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

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

                                   FORM 10-K


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

                  For the fiscal year ended December 31, 1996

                         Commission file number 0-27456

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

                                 EQUIMED, INC.
                        (Successor to EquiVision, Inc.)
             (Exact name of registrant as specified in its charter)

            Delaware                                   25-1668112
   (State or other jurisdiction of         (I.R.S. Employer Identification No.)
   incorporation or organization)

                               2171 Sandy Drive
                           State College, PA  16803
              (Address of principal executive offices) (Zip Code)

                                 (814) 238-0375
                        (Registrant's telephone number)

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

                                      None

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

                   Common Stock, par value $0.0001 per share


     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes        No X
                                      ---       ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].

     The number of shares of the Registrant's Common Stock, par value $.0001 per
share, outstanding as of April 30, 1997 was 27,733,862.  The aggregate market
value of voting stock held by nonaffiliates of the Registrant was $15,055,667 as
of April 30, 1997.

                      DOCUMENTS INCORPORATED BY REFERENCE

     None
<PAGE>
 
                                     PART I
                                     ------


     ITEM 1.  BUSINESS

     Company History

          EquiMed, Inc., a Delaware corporation ("EquiMed" or the "Company") is
     the legal successor to EquiVision, Inc., a Pennsylvania corporation
     ("EquiVision"), which was incorporated in October 1991 and commenced
     operations as an ophthalmology-related and physician practice management
     business, effective January 1, 1992. EquiVision completed its initial
     public offering in November 1993 and has been a reporting company under the
     Securities Exchange Act of 1934 (the "Exchange Act") since that time.

          EquiMed is the result of the merger between EquiVision and Colkitt
     Oncology Group, Inc., a Delaware corporation (the "Oncology Group"), and
     the subsequent reincorporation merger of EquiVision with and into its 
     wholly owned Delaware subsidiary, EquiMed. These two mergers are referred
     to collectively herein as the "Merger." The business combination of the
     Oncology Group and EquiVision was accounted for as a reverse purchase. As a
     result, the Oncology Group was considered for financial reporting purposes
     as the acquiror. The Merger was consummated on February 2, 1996, and a
     follow-on public offering was completed on February 15, 1996 consisting of
     shares sold by the Company and a selling stockholder. The Oncology Group
     was formed in order to facilitate the acquisition by EquiVision, of Equimed
     Common Stock and the subsequent acquisition by EquiMed, of the stock and
     assets of various corporations, partnerships and joint ventures owning or
     controlling 30 radiation oncology centers comprising the Oncology Group.
     Pursuant to the merger agreement the stockholders of the Oncology Group
     received approximately 21 million shares of the Company's common stock 
     (the "Common Stock"). Douglas R. Colkitt, M.D., the principal stockholder
     of the Oncology Group, is currently the Chairman, Chief Executive Officer
     and also the principal stockholder of the Company. Dr. Colkitt became the
     Chief Executive Officer of EquiMed on January 1, 1997. Pursuant to the
     Merger, EquiMed succeeded to all of the assets, liabilities and contractual
     obligations of EquiVision and of the Oncology Group.

          In addition to the acquisition of the radiation oncology centers, the
     Oncology Group had entered into management agreements (the "Management
     Agreements") with the professional corporations affiliated with such
     radiation oncology centers and owned by Dr. Colkitt.  These professional
     corporations employ physicians that maintain medical practices and provide
     medical care to patients receiving treatment at the radiation oncology
     centers.

          In general, the Management Agreements provide that EquiMed, as the
     surviving corporation of the Merger, must supply the professional
     corporations with offices and facilities, non-professional personnel,
     inventory, supplies and management and administrative services.  Under the
     terms of the Management Agreements, EquiMed is responsible for billing and
     collecting the receivables of the professional corporations.  Although each
     professional corporation has legal title to its receivables and net
     revenues from patient care, EquiMed is an agent of each of the professional
     corporations for purposes of billing and collection activities.  See "ITEM
     7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS - Overview."
<PAGE>
 
          The Company currently owns, operates or manages 35 radiation oncology
     centers (the "Oncology Centers") and operates or manages the professional
     corporations affiliated with such Oncology Centers.  In addition, the
     Company currently manages five complementary subspecialty medical practices
     in medical oncology, urology and internal medicine.  The professional
     corporations and the subspecialty medical practices are hereinafter
     collectively referred to as the "Affiliated Medical Practices."

     General Overview

          EquiMed is a transnational holding company for a group of companies
     focused primarily on the provision of physician practice management
     services, information technology and outsourcing services primarily to the
     health care industry. The Company provides medical practice management
     services to the Oncology Centers and Affiliated Medical Practices. In
     addition, through its management services organization division (the "MSO
     Division") the Company provides data processing, billing, accounting,
     collections and other administrative and outsourcing services to the health
     care industry and other businesses. The Oncology Centers and Affiliated
     Medical Practices provide medical services in selected U.S. geographic
     markets. Through wholly and majority owned subsidiaries, the Company also
     engages in real estate leasing, provides medical and legal transcription
     services, established and operates a cosmetic laser treatment center and is
     involved, through a captive insurance company, in the reinsurance of
     professional liability for the Oncology Centers and the Affiliated Medical
     Pratices and workers' compensation insurance.

          Effective November 1, 1996, the Company sold the centers comprising
     its ophthalmology business (the "Ophthalmology Division") to Physicians
     Resource Group, Inc. and its wholly owned subsidiary, PRG Georgia, Inc.,
     both Delaware corporations (collectively, "PRG"). The consideration
     received by the Company for the sale to PRG was approximately $55,077,000
     in cash and the assumption by PRG of approximately $16,611,000 of
     liabilities. In addition, the Company agreed to assist PRG in its
     acquisition of additional ophthalmology practices from November 1996 
     until April 1997 in consideration for negotiated fees and expenses based 
     on the number of additional ophthalmology practice acquisitions
     accomplished in such period. PRG has informed the Company that it does not
     intend to pay such fees and expenses, and in May 1997 the Company initiated
     an arbitration proceeding. See "ITEM 3. LEGAL PROCEEDINGS." There can be 
     no assurance that the Company will receive any of the fees and expenses
     from PRG.

          Effective June 1, 1996, EquiMed established two foreign subsidiaries,
     EquiMed India Private Limited, an Indian company ("EquiMed India") and
     EquiMed Pakistan (Private) Limited, a Pakistan company ("EquiMed Pakistan")
     which provide a wide variety of functions related to the back-office
     support of EquiMed's corporate and medical practice management operations.
     EquiMed India and EquiMed Pakistan each maintain a 50% interest in Poseidon
     Holdings LLC, a Nevis limited liability company ("Poseidon") formed to hold
     all of the equity of Solemar Insurance Ltd., an insurer domiciled in the
     Cayman Islands ("Solemar"). EquiMed India, EquiMed Pakistan and Poseidon
     are hereinafter collectively referred to as "EquiMed Overseas." Through
     contractual arrangements with EquiMed and its controlled or managed
     entities, EquiMed Overseas provides a variety of billing-related services
     and data processing support. Utilizing high-speed, direct telephone and
     satellite links with EquiMed and its affiliated companies, English-speaking
     personnel in India and Pakistan are now providing data processing in
     support of EquiMed's corporate and medical practice management operations.

