to enter the workers' compensation
insurance market by participation in insurance policies with other workers'
compensation insurers, including EGIG, that will serve as the issuing carriers.
The Physician Group will provide medical services, the Company will provide
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 entered into agreements to
purchase 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 August of 1996, the Company acquired a practice in El Paso,
Texas. The following table sets forth certain consolidated financial data as a
percentage of total revenues for each of the three years ended June 30, 1994,
1995 and 1996. The table also sets forth proforma consolidated financial
information as a percentage of proforma revenues assuming the acquisitions of
the Baytown and El Paso practices and the acquisition of RMAC had been completed
on July 1, 1994. The operations of Lancaster are not included in the pro forma
statement of operations as its effect would have been immaterial.

<TABLE>
<CAPTION>
                                                                                      PROFORMA
                                             PERCENTAGE OF REVENUES            PERCENTAGE OF REVENUES
                                                 FOR THE YEARS                      FOR THE YEARS
                                                 ENDED JUNE 30,                     ENDED JUNE 30,
                                     -----------------------------------------------------------------
                                      1994          1995           1996            1995          1996
                                     -----          -----          -----          -----          -----

<S>                                  <C>            <C>            <C>            <C>            <C>   
Revenues ....................        100.0%         100.0%         100.0%         100.0%         100.0%

Cost of services provided ...         38.3           35.4           34.2           35.4           32.2
General and administrative ..         98.3           65.8           60.5           73.1           53.1
Marketing expenses ..........          2.4            1.7            2.3            1.1            1.3
Development/acquisition costs           --             --            4.8             --            2.4

  Total costs and expenses ..        139.0          102.9          101.8          109.6           89.0
                                     -----          -----          -----          -----          -----
Income (loss) from operations        (39.0)          (2.9)          (1.8)          (9.6)          11.0
Other income (expense)
  Interest income ...........                          --             --            3.3          2.42.9
  Interest expense ..........         (2.9)          (3.5)          (1.9)          (4.7)          (1.2)
                                     -----          -----          -----          -----          -----
Net income (loss) pre-tax ...        (41.9)%         (6.4)%          (.4)         (11.9)          12.7
                                     =====          =====          =====          =====          =====
Income tax benefit (expense)           ---            ---            2.4             --           (4.3)
Net income (loss) ...........        (41.9)%         (6.4)%          2.0%         (11.9)%          8.4%
                                     =====          =====          =====          =====          =====

</TABLE>
         Comparison of Fiscal Years Ended June 30, 1995 and 1996.

         Revenues. Revenues increased $1,188,000 or 39.5%, from $3,006,000 in
the fiscal year ended June 30, 1995 (the "1995 Fiscal Year") to $4,194,000 in
the 1996 Fiscal Year. This growth is attributable mainly to two major factors:
(i) improved marketing efforts resulting in new clients at the established
clinics, which together with fees from the then managed clinics, increased
revenues approximately $816,000, and (ii) management of the clinic in Lancaster,
Texas for all of the 1996 Fiscal Year, and the purchase of this facility in
February 1996, and the commencement of management and ownership of a clinic in
Baytown (Houston), Texas in May 1996. These two new clinics collectively
generated revenues of $372,000 from the date of acquisition to the end of the
1996 Fiscal Year. Revenues increased 118.2%

                                      -18-

<PAGE>   19
for the Garland facility, 83.1% for the Arlington facility, 2.4% for the
Shreveport facility and 4.6% for the Dallas facility from the 1995 Fiscal Year
to the 1996 Fiscal Year. The Company opened a clinic in Ft. Worth in April, 1996
and revenues from that clinic were nominal as a start-up clinic. The unaudited
proforma consolidated statement of operations, assuming the acquisitions of the
Baytown and El Paso practices and the acquisition of RMAC had been completed on
July 1, 1994, indicate that revenues for the 1995 Fiscal Year would have been
$6,355,000 and $8,479,000 for the 1996 Fiscal Year, or over two times the
revenues of the Company as actually constituted in such years.

         Cost of Services. Cost of services provided increased 34.6% from
$1,065,000 in the 1995 Fiscal Year to $1,433,000 in the 1996 Fiscal Year. Cost
of services provided as a percentage of revenues decreased slightly from 35.4%
in the 1995 Fiscal Year to 34.2% in the 1996 Fiscal Year. The cost of services'
increase in actual dollars was primarily due to increased costs of supplies and
cost of therapy services, which were provided during all of the 1996 Fiscal Year
and only a part of the 1995 Fiscal Year. The Company believes that cost of
services provided as a percentage of revenues decreased primarily due to
operating efficiencies and the allocation of service cost over a larger revenue
base. The unaudited proforma consolidated statement of operations described
above show that cost of services provided would have been $2,249,000 for the
1995 Fiscal Year and $2,732,000 for the 1996 Fiscal Year, and the cost of such
services as a percentage of revenues would have been 35.4% and 32.2%,
respectively, if the Baytown and El Paso practices and RMAC had been acquired by
July 1, 1994.

         General and Administrative Expense. General and administrative expense
increased 28.3% from $1,978,000 in the 1995 Fiscal Year to $2,537,000 in the
1996 Fiscal Year. The general and administrative expenses as a percentage of
revenues decreased 5.3%, from 65.8% of revenues in the 1995 Fiscal Year to 60.5%
of revenues in the 1996 Fiscal Year. This decrease reflects increased absorption
of fixed costs over a larger revenue base. The unaudited proforma consolidated
statement of operations referred to above indicate that general and
administrative expenses would have been $4,644,000 for the 1995 Fiscal Year and
$4,503,000 for the 1996 Fiscal Year, or 73.1% and 53.1% of proforma revenues in
such years, respectively. The decrease in general and administrative expense in
absolute amount was due to an approximate $600,000 increase in claims payable
reserves and expense incurred in the 1995 Fiscal Year, and as to which there was
no significant amount incurred in the 1996 Fiscal Year.

         Marketing. Marketing expenses (some of which are incurred with the
express consent of the Physician Group pursuant to the Practice Management
Agreement) increased from $52,000 in the 1995 Fiscal Year to $95,000 in the 1996
Fiscal Year, and increased as a percentage of revenues from 1.7% to 2.3%. 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. The unaudited proforma
consolidated statement of operations indicate that marketing expenses, assuming
the acquisitions of the Baytown and El Paso practices and RMAC had been
completed on July 1, 1994, would have been $71,000 for the 1995 Fiscal Year and
$108,000 for the 1996 Fiscal Year, just slightly higher than actual marketing
expenses incurred by the Company and significantly less as a percentage of
revenues, as the acquired entities were not aggressively marketing their
services.