     Business Strategy

          EquiMed's business strategy is to continue to expand, add value to and
     lower the operating costs of its medical practice management and
     outsourcing operations, and to acquire additional medical transcription
     services, court reporting businesses, and accounting, billing and
     collection service providers, which can benefit from the cost advantage of
     utilizing the overseas back-office support facilities of EquiMed Overseas.
     There can be no assurance that EquiMed will acquire any such businesses or
     if acquired that such acquisitions will be on terms favorable to the
     Company. In addition, there can be no assurance that the Company will be
     able to adequately integrate such acquisitions.

                                       2
<PAGE>
 
          The Company's long-term strategy is to continue to pursue synergistic
     acquisitions for the Oncology Centers and Affiliated Medical Practices and
     to expand its MSO Division and related business activities. In addition,
     the Company intends to use its MSO Division to enhance the efficiency of
     the Oncology Centers and Affiliated Medical Practices, as well as to
     provide outsourcing, temporary staffing and recruiting services to the
     health care industry.

          Ongoing rapid advances in communications technology continue to
     provide business organizations with new ways to organize and configure
     their operations, particularly entities in the medical practice management
     industry. The MSO Division assumes responsibility for the "back room"
     administrative functions, which place burdens on physicians' time and
     interfere with their ability to provide quality medical services to their
     patients, by providing physicians, hospitals and other health care
     providers with billing, collections, accounting and transcription services.

     Recent Developments

          In July 1996, the Company entered into a laser equipment, services and
     revenue sharing agreement with a division of Palomar Medical Technologies,
     Inc. ("Palomar") in connection with the Company's plans to establish
     cosmetic laser treatment centers. In March 1997, the Company terminated its
     revenue sharing agreement with Palomar and Rejuve, Inc. ("Rejuve"), a
     wholly owned subsidiary of the Company will be responsible for the
     acquisition of all laser equipment for the Company's cosmetic laser
     treatment centers. The first new cosmetic laser treatment center was opened
     in the second quarter of 1997 under the administration of Rejuve. Rejuve
     expects to open additional cosmetic laser treatment centers. There can be
     no assurance that the Company will be successful in establishing and
     operating the planned cosmetic laser treatment centers or that the
     anticipated benefits of operating such centers will be realized.

          The Company is also expanding into the reinsurance business through
     its recent establishment of Solemar. Solemar is a captive insurance company
     whose equity is held by Poseidon. Solemar is currently involved in the
     reinsurance of professional liability and workers' compensation policies
     for the Company and anticipates expanding the scope of its business.
     Effective January 1, 1997, Solemar's liability is capped at $250,000 per
     occurrence/incident with a $1,000,000 aggregate limit for 1997.

          As of January 1, 1997, the Company acquired several equipment and real
     estate leasing companies from Douglas R. Colkitt, M.D., Chairman and CEO of
     EquiMed. The companies involved are Nixon Equipment Corporation, ("Nixon")
     which leases medical equipment to many of the Oncology Centers and the
     George Washington Real Estate Corporation ("George Washington") and Thomas
     Jefferson Real Estate Corporation ("Thomas Jefferson"), which own eight
     buildings, seven of which are leased to the Oncology Centers.

                                       3
<PAGE>
 
          Nixon leases various equipment including linear accelerators,
     simulators, High Dose Radiation units, tissue compensators and other
     miscellaneous equipment. The 1996 revenues of Nixon were $2,319,438. The
     total purchase price paid in cash by the Company in the Nixon transaction
     was approximately $400,000. The Company obtained two independent appraisals
     of the equipment to arrive at a fair market valuation for purposes of the
     acquisition of the stock of Nixon.

          The 1996 revenues of George Washington and Thomas Jefferson were
     $574,107 and $102,480, respectively. The total purchase prices paid in cash
     by the Company in the George Washington and Thomas Jefferson transactions
     were approximately $2,000,000 and $339,000, respectively. An independent
     opinion of the property value for the eight properties located in Salisbury
     and Laurinburg, North Carolina, Ft. Pierce, Okeechobee and Tampa, Florida,
     Vineland, New Jersey, Greenbelt, Maryland and Oneonta, New York was
     obtained by the Company for purposes of the acquisition of the stock of
     George Washington and Thomas Jefferson.
     
          Effective April 1, 1997, the Company also acquired from Dr. Colkitt
     all of the capital stock of a group of management services companies
     including Russell Data Services, Inc. ("Russell"), Billing Services Inc.,
     Trident International Accounting, Inc., Tiger Communications International,
     LTD and an 80% interest in Nittany Decisions Services Private Limited
     (collectively, the "Management Services Companies"). The Management
     Services Companies provide outsourcing to health care clients for billing,
     accounting, data processing, collections and other administrative services.
     The 1996 combined revenues for the Management Services Companies was
     approximately $9,565,000. Approximately 50% of the current clients of the
     Management Services Companies are third parties not affiliated with the
     Company. The total consideration paid for the Management Services Companies
     was $6,000,000 in cash plus a potential earn-out of up to $9,300,000
     payable in Common Stock in the event the Management Services Companies
     achieve aggregate combined pre-tax earnings of $3,500,000 in 1997. The
     purchase price was determined on the basis of an acquisition valuation
     study undertaken by an independent appraiser and was approved by the
     Company's independent directors.

          The Affiliated Medical Practices currently have contracts with
     National Medical Financial Services Corporation ("NMFS") for the provision
     of billing, collection and accounts receivable management services, as well
     as certain accounting services. NMFS is a Nevada corporation whose
     securities are registered under the Exchange Act and traded on the Nasdaq
     Stock Market. Dr. Colkitt is the Chairman of the Board and principal
     shareholder of NMFS. NMFS subcontracts its obligations to Russell. In
     conjunction with the acquisition of Russell, the Company is currently in
     the process of renegotiating the contracts with NMFS to have NMFS provide
     marketing services for the MSO Division rather than serving as a contractor
     for outsourcing activities.

          The Company is also expanding into the transcription services
     business. On January 3, 1997, Transcriptions International Inc. ("TI"), a
     wholly owned subsidiary of the Company, acquired the assets of Prophecy
     Health Information Management, Inc., a medical transcription service
     business serving hospitals, health maintenance organizations ("HMOs") and
     private physician practices throughout the United States. The 1996 
     revenues of Prophecy Health Information Management, Inc. were $602,199. 
     The acquisition price was $500,000 in cash. The Company, through TI,
     provides medical records dictation to clients. TI utilizes its employee
     network of transcriptionists, telecommunications network equipment and
     personal computers to convert free-form medical dictation into the
     electronically-formatted patient records.

                                       4
<PAGE>
 
     The Company believes that medical transcription is a growth industry due to
     an increasing demand for legible medical records by insurance companies, as
     a result of health care quality improvement initiatives and by doctors for
     legal defense purposes. The Company expects to acquire additional medical
     transcription firms. However, there can be no assurance that the Company
     will acquire any such businesses or if acquired that such acquisitions will
     be on terms favorable to the Company. In addition, there can be no
     assurance that the Company will be able to adequately integrate such
     acquisitions.

          On January 8, 1997, ALR Reporting, Inc. ("ALR"), a wholly owned
     subsidiary of the Company, acquired all of the capital stock of Doyle
     Reporting Inc., a New York court reporting company and of its related
     support entities (collectively, "Doyle Reporting") that provide the legal
     profession printed and computerized transcripts and video recordings of
     testimony from depositions. The total purchase price was $4,473,000 plus a
     potential earn-out of $300,000 payable in cash in the event Doyle Reporting
     achieves combined gross revenues of $4,500,000 in 1997. The 1996 revenues
     of Doyle Reporting were $4,594,988. ALR expects to acquire other court
     reporting companies in major business markets around the country. There can
     be no assurance that the Company will acquire any such businesses or if
     acquired that such acquisitions will be on terms favorable to the Company.
     In addition, there can be no assurance that the Company will be able to
     adequately integrate such acquisitions.

          EquiMed India has entered into a management agreement with Anesthesia
     Solutions, Inc. ("ASI"), a provider of hospital-based anesthesia department
     staffing services.  On February 3, 1997, the Company approved the
     acquisition of ASI, which is owned by Dr. Colkitt.  The acquisition is not
     yet complete.

     Industry Overview

          Oncology Treatment Centers.  The Health Care Financing Administration
     ("HCFA") estimated health care expenditures in the United States for 1995
     at $989 billion, representing more than 13.6% of gross domestic product
     ("GDP"), up from $600 billion, or 12.1% of GDP, in 1990.  The aging of the
     population and advances in medical technology have contributed to increases
     in the demand for health care.  Medicare and Medicaid, which provide for
     the payment of health care services for approximately 39 million
     individuals in the United States are estimated to have accounted for $214
     billion and $98 billion, respectively, of federal expenditure in fiscal
     1997.

          Within the national health care budget, the provision of cancer
     treatment is a large and growing market.  According to the American Medical
     Association, there are at least 6,000 physicians in the United States
     specializing in oncology.  According to the American Cancer Society, the
     estimated number of cancer cases diagnosed annually in the United States,
     excluding certain skin cancers, increased from approximately 782,000 in
     1980 to approximately 1,252,000 in 1995.  This increase can be attributed
     to a number of factors, including a growing and aging population.  In
     addition, earlier diagnosis and more effective treatment have increased the
     relative five-year survival rate of cancer patients from 39% in 1963 to 54%
     in 1990.  As a result, over eight million Americans living today have been
     diagnosed with cancer.  The National Cancer Institute estimates that total
     cancer costs, including lost productivity and mortality costs, were
     approximately $104 billion in 1994, with direct medical costs constituting
     approximately $35 billion of that total.  Of the approximately one-third of
     all Americans who are expected to develop cancer, approximately 50% will
     receive at least one course of radiation therapy and approximately 20% will
     receive multiple courses of therapy.

          Cancer is a group of more than 100 complex diseases characterized by
     the uncontrolled growth and spread of abnormal cells.  Cancer treatment is
     provided primarily by physicians utilizing radiation

                                       5
<PAGE>
 
     therapy, chemotherapy, surgery and immunotherapy, depending on the type of
     cancer involved.  Radiation therapy, the treatment of cancer with high
     energy radiation, is commonly used to destroy localized tumors and to
     relieve pain and other symptoms.  Chemotherapy, the treatment of cancer
     with pharmaceuticals, is often complicated, requiring management not only
     of the chemotherapy treatment itself, but also of its potentially adverse
     side effects.  Chemotherapy is commonly used to destroy cancer cells that
     have spread to other parts of the body.  Surgery is used in both the
     diagnosis and the treatment of cancer.  Immunotherapy, the treatment of
     cancer by enhancing the patient's own disease-fighting mechanisms, involves
     advanced therapies, such as interferon (a naturally occurring human protein
     capable of stopping the growth of cancer) and other immune response
     modifiers.

          The Company historically has focused on providing radiation and
     medical oncology treatment to cancer patients.  The Company intends to
     expand its range of cancer treatment services to include chemotherapy,
     immunotherapy and surgery.  The Company anticipates that these services
     increasingly will be provided in an outpatient setting.  In the Company's
     view, the delivery of coordinated cancer care in an outpatient setting
     improves the quality of life of patients by providing high-quality care and
     services in a more convenient and cost-effective manner than in a
     traditional hospital setting.

          The Company believes that the recent national focus on cost-
     containment has placed small physician groups and individual practices at a
     disadvantage.  These practices typically lack the capital to expand,
     develop information and billing systems and purchase new technologies,
     which are often required to improve quality of care and to reduce costs.
     These practices also lack the cost accounting and quality management
     systems necessary to allow physicians to enter into sophisticated risk-
     taking contracts with private third party payors.  Additionally, small to
     mid-sized groups and individual practices often lack formal ties with other
     medical care providers; nor do they have themselves the ability to offer a
     variety of medical services.  Small practices also have higher operating
     costs because overhead must be spread over a relatively small revenue base.
     In order to remain competitive in the changing health care industry,
     physicians are increasingly affiliating with larger organizations, such as
     EquiMed.

          Management Services Organizations.  Information collected by HCFA
     indicates that the approximately 600,000 physicians located in the United
     States billed between $134 billion and $175 billion for services in 1993
     and that billings could have reached almost $195 billion in 1994.  In
     addition, it is estimated that physicians control another $600 billion per
     year in referral business to hospitals, clinical labs, home health
     organizations and nursing homes.  Although most physician practice groups
     have an office administrator who handles general administrative tasks,
     recent estimates indicate that less than 25% of direct physician billings
     is currently professionally managed by physician practice management
     companies, hospitals, HMOs or insurance companies.

          The MSO Division now offers a broad range of business services,
     principally to health care providers, including accounting, corporate
     development, managed care administration and quality assurance
     administration. The Company believes that demand for these services is
     significant due to an increasingly complex reimbursement process, downward
     pressure on medical fees, rapid technological changes and processing system
     obsolescence and the growth in hospital outpatient claims and receivables
     owed by patients.

                                       6
<PAGE>
 
          The Company's recent acquisitions of the Management Services Companies
     will provide the Company with the necessary infrastructure in its United
     States facilities and the interface with EquiMed Overseas to offer
     accounting, billing, collections and medical and legal transcription
     services. The Company believes that it is uniquely positioned to enhance
     its revenues through this augmentation of its MSO Division and to provide
     services on an outsourcing basis to other companies.

          Cosmetic Laser Treatment Industry.  Until recently, plastic surgeons
     and dermatologists have utilized a variety of chemical and surgical
     procedures to treat a range of cosmetic skin conditions.  While these
     procedures have produced benefits in some patients, they are subject to
     complications such as hypo-pigmentation, scarring, discomfort and lengthy
     recovery times.  The introduction of laser technology for cosmetic
     treatment has dramatically improved patient outcomes while eliminating many
     frequent complications.  Laser cosmetic treatment is becoming a widely
     accepted form of treatment because it involves non-invasive procedures with
     the potential for rapid recovery and positive results.