         Development and Acquisition Costs. The Company had no development and
acquisition costs in the 1995 Fiscal Year, but such costs were $202,000 in the
1996 Fiscal Year, or 4.8% of revenues. The Company's planned expansion
activities caused the Company to incur expected costs in three areas: (i)
pursuing and negotiating affiliations or acquisitions with physicians who have
established occupational medicine practices or patient bases which can be served
in an occupational medical setting; (ii) negotiating the acquisition of, and
acquiring, RMAC on June 30, 1996; and (iii) start-up costs for the clinic
established in April 1996 in Fort Worth, Texas.


                                      -19-

<PAGE>   20
         Interest Expense and Interest Income. Interest expense decreased 21.0%
from $105,000 in the 1995 Fiscal Year to $83,000 in the 1996 Fiscal Year. This
decrease is partially attributable to certain equipment leases being paid and
retired in accordance with their terms during the 1996 Fiscal Year and an
overall reduction in interest rates by paying off a number of equipment leases
(which carried interest rates ranging from 11% to 20%) from the proceeds of a
bank loan bearing interest at 6.75%. As a percentage of revenues, interest
expense was 3.5% in the 1995 Fiscal Year and 1.9% in the 1996 Fiscal Year. The
unaudited proforma consolidated statement of operations indicate that interest
expense would have been $299,000 for the 1995 Fiscal Year and $99,000 for the
1996 Fiscal Year. The increase in proforma interest expense as compared to
actual interest expense reflects the interest payable in connection with notes
issued as partial consideration for the acquisitions of the Baytown and El Paso
practices. Proforma interest expense assumes an acquisition date of July 1,
1994, with the notes paid as of July 1995. The Company had no interest income in
the 1995 Fiscal Year but had $139,000 of interest income in the 1996 Fiscal
Year. This additional source of revenue is primarily attributable to investment
of proceeds of the Company's initial public offering in interest-bearing
obligations. As a percentage of revenues, interest income was 3.3% in the 1996
Fiscal Year. The unaudited proforma consolidated statement of operations
indicate that interest income would have been $154,000 in the 1995 Fiscal Year
and $241,000 for the 1996 Fiscal Year.

         Net Income or Loss. As a result of the factors described above, in
particular, the combination of growth in revenues and containment of costs, the
Company had net income after tax benefits of $83,000 in the 1996 Fiscal Year as
compared to a loss of $194,000 in the 1995 Fiscal Year, an increase of $277,000.
At June 30, 1996, the Company had approximately $1.149 million of net operating
loss carryforwards (for income tax reporting purposes) which expire in the year
2008 through 2010. However, the use of net operating loss carryforward may be
limited or reduced due to a change in ownership as a result of February 1996
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 reduced from
$424,000 to $324,000 in the 1996 Fiscal Year due to the Baytown acquisition and
the historical profitability of such practice, resulting in a $100,000 deferred
tax benefit on the income statement. See "Note 9 to Consolidated Financial
Statements." The proforma consolidated statement of operations indicates that
the Company would have had a net loss of $755,000 in the 1995 Fiscal Year and
net income of $710,000 in the 1996 Fiscal Year had the acquisitions of the
Baytown and El Paso practices and RMAC had been completed on July 1, 1994.

         Comparison of Fiscal Years Ended June 30, 1994 and 1995.

         Revenues. Revenues increased 45.1% from $2,072,000 in the year ended
June 30, 1994 (the "1994 Fiscal Year") to $3,006,000 in the 1995 Fiscal Year.
This growth is attributable to the further development of the facilities managed
by the Company and the Company's ability to capture additional market share.
Revenues increased 16% for the Shreveport facility, 36% for the Dallas facility,
1,125% for the Garland facility and 210% for the Arlington facility from the
1994 Fiscal Year to the 1995 Fiscal Year. The Garland and Arlington facilities
opened in mid-1994, which make comparisons to the 1995 Fiscal Year less
meaningful. The marketing strategy that has been implemented by the Company
provides for marketing to regional as well as local clients.

         Cost of Services. Cost of services provided increased 34% from $794,000
in the 1994 Fiscal Year to $1,065,000 in the 1995 Fiscal Year. Cost of services
provided as a percentage of revenues decreased 2.9% from 38.3% in the 1994
Fiscal Year to 35.4% in the 1995 Fiscal Year. The cost of services' increase is
primarily due to variable costs and facility expenses reflected for an entire
year in the 1995 Fiscal Year which were not in operation for the entire 1994
Fiscal Year. Therapy services in 1995 were

                                      -20-

<PAGE>   21
$75,000, and $0 in 1994. The cost of services as a percentage of revenues
decreased in the 1995 Fiscal Year as a result of management's efforts at cost
control and increased utilization of existing facilities.

         General and Administrative Expense. General and administrative expense
decreased 2.8% from $2,036,000 in the 1994 Fiscal Year to $1,978,000 in the 1995
Fiscal Year. The general and administrative expenses as a percentage of revenues
decreased 32.5%, from 98.3% of revenues in the 1994 Fiscal Year to 65.8% of
revenues in the 1995 Fiscal Year. This decrease is the result of the Company's
management of fixed and variable costs.

         Marketing. Marketing expenses (some of which are incurred with the
express consent of the Physician Group pursuant to the Practice Management
Agreement) increased slightly from $50,000 in the 1994 Fiscal Year to $52,000 in
the 1995 Fiscal Year, but declined as a percentage of revenues from 2.4% to
1.7%.

         Interest Expense. Interest expense increased 75% from $60,000 in the
1994 Fiscal Year to $105,000 in the 1995 Fiscal Year. This increase is
attributable to additional capital leases entered into by the Company. These
capital leases were entered into in mid-1994 and relate to medical and office
equipment associated with the establishment of new facilities. As a percentage
of revenues, interest expense was 2.9% in the 1994 Fiscal Year and 3.5% in the
1995 Fiscal Year.

         Net Loss. As a result of the factors described above, the Company's net
loss of $868,000 in the 1994 Fiscal Year decreased to a net loss of $194,000 in
the 1995 Fiscal Year. At June 30, 1995, the Company had approximately $1.138
million of net operating loss carryforwards for income tax reporting purposes.

LIQUIDITY AND CAPITAL RESOURCES

         In November 1995, the Company raised $500,000 of gross proceeds
($397,500 in net proceeds) by issuing a total of 400,000 shares of Series A
Convertible Preferred Stock. Each share of Preferred Stock automatically
converted into one share of the Company's Common Stock on the completion of the
Company's initial public offering. Proceeds of the private offering were used to
reduce accounts payable (including taxes remaining overdue, penalties and
interest as described above), pay expenses associated with the offering and to
fund working capital.