          National statistics on cosmetic surgery treatment in 1995 indicate a
     national patient potential of approximately 2,600,000, with potential
     revenues of $15 billion annually in the U.S., with the potential for an
     additional $3 billion in annual revenues in the emerging laser hair removal
     market. With the advent of laser-assisted operations, organizations such as
     the American Academy of Cosmetic Surgery and the American Society of
     Plastic and Reconstructive Surgeons have indicated that laser-assisted
     treatment modalities may dominate this field. The Company believes its
     plans to develop and operate cosmetic laser treatment centers will allow
     the Company to compete in this expanding field, although there can be no
     assurance that the Company will be successful.

          Medical Transcription.  For the year ended September 30, 1995, the
     American Hospital Association estimated the number of hospital admissions
     and outpatient visits in the United States to be 8.5 million.  Each
     hospital admission and outpatient visit generates a new patient record or
     data to be added to an existing record.  The Company believes the market
     for outsourced transcription services will expand due in part to the trends
     toward outsourcing, the general growth in information and technology, and
     the need to increase the efficient delivery of patient care.

          Medical transcription is the process by which free-form, dictated
     patient data is captured in useable format, routed to the appropriate
     location and inserted into a patient's medical record.  Increasingly,
     individual hospital departments, such as radiology, emergency, oncology,
     pediatrics and cardiology, are dictating reports to improve their delivery
     of care and administrative functions.  HMOs, outpatient clinics and
     physician practice groups are each generating their own set of medical
     reports.

          The medical transcription industry is highly fragmented.  It has been
     reported that there are approximately 1,500 providers of medical
     transcription services in the United States.  The majority are small,
     local, or regional companies that lack the financial resources or the
     capabilities necessary to provide outsourced services to health care
     providers nationwide.  

                                       7
<PAGE>
 
          Court Reporting.  Court reporting is the verbatim transcription of the
     spoken word into the written word, generally from sworn legal testimony.
     The industry is divided into two distinct sectors -- the recording of
     proceedings in court, or official court reporting, and all other legal
     transcription services.  Official court reporting is frequently performed
     by civil servant court reporters employed by municipal, state or federal
     courts.  All other legal transcription services are performed outside the
     courtroom by free-lance court reporters, who may be either self-employed or
     employees or independent contractors affiliated with a court reporting
     agency.

          Court reporting firms range in size from sole practitioners to firms
     with more than 100 free-lance court reporters.  Although there are no
     independently verified statistics with respect to the number of court
     reporters or the total revenues of the court reporting industry, there are
     approximately 22,000 members of the National Court Reporting Association
     ("NCRA"), a national professional association in the industry and an
     estimated additional 50,000 court reporters in the United States.
     Professional associations such as the NCRA and various national networks
     facilitate both the development of personal relationships between agency
     owners and the referral of business between agencies.

          The Company believes that, by expanding nationally, ALR will be able
     to more effectively serve new and existing clients, particularly law firms
     and companies with multistate operations.

     Company Operations

          Oncology Centers.  The Company currently owns, operates or manages 35
     Oncology Centers.  Each radiation Oncology Center contains a linear
     accelerator and contains or has access to a treatment simulator and
     treatment planning computer.  The radiation Oncology Centers are staffed by
     at least one board certified or board eligible radiation oncology
     physician, one or more radiation therapy technologists, an oncology nurse
     and other personnel, including secretarial and maintenance personnel, and
     van drivers for patient transportation.  Ownership and management
     structures vary among the Oncology Centers, i.e., the Company wholly owns
     certain of the centers, owns an interest in partnerships that own certain
     other centers and has entered into long-term management services agreements
     with certain other centers.

          Options to purchase two of the Company's Oncology Centers in Holyoke,
     Massachusetts and Key West, Florida, are presently held by third parties,
     exercisable prior to 1999. The option price in each case is determined by a
     market-value formula based on the center's income.

          Practice Management and Quality Assurance.  The Company has developed
     operational procedures, management information systems, financial controls
     and cost containment measures which are implemented in each Oncology Center
     and Affiliated Medical Practice to improve operational and financial
     performance.  The Company also purchases supplies, equipment, drugs and
     insurance at volume discounts for these entities.  In addition, the Company
     provides the regulatory expertise to assist these centers in complying with
     increasingly complex laws and regulations applicable to oncology treatment.

          With respect to subspecialty medical practices operations, the Company
     operates or manages three medical oncology practices in Ogdensburg, New
     York, St. Petersburg, Florida and Oaklane, Michigan, one urology practice
     in Stuart, Florida and one internal medicine practice in Riverdale,
     Maryland. The Company also operates a health care-related cosmetic laser
     treatment center in New Orleans.

                                       8
<PAGE>
 
          The Company's comprehensive quality assurance program incorporates
     peer review, patient satisfaction surveys, continuing medical and staff
     development and regular continuing medical education seminars.  The
     physicians practicing at the Affiliated Medical Practices and Oncology
     Centers, however, retain full authority and responsibility for the
     treatment of patients.

          Management Information Systems.  The Company's management information
     systems, including those operated by EquiMed Overseas, support both medical
     practice and administrative functions.  From a medical practice standpoint,
     these systems are designed to enable physicians to devote their time to the
     practice of medicine in a cost-effective and productive manner.  The
     Company's management information systems also support various
     administrative functions, including appointment scheduling, insurance
     verification, third party claims processing, billing, accounts payable and
     receivable, electronic billing to Medicare, financial reporting,
     determining and managing overhead ratios, marketing results, patient
     demographics, purchasing patterns and procedure utilization.  The Company
     believes that timely information on utilization patterns improves physician
     productivity and effectiveness.  The data also play an integral role in
     enabling the Company's medical directors to monitor case management
     decisions, evaluate patient outcomes and monitor utilization trends.  In
     addition, the Company believes that this data can be used to support
     negotiations with managed care payors.

          Cancer Treatment Data Base.  The Company has developed and implemented
     a cancer treatment data base (the "Tumor Registry") in all of the Oncology
     Centers.  The Tumor Registry currently provides outcome analysis for
     approximately 25,000 patients.  Utilizing this data base, the Company is
     able to determine the outcome of therapy of cancer patients based upon
     their type of cancer, the stage of cancer, and the type of treatment
     prescribed.  The Company believes that the Tumor Registry provides the
     Company with certain competitive advantages by allowing it to demonstrate
     outcome analysis to payors, more fully understand patient demographics and
     more accurately predict utilization.

          Administrative Personnel.  The Company employs and manages
     substantially all non-medical personnel at each of the Oncology Centers and
     Affiliated Medical Practices, including the administrator, secretarial and
     other administrative personnel.  The Company evaluates employees, makes
     staffing decisions, provides and manages employee benefits and implements
     personnel policies and procedures.  These personnel assist in providing
     routine and complex medical services in the Oncology Centers and Affiliated
     Medical Practices.  Support personnel are certified in their respective
     specialties and receive continuing education to update and improve their
     skills.