         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.

         The acquisition of RMAC contributed assets including cash of $1.1
million and short-term investments of $999,000, consisting of $949,000 in U.S.
treasury bills and $50,000 in a certificate of deposit. Those assets are
partially offset by RMAC claims of $1.743 million estimated to be payable over
the course of several years.

         The Company has, in the past, utilized short term financing. 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 prime rate and required quarterly payments
with unpaid interest and principal due on demand. The note was collateralized by
all of the equipment of Andicare, an affiliate of the Company. This line of
credit was used to fund working capital requirements. The balance outstanding
under the line of credit was paid in full prior to June 30, 1996.

                                      -21-

<PAGE>   22
         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 will manage 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 a private placement. 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 attributed the cash flow difficulties to the
start-up of operations in the Garland and Arlington facilities in mid-1994,
which facilities were then being supervised by two former directors of the
Company. Based on the operating history of these facilities since that time,
management believes that the results of operations for these two facilities did
not meet expectations due to the failure of the Company to achieve its 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 facilities
and implemented a new marketing plan which resulted in significant revenue
increases in these facilities.

         As of June 30, 1996, the Company's principal sources of liquidity
included cash and cash equivalents of $5.636 million (derived primarily from
proceeds of the public offering and the acquisition of RMAC), short term
investments of $1.250 million and accounts receivable of $1.097 million, with
all currents assets totalling $8.780 million. The Company had net working
capital of $4.388 million at June 30, 1996. The Company also had investments of
$1.630 million in "other assets" consisting of U.S. treasury notes maturing in
excess of one year from June 30, 1996 and therefor classified as long-term
assets. These U.S. treasury notes could be sold and converted to cash at any
time, and would effectively increase working capital to $6.1 million.

         The Company's operating activities provided cash of $18,000 during the
1995 Fiscal Year and used cash of $947,000 during the 1996 Fiscal Year. The
principal components in cash used or provided by operating activities included
depreciation and amortization ($129,000 and $164,000 in the 1995 Fiscal Year and
1996 Fiscal Year, respectively), deferred taxes of $100,000 in the 1996 Fiscal
Year, accounts receivable (an increase of $121,000 in the 1995 Fiscal Year and
$385,000 in the 1996 Fiscal Year), accounts payable and accrued expenses
($197,000 increase in the 1995 Fiscal Year and $501,000 decrease in the 1996
Fiscal Year), prepaid expenses ($10,000 in the 1995 Fiscal Year and $78,000 in
the 1996 Fiscal Year) and other assets ($2,000 in the 1995 Fiscal Year and
$111,000 in the 1996 Fiscal Year). The changes in accounts receivable, accounts
payable and accrued expenses in the 1995 Fiscal Year and the 1996 Fiscal Year
correspond, to some degree, with the increase in revenues from the 1995 Fiscal
Year to the 1996 Fiscal Year. Nonetheless, in the 1995 Fiscal Year, the Company
experienced the cash flow difficulties discussed above. The Company's cash flow
difficulties were partially responsible for the increase in accrued expenses and
accounts payable in the 1995 Fiscal Year and the first two quarters of the 1996
Fiscal Year, and also contributed to the Company's deferral of its withholding
tax obligation.

                                      -22-

<PAGE>   23
The majority of such tax was paid by November 1995 and the balance was paid in
February 1996 from the proceeds of the Series A Convertible Preferred Stock
offering.

         Cash provided from financing activities totalled $8.407 million in the
1996 Fiscal Year, which was accounted for principally by cash received in the
private placement and the public offering. Cash used in financing activities in
the 1996 Fiscal Year were principally attributed to payments on equipment leases
totalling $371,000 and payment on a note payable of $33,000, offset by proceeds
from a note payable of $506,000. Cash used in financing activities in the 1995
Fiscal Year was primarily attributable to payments on equipment leases totalling
$84,000, countered by proceeds from a note payable of $48,000.

         Cash used in investing activities totalled $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.

         The Company currently has no commitments for capital expenditures,
although the Company anticipates that its working capital needs and capital
expenditures will 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 managed by it
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 acquisitions of practices. The Company obtained a $491,000 bank
loan from BankOne in May, 1996 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 accrues interest at 6.75%, payable monthly, matures in
November, 1996, and is collateralized by a $500,000 certificate of deposit.

         The Company allocated $4.0 million of the proceeds of the public
offering to acquisition and capitalization of RMAC and additional medical
practices to manage. During the 1996 Fiscal Year, the Company and the Physician
Group acquired a practice in Lancaster for 51,846 shares of Common Stock and
acquired a practice 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
in February 1997 valued at $350,000 at the time of issuance. The Company also
acquired RMAC for $687,000 cash. All of the cash used for these acquisitions was
paid subsequent to the end of the 1996 Fiscal Year. Since the end of the 1996
Fiscal Year, the Company and the Physician Group have acquired a practice 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 practice in Fort Worth for
48,047 shares of Common Stock, $300,000 cash and a promissory note in the
principal amount of $200,000; and another practice in Carrollton (a suburb of
Dallas) for 63,380 Shares, 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. The
Company has agreed to register certain of the shares of Common Stock issued in
connection with these acquisitions and, in two instances, if such registration
is not effected by the end of February, 1997, the physicians have the right to
sell the Shares back to the Company for the greater of a specified amount or the
market value of the shares.

                                      -23-

<PAGE>   24
POSSIBLE NON-CASH FUTURE 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 will be subject to release to such
stockholders only in the event the Company's earnings per share for the calendar
year ending December 31, 1996 are equal to or exceed $.25 per share. The
earnings per share calculation will be based on fully diluted earnings per
share, but excluding extraordinary items and excluding any compensation expense
charged to the Company as a result of the release of the escrowed shares. In the
event the Company attains the pre-determined earnings target, the market value
of the escrowed shares held by officers, employees and consultants at the time
the escrowed shares are released will be deemed to be additional compensation
expense to the Company. Accordingly, assuming the earnings target is met (of
which there is no assurance), the Company will recognize what could be a
significant charge to income, and which may reduce or eliminate earnings, if
any. The amount of compensation expense recognized by the Company will not
affect in any way the Company's total stockholders' equity or working capital.

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 first and second 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.