          Strategic Planning Services.  The Company's management team provides
     each of the Oncology Centers and Affiliated Medical Practices with
     strategic planning services by developing an overall plan for the
     practice's growth and development.  The strategic plan, with significant
     physician input, identifies additional services and related equipment
     needs, other possible acquisition or affiliation candidates, satellite
     office opportunities and radiation center developments.  The strategic plan
     is implemented by an on-site full time administrator and regional manager.

          Clinical Research Studies.  The Company believes its commitment to
     research through its clinical trial programs enhances its reputation and
     ability to recruit physicians, and provides patients with access to
     innovative therapies when more conventional therapies have not been
     effective.  The Company facilitates clinical research conducted by the
     Affiliated Medical Practices and markets the physician's ability to manage
     clinical trials to pharmaceutical and biotechnology companies.  

                                       9
<PAGE>
 
     Government Regulation and Other Risk Factors

          Reimbursement.  The Company derives its revenue primarily from third
     party payors.  The Company attributes its high proportion of Medicare
     payments to the fact that the incidence of cancer tends to increase with
     age.  Medicare is a federally funded and administered health insurance
     program for all individuals age 65 and over.  Medicare is comprised of
     Parts A and B.  Part A benefits primarily are for inpatient services, and
     principally are made on the basis of the diagnostic related group ("DRG")
     of the patient's diagnosis, not on the heath care provider's actual costs
     or charges.  In general, DRGs have created an incentive for health care
     delivery to shift to the outpatient facilities such as the Oncology Centers
     operated by the Company.  Medicare Part B, which provides coverage for
     physician and other professional services, generally covers outpatient care
     delivered at such centers and by the Affiliated Medical Practices.

          Medicaid is a joint federal-state program that provides medical
     benefits for the financially needy, including many who are aged, blind and
     disabled, and those families with dependent children who cannot pay for
     such care.  Medicaid benefits vary widely from state to state.

          Group health insurance premiums are typically paid in part by
     employers for their employees.  Individuals (generally employees and their
     dependents) covered by group health insurance tend to comprise a younger
     population than those covered by Medicare.  A leading method of controlling
     health care expenditures for these populations is the HMO.  HMOs provide
     health care services to enrollees with minimal co-payments and deductibles.
     HMOs generally require all services to be accessed through primary care
     physicians who are reimbursed by the HMO with a fixed capitation amount
     that generally does not vary with the frequency, cost or type of services
     utilized.

          The Company in general, and its MSO Division in particular, is
     impacted by trends in the U.S. health care industry, particularly the
     manner in which public and private health care cost containment measures
     affect the margins of health care providers.  While some payors continue to
     pay the fees and costs established by providers, other payors, particularly
     the government programs and managed care companies, negotiate for and pay
     significantly reduced reimbursement rates.  Accordingly, the Affiliated
     Medical Practices continually evaluate their charges and fee structures to
     appropriately maximize the reimbursement received from all third party
     payors.  Additionally, health care providers are affected by the increasing
     complexity in the reimbursement system and assumption of greater payment
     responsibility by individuals which have caused higher receivables, bad
     debt levels and business office costs to health care providers.

          Various proposals affecting federal and state regulation of the health
     care industry, including limitations on Medicare and Medicaid payments,
     have been introduced in the past, including provisions that would reduce
     funds available for the Medicare program.  Any limitation on Medicare,
     Medicaid or other government sponsored payments may adversely affect the
     Company.  Furthermore, funds received under these programs are subject to
     audit and retroactive review.  In addition, many of the services and
     procedures provided and performed at the Oncology Centers and Affiliated
     Medical Practices are reimbursed pursuant to Resource Based Relative Value
     Scale ("RBRVS") developed under the Medicare program.  The Company believes
     that the impact of RBRVS on the operations and financial condition of the
     Oncology Centers and Affiliated Medical Practices has not been significant.
     However, if future changes are adopted relating to the RBRVS fee structure,
     the aggregate fee payments from Medicare for certain procedures could be
     affected.  If the result is a reduction in such fees, especially if
     followed by

                                       10
<PAGE>
 
     reductions in reimbursement by commercial third party payors, the RBRVS
     system could adversely affect the Company's operating results or financial
     condition.  There can be no assurance that the payments under any
     governmental and private third party payor program will remain at levels
     comparable to present levels or will be sufficient to cover the costs
     allocable to patients eligible for reimbursement pursuant to such programs.
     Furthermore, changes in reimbursement regulations, policies, practices,
     interpretations or statutes could adversely affect the operations of the
     Company.

          Government Regulation. The health care industry is highly regulated,
     and regulation of health care providers is increasing. There can be no
     assurance that the regulatory environment in which the Company operates
     will not change significantly and adversely affect the Company in the
     future.

          There are currently several federal and state initiatives designed to
     amend regulations relating to the provision of health care services, the
     access to health care, the costs of health care and the manner in which
     health care providers are reimbursed for their services.  However, it is
     not possible to predict whether any such initiatives will be enacted as
     legislation or, if enacted, what their form, effective dates or impact on
     the Company will be.

          Every state imposes licensing requirements on individual physicians
     and on facilities and services operated by physicians.  Many states require
     regulatory approval before establishing or expanding certain types of
     health care facilities, offering certain services or making expenditures
     for equipment, facilities or programs.  The execution of a management
     agreement with a physician group currently does not require any health care
     regulatory approval on the part of the Company or the Affiliated Medical
     Practices.  However, in connection with the expansion of existing
     operations and the entry into new markets, the Company and its Affiliated
     Medical Practices may become subject to additional regulation.

          The Company believes its operations are in material compliance with
     applicable law.  The ability of the Company to operate profitably will
     depend in part upon the Company and its Affiliated Medical Practices
     obtaining and maintaining all necessary licenses, certificates of need and
     other approvals and operating in compliance with applicable health care
     regulations.  The Company believes that it has obtained all licenses,
     permits and approvals necessary for the operation of its business.

          Fee-Splitting; Corporate Practice of Medicine.  The laws of many
     states prohibit physicians from splitting professional fees with non-
     physicians and prohibit non-professional corporations from practicing
     medicine. The laws in most states prohibiting the corporate practice of
     medicine have been subjected to limited judicial and regulatory
     interpretation. The Company believes its current and planned activities do
     not constitute fee-splitting or the corporate practice of medicine as
     contemplated by such state laws. However, there can be no assurance that
     future interpretations of such laws will not require structural and
     organizational modifications of the Company's existing relationships with
     the Affiliated Medical Practices or that the Company will be able to make
     changes to comply with future interpretations of such laws. In addition,
     statutes in some states in which the Company does not currently operate
     could restrict expansion of Company operations to those jurisdictions.