FORWARD-LOOKING STATEMENTS

         This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
and are subject to the safe harbors created thereby. These forward-looking
statements include the plans and objectives of management for future operations,
including plans and objectives relating to (i) the operations of RMAC, (ii) the
continued expansion of the Company's operations through joint ventures and
acquisitions, (iii) success of existing and new marketing initiatives undertaken
by the Company, (iv) the retention of physicians, through the Physician Group,
and the Company's success in generating revenue increases through the retention
of such physicians and an increase in their practices, (v) the Company's success
in concluding acquisitions at prices which permit the Company to achieve
reasonable rates of return on such acquisitions, (vi) the Company's success in
expanding service to regional and national customers which can be serviced
through existing facilities and facilities the Company may be successful in
acquiring, and (vii) 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

                                      -24-

<PAGE>   25
forward-looking statements were based on assumptions that the Company would
continue to grow and on a timely basis, 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.




                                      -25-

<PAGE>   26
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

         None


                                      -26-

<PAGE>   27


                                    PART III

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

ITEM 10. EXECUTIVE COMPENSATION

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company will file a definitive Proxy Statement pursuant to
Regulation 14A for its annual meeting of shareholders. The information called
for by the above Items will be included in such definitive Proxy Statement under
"Election of Directors," "Management and Directors," "Executive Compensation and
Other Remuneration," "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Relationships and Related Transactions," which is
incorporated herein by reference. If such definitive Proxy Statement is not
filed with the Commission within 120 days after the end of the fiscal year
covered by this report, then the information described above will be filed as an
amendment to this report before the end of such 120-day period.

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 Securities and Exchange Commission and are
incorporated herein by this reference:

EXHIBIT NO.
-----------

   #   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       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, including Security Agreement

                                      -27-
<PAGE>   28
EXHIBIT NO.
-----------

   ++ 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., including Secured Promissory
                 Note, Pledge and Security Agreement and Rescission Agreement

   ** 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., including Note, Pledge Agreement and
                 Security Agreement

   ** 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.

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

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

   *  4.3        Form of specimen certificate for Units of the Company.

   *  4.4        Form of Unit Purchase Option to be issued by the Company to
                 the Representative.

   *  4.5        Form of Warrant Agreement by and among the Company,
                 Continental Stock Transfer & Trust Company and the
                 Representative.

   * 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        Omnibus Stock Option Plan, effective January 1, 1995,
                 authorizing 440,875 shares of Common Stock for issuance
                 pursuant to the Plan.

   * 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.

                                      -28-
<PAGE>   29
EXHIBIT NO.
-----------

   **  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.

   *   10.4      Letter of Intent dated December 13, 1994, by and between
                 Creative Business Solutions and the Company.

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

   *   10.6      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 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.

                                      -29-
<PAGE>   30
EXHIBIT NO.
-----------

   *   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.

   *   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.

       14        Not applicable.

       15        Not applicable.

   *   21        Subsidiaries of the Company.

   o   27.1      Financial Data Schedule

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

o        Filed herewith.

*        Incorporated by reference from the Registrant'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 Registrant's Form 8-K for event date
         of July 9, 1996.

##       Incorporated by reference from the Registrant's Form 8-K for event date
         of August 15, 1996.

+        Incorporated by reference from the Registrant's Form 8-K for event date
         of August 21, 1996.

++       Incorporated by reference from the Registrant's Form 8-K for event date
         of August 28, 1996.

**       Incorporated by reference from the Registrant's Form 8-K for event date
         of September 20, 1996.

                                      -30-
<PAGE>   31
EXHIBIT NO.
-----------

     (B) REPORTS ON FORM 8-K

     The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year ended June 30, 1994, but has subsequently filed four reports on
Form 8-K reporting the acquisitions discussed herein.

                                      -31-
<PAGE>   32
ITEM 7.  FINANCIAL STATEMENTS


                                    INDEX TO
                        CONSOLIDATED FINANCIAL STATEMENTS

                             -----------------------
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                             <C>
Independent Auditors' Report.............................................................................       F-2

Consolidated Balance Sheet -- June 30, 1996..............................................................       F-3

Consolidated Statements of Operations -- Years ended June 30, 1995 and 1996..............................       F-4

Consolidated Statement of Changes in Stockholders' Equity (Deficit)
 -- Years ended June 30, 1995 and 1996...................................................................       F-5

Consolidated Statements of Cash Flows -- Years ended June 30, 1995 and 1996..............................       F-6

Notes to Consolidated Financial Statements...............................................................       F-8
</TABLE>


                                       F-1
<PAGE>   33
                          INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheet of The Company
Doctor (a Delaware corporation) and Subsidiaries as of June 30, 1996, and the
related consolidated statements of operations, changes in stockholders' equity
(deficit) and cash flows for the years ended June 30, 1996 and 1995. 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, 1996, and the consolidated
results of their operations and their cash flows for the years ended June 30,
1996 and 1995, in conformity with generally accepted accounting principles.



                                         /s/ Ehrhardt Keefe Steiner & Hottman PC
                                         ---------------------------------------
                                         Ehrhardt Keefe Steiner & Hottman PC


July 26, 1996 (except for Note 2 as to
 which the date is August 23, 1996)
Denver, Colorado



                                     F - 2
<PAGE>   34
                       THE COMPANY DOCTOR AND SUBSIDIARIES


                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 1996
<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                                 <C>
Current assets

       Cash and cash equivalents (Notes 2 and 11)                                   $  5,636,433
       Restricted cash (Note 6)                                                          500,000
       Short-term investments (Notes 3 and 11)                                         1,250,357
       Accounts receivable
             Trade, less allowance for doubtful accounts of $105,000 (Note 2)          1,097,308
             Related parties (Note 8)                                                    113,117
             Other                                                                        85,348
       Prepaid expenses (Note 2)                                                          97,767
                                                                                    ------------
                        Total current assets                                           8,780,330
                                                                                    ------------
Property and equipment (Notes 2, 4, 6, and 7)                                          1,536,898
       Less accumulated depreciation and amortization                                   (659,394)
                                                                                    ------------
                                                                                         877,504

Other assets

       Intangibles, net (Notes 2 and 5)                                                1,688,314
       Other assets (Notes 5 and 9)                                                      563,406
       Investments (Notes 3 and 11)                                                    1,630,453
                                                                                    ------------
                        Total other assets                                             3,882,173
                                                                                    ------------
Total assets                                                                        $ 13,540,007
                                                                                    ============

                                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

       Notes payable (Notes 2 and 6)                                                   1,271,357
       Current maturities of capital lease obligations (Note 7)                           52,501
       Accounts payable and accrued expenses                                             338,077
       Due to sellers (Note 2)                                                           987,010
       Claims payable (Note 10)                                                        1,743,107
                                                                                    ------------
                        Total current liabilities                                      4,392,052

Capital lease obligations, net of current maturities (Note 7)                             79,644
                                                                                    ------------
                        Total liabilities                                              4,471,696
                                                                                    ------------

Commitments and contingency (Notes 8 and 11)

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; 4,676,494
        shares issued and outstanding at June 30, 1996                                    46,765
       Additional paid-in capital                                                     10,255,346
       Accumulated deficit                                                            (1,233,800)
                                                                                    ------------
                        Total stockholders' equity                                     9,068,311
                                                                                    ------------
Total liabilities and stockholders' equity                                          $ 13,540,007
                                                                                    ============
</TABLE>

                 See notes to consolidated financial statements.

                                      F - 3
<PAGE>   35
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                                 Pro Forma
                                                   For the Year Ended June 30,           for the Year Ended June 30,
                                                   ---------------------------           ---------------------------
                                                    1996                1995                1996               1995
                                                    ----                ----                ----               ----
                                                                                              (Unaudited Note 2)
<S>                                               <C>                <C>                <C>                <C>        
Revenues                                          $ 4,193,906        $ 3,006,064        $ 8,479,398        $ 6,354,577

Cost of services provided                           1,433,170          1,064,503          2,732,381          2,249,149
General and administrative expenses                 2,536,751          1,977,804          4,502,727          4,644,127
Marketing expenses                                     94,964             52,032            107,687             71,064
Development and acquisition costs                     202,468               --              202,468               --
                                                  -----------        -----------        -----------        -----------
                                                    4,267,353          3,094,339          7,545,263          6,964,340
                                                  -----------        -----------        -----------        -----------

Loss from operations                                  (73,447)           (88,275)           934,135           (609,763)

Other income (expense)

       Interest income                                139,082               --              241,396            153,676
       Interest expense                               (82,665)          (105,339)           (99,141)          (298,740)
                                                  -----------        -----------        -----------        -----------
                                                       56,417           (105,339)           142,255           (145,064)
                                                  -----------        -----------        -----------        -----------

Net (loss) income before income tax benefit           (17,030)          (193,614)         1,076,390           (754,827)

Income tax benefit (Note 9)                           100,000               --             (366,000)              --
                                                  -----------        -----------        -----------        -----------

Net income (loss)                                 $    82,970        $  (193,614)       $   710,390        $  (754,827)
                                                  ===========        ===========        ===========        ===========

Net income (loss) per common share                $       .02        $      (.09)       $       .16        $      (.30)
                                                  ===========        ===========        ===========        ===========

Weighted average common shares outstanding          4,091,775          2,208,443          4,375,722          2,501,862
                                                  ===========        ===========        ===========        ===========
</TABLE>

                 See notes to consolidated financial statements.

                                      F - 4
<PAGE>   36
                      THE COMPANY DOCTOR AND SUBSIDIARIES

       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
                                                                  Preferred Stock            Common Stock          
                                                                     Series A            ------------------------  
                                                             ------------------------      Number  
                                                              Number of       Par           of           Par       
                                                               Shares        Value        Shares         Value     
                                                             ----------   -----------   -----------   -----------  

<S>                                                          <C>          <C>          <C>           <C> 
Balance at June 30, 1994                                          --        $  --        2,208,443     $ 22,085

Net loss for the year                                             --           --             --           --   
                                                              --------      -------      ---------     --------

Balance at June 30, 1995                                          --           --        2,208,443       22,085

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

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

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)      (4,000)       400,000        4,000

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

Issuance of stock in conjunction with acquisition of
  medical practice, valued at $5.25 per share (Note 2)            --           --           51,846          518

Issuance of stock in conjunction with acquisition of
  medical practice, valued at $10.25 per share (Note 2)           --           --           68,293          683

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

Balance at June 30, 1996                                          --        $  --        4,676,494     $ 46,765
                                                              ========      =======      =========     ========
<CAPTION>

                                                                                                     Total          
                                                               Additional                        Stockholders'      
                                                                 Paid-in         Accumulated         Equity         
                                                                  Capital           Deficit          (Deficit)      
                                                            ---------------   ---------------   -------------       
                                                                                                                    
<S>                                                          <C>               <C>              <C>         
Balance at June 30, 1994                                      $  1,003,009      $(1,123,156)     $   (98,062)

Net loss for the year                                                 --           (193,614)        (193,614)
                                                              ------------      -----------      -----------

Balance at June 30, 1995                                         1,003,009       (1,316,770)        (291,676)

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

Issuance of preferred, Series A at $1.25 per share net of
  $102,500 of offering costs (Note 12)                             393,500             --            397,500

Issuance of common stock net of $2,126,569 of offering
  costs (Note 12)                                                7,570,031             --          7,588,431

Imputed costs associated with stock options granted to
  underwriter in conjunction with initial public 
  offering (Note 12)                                               312,245             --            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)                     6,638             --              6,650

Issuance of stock in conjunction with acquisition of
  medical practice, valued at $5.25 per share (Note 2)             271,673             --            272,191

Issuance of stock in conjunction with acquisition of
  medical practice, valued at $10.25 per share (Note 2)            699,317             --            700,000

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

Balance at June 30, 1996                                      $ 10,255,346      $(1,233,800)     $ 9,068,311
                                                              ============      ===========      ===========
</TABLE>

                 See notes to consolidated financial statements.

                                      F-5
<PAGE>   37
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 For the Years Ended
                                                                                       June 30,
                                                                            -----------------------------
                                                                                1996              1995
                                                                            -----------        ----------
<S>                                                                         <C>                <C>
Cash flows from operating activities
     Net income (loss)                                                      $    82,970        $(193,614)
                                                                            -----------        ---------
     Adjustments to reconcile net loss income to net cash provided by
      operating activities
         Depreciation and amortization                                          163,620          129,078
         Deferred taxes                                                        (100,000)              --
         Change in assets and liabilities
              Accounts receivable                                              (385,711)        (121,354)
              Prepaid expenses                                                  (77,517)          (9,877)
              Other assets                                                     (110,958)          (1,793)
              Checks written in excess of bank balance                          (18,265)          18,265
              Accounts payable and accrued expenses                            (501,117)         196,956
                                                                            -----------        ---------
                                                                             (1,029,948)         211,275
                                                                            -----------        ---------
                  Net cash (used in) provided by operating activities          (946,978)          17,661
                                                                            -----------        ---------

Cash flows from investing activities
     Cash acquired from medical practices                                     1,139,056               --
     Purchases of property and equipment                                       (482,825)          (3,832)
     Purchase of investments                                                 (1,881,469)              --
     Increase in restricted cash                                               (500,000)              --
     Purchase of intangibles                                                    (97,863)          (8,884)
                                                                            -----------        ---------
                  Net cash used in investing activities                      (1,823,101)         (12,716)
                                                                            -----------        ---------
Cash flows from financing activities
     Proceeds from notes payable                                                506,250           48,250
     Net proceeds from offerings                                              8,304,826               --
     Payments on notes payable                                                  (33,143)              --
     Payments on equipment leases                                              (371,421)         (84,161)
                                                                            -----------        ---------
                  Net cash provided by (used in) financing activities         8,406,512          (35,911)
                                                                            -----------        ---------
Cash and cash equivalents increase (decrease)                                 5,636,433          (30,966)
Cash and cash equivalents at beginning of period                                     --           30,966
                                                                            -----------        ---------
Cash and cash equivalents at end of period                                  $ 5,636,433        $      --
                                                                            ===========        =========
</TABLE>

Supplemental disclosures of interest paid:
         Interest paid on borrowings for the years ended June 30, 1996 and 1995
         was $95,528 and $92,476, respectively.