          Medicare Referrals and Medicare Fraud and Abuse Provisions.  Federal
     law prohibits the offer, payment, solicitation or receipt of any form of
     remuneration in return for,  or in order to induce, (i) the referral of a
     person, (ii) the furnishing or arranging for the furnishing of items or
     services reimbursable under Medicare or Medicaid programs or (iii) the
     purchase, lease, order, arranging or recommending purchasing, leasing or
     ordering of any item or service reimbursable under Medicare or Medicaid.
     The federal government has recently announced a policy of increased
     scrutiny of joint ventures and other

                                       11
<PAGE>
 
     transactions among health care providers in an effort to reduce potential
     fraud and abuse relating to Medicare costs.  The applicability of these
     provisions to many business transactions in the health care industry has
     not yet been subject to definitive judicial and regulatory interpretation.
     In addition, effective January 1, 1995, legislation enacted as part of the
     Medicare and Medicaid programs restricts the ability of physicians to
     refer patients to entities in which they have a financial interest for
     several kinds of health care services including diagnostic services.  Many
     states have similar anti-kickback and self-referral laws.

          Management believes that although it is receiving fees under the
     service agreements for management services, it is not in a position to make
     or influence referrals of patients or services reimbursed under Medicare or
     Medicaid programs to the Affiliated Medical Practices.  Such service fees
     are intended by management to be consistent with fair market value in arm's
     length transactions for the nature and amount of management services
     rendered and therefore would not constitute unlawful remuneration under
     anti-kickback laws and regulations.  For these reasons, management does not
     believe that fees payable to the Company would be viewed as remuneration
     for referring or influencing referrals of patients or services covered by
     such programs as prohibited by the statutes.  If the Company is deemed to
     be in a position to make or influence referrals from or the Affiliated
     Medical Practices or to individual physicians, the operations of the
     Company could be subject to scrutiny under federal and state anti-kickback
     and anti-referral laws. In addition, management believes that the methods
     used to acquire medical facilities and other assets and to recruit new
     physicians do not violate anti-kickback and self-referral laws and
     regulations. Specifically, management believes the consideration paid by
     the Company to physicians to acquire assets in their practices is
     consistent with fair market value in arm's length transactions and not
     intended to induce the referral of patients. Should this practice be deemed
     to constitute an arrangement designed to induce the referral of Medicare or
     Medicaid patients, then such could be viewed as possibly violating anti-
     kickback and anti-referral laws and regulations. A determination of
     liability under any such law could have a material adverse effect on the
     Company's revenue. The Company does not believe that its operations
     generally are likely to be challenged or, if challenged, likely to be
     subject to a successful enforcement action.

          Prohibitions on Certain Referrals.  The Omnibus Budget Reconciliation
     Act of 1993 ("OBRA") significantly expands the prohibitions against
     physician referrals.  These prohibitions, commonly known as "Stark II,"
     dramatically enlarged the field of physician-owned or physician-interested
     entities to which the referrals prohibitions apply.  Stark II prohibits a
     physician from referring Medicare or Medicaid patients to an entity
     providing "designated health services" in which the physician has an
     ownership or investment interest, or with which the physician has entered
     into a compensation arrangement.  The designated health services include
     radiology services and radiation therapy services and supplies.  However,
     the Company believes its activities fall within the range of permissible
     activities defined in Stark II, including, but not limited to, the
     provision of in-office technical services.  The Company does not believe
     that Stark II will adversely affect the operations of the Company.

          Prohibitions on Certain Compensation Arrangements.  The OBRA
     legislation also prohibits physician group practices from developing
     compensation or bonus arrangements that are directly related to the volume
     or value of referrals by a physician in the group for designated health
     services.  While there are no regulatory guidelines or case law
     interpretations of this provision of OBRA, the Company believes that the
     compensation arrangements of the physicians owning and the physicians
     employed by the Affiliated Medical Practices are in compliance with the
     OBRA requirements.

                                       12
<PAGE>
 
          Cosmetic Laser Treatment. The cosmetic laser treatment industry is
     subject to certain federal regulations established by the Food and Drug
     Administration for the use of certain lasers for various procedures. In
     addition, some states have established industry regulations adapted from
     the standards set by national accrediting bodies such as the Conference of
     Radiation Control Program Directors. With laser treatments emerging as the
     principal trend in cosmetic skin care, Rejuve will operate in a highly
     competitive climate. There are currently several well-capitalized
     corporations who have entered this industry. The industry is also dominated
     by individual physicians performing such procedures in small office
     practice settings. There are also potential liabilities and exposure to
     future litigation in this emerging industry in which the long term effects
     of laser-based treatment are not fully known.

          Antitrust Regulation. Because the Affiliated Medical Practices
     associated with the Company remain separate legal entities, they may be
     deemed competitors subject to a range of antitrust laws that prohibit anti-
     competitive conduct, including price fixing, concerted refusals to deal and
     division of market. If the Affiliated Medical Practices and Oncology
     Centers are deemed by regulatory authorities or courts to be part of a
     single entity or system, they may be subject to antitrust laws that
     prohibit anti-competitive combinations or activities in excess of an
     immaterial size. The Company believes that it is in compliance with the
     antitrust laws, but there can be no assurance that the Company's
     interpretation is consistent with that of federal or state authorities or
     courts or that such circumstances will remain as the Company grows and
     matures and as further regulation and interpretations are promulgated. The
     impact of the antitrust laws in such circumstances could have a material
     adverse effect on the Company's results of operations.

          Regulatory Compliance.  The Company believes that health care
     regulations will continue to change and, as a result, regularly monitors
     developments in health care law. The Company expects to modify its
     agreements and operations from time to time as the business and regulatory
     environments change. While the Company believes it will be able to
     structure all its agreements and operations in accordance with applicable
     law, there can be no assurance that its arrangements will not be
     successfully challenged. Any such challenge could have a material adverse
     effect on the Company's results of operations.

          Federal and State Laws Regulating Insurance Companies, HMOs and Other
     Managed Care Organizations.  Many states also regulate the establishment
     and operation of networks of health care providers.  Generally, these laws
     do not apply to the hiring and contracting of physicians by other health
     care providers.  There can be no assurance that regulators of the states in
     which the Company operates would not apply these laws to require licensure
     of the Company's operations as an HMO, an insurer or a provider network.
     The Company believes that it is in compliance with these laws in the states
     in which it does business, but there can be no assurance that
     interpretations of these laws by the regulatory authorities in these states
     or in the states in which the Company may expand will not require
     licensure or a restructuring of some or all of the Company's operations.
     In the event that the Company is required to become licensed under these
     laws, the licensure process can be lengthy and time consuming and, unless
     the regulatory authority permits the Company to continue to operate while
     the licensure process is progressing, the Company could experience a
     material adverse change in its business while the licensure process is
     pending.  In addition, many of the licensing requirements mandate strict
     financial and other requirements which the Company may not immediately be
     able to meet.  Further, once licensed, the Company would be subject to
     continuing oversight by and reporting to the respective regulatory
     agencies.