Supplemental disclosures of noncash investing and financing activities:
         Purchases of medical equipment through capital leases for the year
         ended June 30, 1995 was $71,329.

Continued on next page.


                See notes to consolidated financial statements.

                                     F - 6
<PAGE>   38
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

Continued from previous page.

During the year ended June 30, 1996, the Company acquired a medical practice in
Lancaster, Texas for 51,846 shares of common stock and a medical practice in
Baytown, Texas for 33,334 shares of common stock and an estimated 34,959 shares
to be issued in 1997, cash (paid subsequent to year end) and a note payable
(Note 2). Additionally, the Company acquired an insurance company for $687,000
cash (paid subsequent to year end). The assets acquired were as follows:

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

    Cash                                            $1,139,000
    Investments                                        999,000
    Accounts receivable                                424,000
    Fixed assets and intangibles                       376,000
    Other                                                3,000
                                                    ----------
                                                     2,941,000
Liabilities assumed
    Claims payable                                   1,743,000)
    Accounts payable and accrued expenses              (83,000)
                                                    ----------
    Net assets acquired                              1,115,000
Fair value of common stock issued                      972,000
Due to seller                                          987,000
Notes payable issued                                   750,000
                                                    ----------
    Goodwill                                        $1,594,000
                                                    ==========
</TABLE>


                See notes to consolidated financial statements.

                                     F - 7



<PAGE>   39
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO 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 (formerly Montfort Insurance
Company) (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 four clinics in the Dallas/Fort Worth Metroplex, one in
Lancaster, Texas, and one in Baytown, 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 65 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.

Cash overdraft positions may occur from time to time due to the timing of
depositing cash receipts and releasing disbursements in accordance with the
Company's cash management policies.

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, 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 - 8
<PAGE>   40
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO 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 1996,
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.

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.

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, 1996 to start operations which is to be repaid out of the $500,000
capitalization (Note 4). 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.


                                     F - 9
<PAGE>   41
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO 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 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, 1996 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, 1996. As noted above, available-for-sale investments are recorded at fair
value.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the 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 $1,750,000 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 Income (Loss) Per Common Share

Net income (loss) per common share has been computed based on the weighted
average number of common shares outstanding during each year. At June 30, 1995,
common stock equivalents have been excluded from the weighted average number of
common shares outstanding as their effect would be immaterial or anti-dilutive.
At June 30, 1996, common stock equivalents are included in weighted average
number of common shares outstanding unless they are anti-dilutive.



                                     F - 10
<PAGE>   42
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounting Standards Not Yet Adopted

In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"). FAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. FAS 123 is
effective for transactions entered into in fiscal years beginning after December
15, 1995. The Company currently accounts for stock-based compensation awards to
employees under the provisions of Accounting Principles Board Opinion No. 25, as
permitted by FAS 123, and intends to continue to do so.

The Company has adopted FAS 123 for stock-based compensation awards to
non-employees for transactions entered into after December 15, 1995 (Note 12).

Reclassification

Certain amounts in the June 30, 1995 consolidated financial statements have been
reclassified to conform with the June 30, 1996 presentation.

NOTE 2 - ACQUISITIONS

In February and May of 1996, the Company entered into agreements to purchase
Doyle M. Sharp, M.D. (Sharp) in Lancaster and C.A. Riser MD, d/b/a Occupational
and Family Medicine (OFM) in Baytown, respectively. Additionally, in June 1996,
the Company acquired RMAC.

The accompanying consolidated financial statements includes the results of
operations from February 6, 1996, May 8, 1996, and June 30, 1996 of Sharp, OFM
and RMAC, respectively.

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>
<CAPTION>
                                                                 Total
                                                                 -----
<S>                                                       <C>            
Asset acquired:
   Cash                                                   $     1,139,000
   Investments                                                    999,000
   Accounts receivable                                            424,000
   Fixed assets and deposits                                      376,000
   Intangibles                                                      3,000
                                                          ---------------
                                                                2,941,000
</TABLE>


                                     F - 11
<PAGE>   43
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


NOTE 2 - ACQUISITIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                            Total
                                                            -----
<S>                                                      <C>            
Liabilities assumed:
   Claims payable                                             (1,743,000)
   Accounts payable and accrued expenses                         (83,000)
                                                         ---------------

Net assets acquired                                            1,115,000

Costs associated with acquisition                                106,000
Fair value of common stock issued                                972,000
Notes payable incurred                                           750,000
Cash (paid subsequent to June 30, 1996)                          987,000
                                                         ---------------

Goodwill                                                 $     1,700,000
                                                         ===============
</TABLE>

The common stock issued in the Lancaster clinic acquisition completed in
February was recorded at the fair value of the stock at the date of the
acquisition which was $5.25 or the price of the stock issued in connection with
the initial public offering completed in February.

Per the acquisition document for the Baytown clinic, the seller is to receive
33,334 shares of stock upon closing and an estimated 34,959 additional shares in
February 1997 equal to $350,000 divided the market value of the common stock in
February 1997. All share and per share amounts in the accompanying consolidated
financial statements have been recorded using the average common stock price at
year end or $10.25.

In August 1996, the Company acquired Doctor's Inn, Incorporated in El Paso,
Texas for 226,752 shares of common stock with a total value of $2,250,000 at the
date of closing, cash of $700,000 and notes payable in the amount of $1,900,000.
The notes bear interest at 9.5% and are due as follows:

         a.       One disbursement of $500,000 not later than April 15, 1997;
                  and

         b.       Equal monthly installments in the amount of $25,000 each plus
                  accrued interest, beginning September 15, 1996 until paid in
                  full.

Pro Forma Statement of Operations

The accompanying unaudited consolidated June 30, 1996 and 1995 statement of
operations was prepared assuming the acquisitions of the Baytown and El Paso
clinics and RMAC had been completed on July 1, 1994. The revenue and expenses
represent the predecessor entities' year ended December 31, 1995 and 1994
revenues and expenses. The operations of Lancaster are not included in the pro
forma statement of operations for the years ended June 30, 1996 and 1995 as
their effect is immaterial. The Pro forma tax provision and net income, assuming
a 34% tax rate, discloses the tax expense had the acquisition taken place July
1, 1994.

                                     F - 12
<PAGE>   44
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


NOTE 3 - INVESTMENTS

The following is a summary of investments at June 30, 1996:

<TABLE>
<CAPTION>
                                                       Amortized Cost or Fair Value *
                                                       ------------------------------
                                            Current              Long-Term                  Total
                                            -------              ---------                  -----
<S>                                       <C>                     <C>                     <C>           
         U.S. treasury notes              $      251,016          $    1,630,453          $    1,881,469
         T-bills                                 949,341                      --                 949,341
         Certificate of deposit                   50,000                      --                  50,000
                                          --------------          --------------          --------------

                                          $    1,250,357          $    1,630,453          $    2,880,810
                                          ==============          ==============          ==============
</TABLE>

*        As the cost or amortized cost approximates fair value of all
         investments at June 30, 1996, there were no unrealized gains or losses
         during fiscal 1996.

The amortized cost and fair value of held-to-maturity and available-for-sale
fixed maturities at June 30, 1996, by contractual maturity, are shown below:

<TABLE>
<S>                                                       <C>           
         Due in one year or less                          $    1,250,357
         Due after one year through five years                 1,089,520
         Due after five years through ten years                  540,933
                                                          --------------
                                                          $    2,880,810
                                                          ==============
</TABLE>

There were no sales of available-for-sale investments during fiscal 1996 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, 1996:

<TABLE>
<S>                                                            <C>            
      Medical equipment                                        $     1,309,080
      Leased equipment                                                 143,780
      Furniture and fixtures                                            30,305
      Leasehold improvements                                            53,733
                                                               ---------------
                                                                     1,536,898

           Less accumulated depreciation and amortization             (659,394)
                                                               ---------------

                                                               $       877,504
                                                               ===============
</TABLE>




                                     F - 13
<PAGE>   45
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


NOTE 5 - INTANGIBLES AND OTHER ASSETS

Intangibles consist of the following at June 30, 1996:

<TABLE>
<CAPTION>
                                                                 Cost
                                                                 ----
<S>                                                          <C>            
         Goodwill                                            $     1,700,014
         Accumulated amortization                                    (11,700)
                                                             --------------- 

                                                             $     1,688,314
                                                             ===============

<CAPTION>
Other assets consist of the following at June 30, 1996.

<S>                                                          <C>            
         Prepaid tax deposit                                 $       324,163
         Deferred tax asset (Note 9)                                 100,000
         Other                                                       139,243
                                                             ---------------

                                                             $       563,406
                                                             ===============
</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, 1996, 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 - NOTES PAYABLE

The notes payable consist of the following at June 30, 1996:

<TABLE>
<S>                                                                  <C>        
Note payable - bank, interest at 6.75% payable monthly.
   Matures November 1996. The note is collateralized by a
   $500,000 certificate of deposit.                                      491,357

Note payable to a limited liability affiliate (Note 3),
   interest at 9%, unpaid principal and interest due October
   31, 1996. The note is collateralized by the equipment of
   HealthFirst.                                                           30,000

Note payable - seller, interest at 9.5%, due in monthly
   installments of $10,000 including interest through April
   15, 1997 when unpaid principal and interest are due.
   Collateralized by the assets of the Houston clinic.                   750,000
                                                                     -----------

                                                                     $ 1,271,357
                                                                     ===========
</TABLE>



                                     F - 14
<PAGE>   46
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


NOTE 7 - CAPITAL LEASES

The Company leases medical equipment under capital leases which require monthly
payments ranging from $233 to $2,785 including interest and expire between June
1996 and December 1999. The following is a summary of assets under capital
leases at June 30, 1996:

<TABLE>
<S>                                                     <C>            
         Medical equipment                              $ 76,582
         Office equipment                                 67,198
         Accumulated amortization                        (28,643)
                                                        -------- 

                                                        $115,137
                                                        ========
</TABLE>

Future minimum lease payments for capital lease obligations are as follows at
June 30, 1996:

<TABLE>
<CAPTION>
         Year ending June 30,
         --------------------
<S>                                                      <C>            
              1997                                       $   63,224
              1998                                           49,607
              1999                                           37,217
              Thereafter                                         --
                                                         ----------
              Total minimum lease payments                  150,048
              Less amounts representing interest            (17,903)
                                                         ---------- 
              Present value of minimum lease payments       132,145
              Less current maturities                       (52,501)
                                                         ---------- 

                                                         $   79,644
                                                         ==========
</TABLE>


NOTE 8 - RELATED PARTY TRANSACTIONS

Related Party Receivables

At June 30, 1996, the Company had advanced monies to two shareholders in the
normal course of business for travel and other related costs totaling
approximately $31,000. Additionally, the Company has receivables due from
HealthFirst of $30,000, for advances to assist in funding operations and $52,000
for management fees.

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.



                                     F - 15
<PAGE>   47
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)

Physicians Group (continued)

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 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,
                                                                --------
                                                     1995                    1996
                                                     ----                    ----
<S>                                              <C>                     <C>            
       Revenue billed to third parties           $     1,871,748         $     2,865,602
                                                 ===============         ===============

       Compensation to doctors                   $       390,879         $       534,674
                                                 ===============         ===============
</TABLE>

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.

NOTE 9 - INCOME TAXES

The Company has the following temporary differences which result in a deferred
tax asset at June 30, 1996:

<TABLE>
<S>                                                            <C>            
       Allowance for credit loss                               $        36,000
       Net operating loss carryforward                                 388,000
                                                               ---------------
                                                                       424,000

       Valuation allowance                                            (324,000)
                                                               ---------------

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




                                     F - 16
<PAGE>   48
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


NOTE 9 - INCOME TAXES (CONTINUED)

At June 30, 1996, the Company has approximately $1,149,000 of net operating loss
carryforwards for income tax reporting purposes which expire in 2008 through
2010. The valuation allowance related to the deferred tax asset has been reduced
$100,000 in the current year due to the acquisition of OFM and the historical
profitability of the OFM clinic which will more likely than not allow the
Company to utilize a portion of its net operating loss carryforwards.