          Managed Care Contracts.  As an increasing percentage of the population
     is covered by HMOs and other managed care organizations, the Company
     believes that its success will, in part, be dependent upon its ability to
     negotiate contracts with HMOs, employer groups and other private third
     party payors, pursuant to which services will be provided on a risk-sharing
     or capitated basis.  Under some of these

                                       13
<PAGE>
 
     agreements, the health care provider may accept a pre-determined amount per
     month per patient in exchange for providing all necessary covered services
     to the patients covered under the agreement.  These contracts pass much of
     the risk of providing care from the payor to the provider.  The
     proliferation of these contracts in markets served by the Company could
     result in greater predictability of revenues, but less certainty with
     respect to expenses.  There can, however, be no assurance that the
     Affiliated Medical Practices or the Company on their behalf will be able to
     negotiate satisfactory arrangements on a risk-sharing or capitated basis.
     In addition, to the extent that patients or enrollees covered by these
     contracts require in the aggregate more frequent or extensive care than is
     anticipated, operating margins may be reduced or the revenue derived from
     these contracts may be insufficient to cover the costs of the services
     provided.  As a result, the Affiliated Medical Practices may incur
     additional costs, which would reduce or eliminate anticipated earnings
     under these contracts.  Any such reduction or elimination of earnings of
     the Affiliated Medical Practices would have a material adverse effect on
     the Company's results of operations.

          Confidentiality Requirements.  Medical transcription services are
     subject to statutory and common law requirements regarding the
     confidentiality of patient medical information.  The Company requires its
     personnel to agree to keep all patient medical information confidential and
     monitors compliance with applicable confidentiality requirements. Any 
     violation of such confidentiality requirements could have a material 
     adverse effect on the Company's results of operations.

          Court Reporting Services.  Due to the large volume, complexity and
     high cost of litigation in the United States, various proposals are under
     consideration to limit the number and length of pretrial depositions, and
     to substitute audio and/or video-tape recording of stenographic
     transcription of legal proceedings which may reduce or eliminate the use of
     court reporters.  In addition, alternatives to litigation, such as
     mediation and arbitration, are increasingly being utilized.  These or other
     trends that reduce litigation and related pretrial depositions could
     adversely impact ALR's revenues.  ALR's revenues can also be adversely
     affected by a general economic recession that reduces demand for court
     reporters.

          ALR currently competes with other companies offering many of the same
     services.  Competition is based on factors such as the existence of
     personal relationships with clients and other reporting agencies, price and
     the quality of services provided.  Some of ALR's competitors are larger,
     have greater resources and are more established than ALR.  ALR's business
     is also subject to changes in technology and new service introductions.
     Accordingly, ALR's ability to compete will be dependent upon its ability to
     adapt to technological changes in the industry and to develop services
     based on those changes to satisfy client requirements.

          The business strategy of ALR involves growth through acquisitions and
     internal development.  ALR is subject to various risks associated with its
     growth strategy, including the risk that it will be unable to identify and
     recruit suitable acquisition candidates in the future or to integrate and
     manage acquired court reporting businesses.  The costs associated with such
     activities could adversely affect ALR's operating results.

          Integration of Acquisitions. An important part of the Company's
     strategy is to expand through acquisitions that either expand or complement
     its business. There can be no assurance that the Company will be able to
     identify and acquire acceptable acquisition candidates on terms favorable
     to it or that it will be able to successfully integrate such acquisitions,
     once acquired. A substantial portion of the Company's capital resources
     could be used to fund these acquisitions. In addition, acquisitions involve
     a number of special risks, including adverse short-term effects on the
     Company's operating results, the diversion of management's attention, the
     dependence on retention, hiring and training of key personnel and risks
     associated with unanticipated problems or legal liabilities, some or all of
     which could have a material adverse effect on the Company's operations and
     financial performance. The failure to complete acquisitions or to integrate
     such acquisitions, once acquired, also could have a material adverse effect
     on the Company's operations and financial performance.

          Dependence on Foreign Operations.  The Company is dependent on the
     continued operation and efficiency of the operations of EquiMed Overseas.
     The ability of EquiMed Overseas to successfully provide billing,
     information, technology and outsourcing services to its clients is subject
     to interruption or disruption based on labor force issues, worldwide
     telecommunications problems and failures and political upheaval in the
     countries where EquiMed Overseas operates.  In addition, changes in local
     tax policies in such countries could adversely affect EquiMed Overseas'
     operating results.

                                       14
<PAGE>
 
     Competition

          The Company's oncology center and medical practice management
     businesses operate in a highly competitive environment.  The Company and
     the Affiliated Medical Practices generally compete with other health care
     providers for acquisitions of medical facilities, physician resources and
     patients.  As a result of several market factors and of the increasing
     regulation of the health care industry, the Company believes that others in
     the health care industry may adopt strategies similar to those of the
     Company.  Many of these potential competitors have significantly greater
     resources than the Company.

          The Company's net revenues are substantially dependent upon the
     continued success of the Oncology Centers and the Affiliated Medical
     Practices.  These practices and centers face competition from several types
     of health care service providers, including sole practitioners, single and
     multi-specialty groups, hospitals and managed care organizations.

     Employees

          As of December 31, 1996, EquiMed employed 185 persons on a full-time
     basis and 50 persons on a part-time basis. As of December 31, 1996, the
     Affiliated Medical Practices employed 27 physicians. The Company provides a
     variety of employment benefits and considers its relationship with its
     employees to be good. There are no collective bargaining agreements to
     which the Company is a party. As of May 31, 1997, as a result of the
     acquisitions described in this Item 1, EquiMed and its subsidiaries employ
     approximately 740 individuals, including approximately 500 individuals
     employed by EquiMed Overseas.

     Insurance

          The Company maintains insurance in an amount, based on historical
     claims and the nature and risk of its business, that it believes to be
     sufficient, including insurance for any vicarious liability of the Company
     that may result from its relationship with the Affiliated Medical
     Practices. In addition, the Company requires each of the Affiliated Medical
     Practices with which it contracts to maintain a designated level of
     professional liability insurance coverage. Such coverage will be provided
     in the future by Solemar, the Company's captive insurance company. The type
     of medical services provided by the Affiliated Medical Practices and at the
     Oncology Centers have inherent risks of liability and it can reasonably be
     expected that medical malpractice claims will be made against the Company
     in the future. The Company has been subject to malpractice claims in the
     past, and its malpractice insurance has provided adequate coverage against
     such claims. Any future claims could adversely effect the Company's
     reputation in the medical community and also could have a material adverse
     effect on the Company's financial condition depending upon the number, size
     and insurance coverage for such claims.

     Important Factors Regarding Forward-Looking Statements

          Some of the information presented in this Form 10-K Report constitutes
     forward looking statements within the meaning of the Private Securities
     Litigation Reform Act of 1995. Although the Company believes that its
     expectations are based on reasonable assumptions within the bounds of its
     knowledge of its business and operations, there can be no assurance that
     actual results of the Company's operations will not differ materially from
     its expectations. Factors which could cause actual results to differ from
     expectations include, among others, the risk factors discussed in this Item
     1 and those risks and uncertainties described in the Company's prior
     reports and registration statements filed with the Securities and Exchange
     Commission. Specific reference is made to the risks and

                                       15
<PAGE>
 
     uncertainties described in the Company's Registration Statement on Form S-
     4, Amendment No. 2, Registration No. 333-12773 (October 15, 1996).