NOTE 10 - CLAIMS PAYABLE

The consolidated financial statements include the estimated liability for unpaid
losses from workers' compensation claims of approximately $1,750,000 at June 30,
1996. 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,
1996 when TCD acquired RMAC (Note 2). 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 1997 will
increase when 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, vehicles, and equipment under
noncancellable operating leases, expiring through March 2001. Future minimum
lease payments for the remaining terms of the leases are as follows:

<TABLE>
<CAPTION>
         Year ending June 30,
         --------------------
<S>                             <C>
                 1997           $  386,758
                 1998              386,131
                 1999              368,375
                 2000              333,045
                 2001              197,043
                                ----------
                                $1,671,352
                                ==========
</TABLE>

Rent expense for the years ended June 30, 1996 and 1995 was $291,887 and
$259,927, respectively.


                                     F - 17
<PAGE>   49
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 - COMMITMENTS AND CONTINGENCY (CONTINUED)

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 (Note 12). 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.

Marketing Agreement

During 1995, the Company 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.

Stockholder Agreement

In 1993, two of the Company's stockholders, who were EOPS stockholders, were
granted the right to receive approximately 4,239 additional shares of common
stock of the Company each time a new facility is opened in the Dallas/Ft. Worth
Metroplex and the greater of 2.5% of the gross revenues of all facilities in the
Dallas/Ft. Worth Metroplex or $8,000 per month. The Company opened new
facilities, and a result, 16,957 shares of common stock were issued,
compensation expense of $62,500 was recorded, and $60,000 was accrued as full
satisfaction for gross revenue payments for the two stockholders. The agreement
was subsequently terminated and no additional amounts are due.

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 - 18
<PAGE>   50
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO 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

On June 30, 1996, the date of acquisition of the insurance company by the
Company, the insurance company had a net surplus of approximately $2,187,000.

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, Montfort is required to
maintain minimum capital stock of $1,000,000 and minimum surplus of $1,000,000.
At June 30, 1996, the date of acquisition, the Company had capital and surplus
of $2,187,000 and has placed internal restrictions on cash and investments for
payment of the approximately $1,750,000 of claims payable.

NOTE 12 - STOCKHOLDERS' EQUITY

Reverse Stock Split

The Board of Directors approved approximately a 1:2.95 reverse stock split. All
references in the accompanying consolidated financial statements to the number
of shares and per share amounts for all periods presented have been restated to
reflect the reverse stock split.


                                     F - 19
<PAGE>   51
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS



NOTE 12 - STOCKHOLDERS' EQUITY (CONTINUED)

Preferred Stock

During the year ended June 30, 1996, the Company and its stockholders approved
amendments of its Certificate of Incorporation to authorize 5,000,000 shares of
preferred stock with attributes to be determined by the Board of Directors.

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.

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 440,875 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 - 20
<PAGE>   52
                       THE COMPANY DOCTOR AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS



NOTE 12 - STOCKHOLDERS' EQUITY (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.

The following is a summary of options and warrants at June 30, 1996:

<TABLE>
<CAPTION>
                                                                  Exercise
                                                                  Price Per
                                       Options     Warrants        Share
                                       -------    ----------     ----------
<S>                                    <C>        <C>            <C>
         Balance - June 30, 1995             -            -      $       -

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

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

         Balance - June 30, 1996       559,500    $1,999,800     $5.25-8.14
                                       =======    ==========     ==========
</TABLE>

                                     F - 21
<PAGE>   53
                                   SIGNATURES


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

                                      THE COMPANY DOCTOR

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

         Pursuant to the requirements of the Securities 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            October 10, 1996
-----------------------------         (Principal Executive Officer) and
Donald F. Angle                       Treasurer (Principal Financial and
                                      Accounting Officer)


/s/  Carl S. Luikart                  Director                                    October 10, 1996
-----------------------------
     Carl S. Luikart

                                      Director
-----------------------------
      Thomas J. Edwards


/s/  John P. Kennedy                  Director                                    October 10, 1996
-----------------------------
     John P. Kennedy


/s/  Dale W. Willetts                 Director                                    October 10, 1996
-----------------------------
     Dale W. Willetts


/s/  W. Howard Haun                   Director                                    October 10, 1996
-----------------------------
     W. Howard Haun


/s/  Stephen W. Cavanaugh             Director                                    October 10, 1996
-----------------------------
     Stephen W. Cavanaugh
</TABLE>
<PAGE>   54
                                EXHIBIT INDEX



<TABLE>
<CAPTION>
EXHIBIT NO.                           EXHIBIT 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       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, including Security Agreement
</TABLE>

<PAGE>   55
<TABLE>
<CAPTION>
EXHIBIT NO.                           EXHIBIT DESCRIPTION
-----------                           -------------------
<S>              <C>
   ++   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., including Secured Promissory
                 Note, Pledge and Security Agreement and Rescission Agreement

   **   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., including Note, Pledge Agreement and
                 Security Agreement

   **   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.

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

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

   *    4.3      Form of specimen certificate for Units of the Company.

   *    4.4      Form of Unit Purchase Option to be issued by the Company to
                 the Representative.

   *    4.5      Form of Warrant Agreement by and among the Company,
                 Continental Stock Transfer & Trust Company and the
                 Representative.

   *   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      Omnibus Stock Option Plan, effective January 1, 1995,
                 authorizing 440,875 shares of Common Stock for issuance
                 pursuant to the Plan.

   *   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.
</TABLE>

<PAGE>   56
<TABLE>
<CAPTION>
EXHIBIT NO.                           EXHIBIT DESCRIPTION
-----------                           -------------------
<S>              <C>
   **  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.

   *   10.4      Letter of Intent dated December 13, 1994, by and between
                 Creative Business Solutions and the Company.

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

   *   10.6      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 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.
</TABLE>

<PAGE>   57
<TABLE>
<CAPTION>
EXHIBIT NO.                           EXHIBIT DESCRIPTION
-----------                           -------------------
<S>              <C>
   *   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.

   *   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.

       14        Not applicable.

       15        Not applicable.

   *   21        Subsidiaries of the Company.

   o   27.1      Financial Data Schedule
</TABLE>

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

o        Filed herewith.

*        Incorporated by reference from the Registrant'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 Registrant's Form 8-K for event date
         of July 9, 1996.

##       Incorporated by reference from the Registrant's Form 8-K for event date
         of August 15, 1996.

+        Incorporated by reference from the Registrant's Form 8-K for event date
         of August 21, 1996.

++       Incorporated by reference from the Registrant's Form 8-K for event date
         of August 28, 1996.

**       Incorporated by reference from the Registrant's Form 8-K for event date
         of September 20, 1996.