     ITEM 2.  PROPERTIES

          The Company leases office space from an entity wholly owned by Dr.
     Colkitt at 2171 Sandy Drive, State College, PA 16803, where its executive
     offices are located.  The annual rental for 1996 was $80,231 and the lease
     expires in March 2000.  In addition, the Company leases space for its
     centers and patient treatment locations under various lease arrangements.
     The Company believes its existing space is adequate and suitable for its
     current and anticipated needs.  To the extent the Company requires
     additional space, the Company believes that suitable additional space will
     be available on commercially reasonable terms.

     ITEM 3.  LEGAL PROCEEDINGS.

          On March 21, 1996, the Company entered an appearance as a plaintiff to
     a declaratory judgment action commenced August 30, 1995, in the Delaware
     Court of Chancery on behalf of eight corporations which were merged into
     the Oncology Group prior to its Merger into the Company. The litigation
     seeks a declaration that an August 1995 merger of the eight corporations
     (described in detail in previous filings of the Company with the Securities
     and Exchange Commission) were effected in accordance with applicable
     Delaware law and that the merger consideration was fair to the former
     minority stockholders. The former minority stockholders of the eight
     corporations have filed answers and counterclaims in the Delaware action
     against the Company and other counterclaim defendants, for breach of
     fiduciary duty, breach of contract, fraud and violations of Delaware
     statutory law. The counterclaims seek rescission of the August 1995 mergers
     of the eight corporations and compensatory and/or rescissory damages.

          Dr. Colkitt and the entities that were merged into the Company
     pursuant to the Merger believe that they have meritorious defenses to the
     allegations of the former minority stockholders. Dr. Colkitt has entered
     into an agreement with the Company to fully indemnify the Company against
     any damage, loss, expense or liability, including attorneys' fees and
     expenses, incurred by the Company resulting from the litigation with the
     former minority stockholders. Pursuant to pledge agreements securing such
     indemnification, among other things, as of June 6, 1997 Dr. Colkitt has
     pledged approximately 4,900,000 shares of Common Stock to secure the
     indemnity obligation, having a value of approximately $16,080,00 as of May
     30, 1997. Such value is less than the value of Common Stock Dr. Colkitt is
     required to pledge pursuant to the pledge agreements, however, because of a
     number of factors, Dr. Colkitt intends to ask the Company's Board of
     Directors to re-evaluate the terms of the pledge agreements. See "ITEM 11.
     EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider
     Participation."

          On May 15, 1997, the Company filed a Demand for Arbitration before the
     American Arbitration Association in Philadelphia, Pennsylvania to enforce
     certain terms of the Asset Purchase Agreement dated October 7, 1996 between
     the Company and PRG (the "Agreement") and to recover damages for breach

                                       16
<PAGE>
 
     of the Agreement by PRG. Under the Agreement, the Company sold
     substantially all of the assets of its Ophthalmology Division to PRG and
     also agreed, during the period beginning November 1996 and ending April
     1997, to assist PRG in the acquisition of additional ophthalmology
     practices. In return for such additional services, the Company was entitled
     to receive from PRG certain fees and expenses based upon the status of such
     additional acquisitions as of May 15, 1997. PRG failed to make the May 15,
     1997 payment to the Company and has advised the Company that it does not
     intend to make such payment. Under the Demand for Arbitration, the Company
     is also seeking damages in connection with PRG's refusal to provide the
     Company's representatives with access to financial records of the
     Ophthalmology Division, which refusal has delayed the Company's ability to
     complete its annual audit and filings required under the Exchange Act.
     There can be no assurance that PRG will not assert a material counterclaim
     against the Company. In addition, there can be no assurance that the
     Company will recover any money as a result of its arbitration claim.

          The Company and its subsidiaries are not presently parties nor is the
     Company's property subject to any other material litigation or proceedings,
     other than the litigation described above and other litigation incidental
     to business.

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

              None.

                                       17
<PAGE>
 
                                    PART II
                                    -------


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

          The following table sets forth, for the periods indicated, the high
     and low sale prices for the Common Stock of EquiMed or of EquiVision, its
     legal predecessor.  The Common Stock is traded under the symbol EQMD on the
     Nasdaq National Market.
<TABLE>
<CAPTION>
 
                                                            High    Low
                                                           ------  ------
     <S>                                                   <C>     <C>
     1996                 
          4th Quarter....................................  $ 8.13  $ 3.48
          3rd Quarter....................................    8.75    6.88
          2nd Quarter....................................   12.88    7.00
          1st Quarter(1).................................   16.00   12.25
                          
     1995                 
          4th Quarter(1).................................  $14.75  $ 9.50
          3rd Quarter(1).................................   16.00   10.00
          2nd Quarter(1).................................   10.25    7.00
          1st Quarter(1).................................   10.00    7.00
                                                           ------  ------
</TABLE>

     ----------------------
     (1)  The information for a portion of the first quarter of 1996 and for all
          quarters in 1995 reflects the high and low sale prices for the Common
          Stock of EquiVision, the Company's legal predecessor, and reflects the
          one-for-two reverse stock split that was effective upon the
          consummation of the Merger effective February 2, 1996.  The common
          stock of EquiVision was traded under the symbol EQVN on the Nasdaq
          SmallCap Market until January 3, 1996, and thereafter on the Nasdaq
          National Market until February 2, 1996.

          As of April 30, 1997, there were approximately 225 holders of record
     of the Common Stock.

          The Company, including its legal predecessor, EquiVision, has never
     declared or paid any cash dividends on its Common Stock.  The Company
     currently intends to retain earnings for use in its business and does not
     anticipate paying any cash dividends in the foreseeable future.  Any
     payment of future dividends will be at the discretion of the Board of
     Directors and will depend upon, among other things, the Company's earnings,
     financial condition, capital requirements, level of indebtedness,
     contractual restrictions with respect to the payment of dividends and other
     relevant factors.

                                       18
<PAGE>
 
     ITEM 6.  SELECTED FINANCIAL DATA

          The following income statement and balance sheet data have been
     derived from the audited consolidated financial statements of the Company
     and of the Oncology Group, predecessor entity for financial reporting
     purposes to the Company. The selected financial data below should be read
     in conjunction with the consolidated financial statements and notes thereto
     and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
     AND RESULTS OF OPERATIONS."

<TABLE> 
<CAPTION> 
                                           Year Ended December 31,
                             -------------------------------------------------
                              1992      1993       1994     1995       1996
                              ----      ----       ----     ----       ---- 
                                     (in thousands, except per share data)

<S>                          <C>       <C>       <C>       <C>       <C>
     Net revenues..........  $31,076   $40,086   $52,266   $58,884    $ 99,115
 
     Costs and expenses:
       Professional 
        expenses...........    8,062    10,554    13,486    15,054      26,479
       Center operating
        expenses...........    8,993    12,089    14,738    18,120      42,422
       General and
        administrative
        expenses...........    3,047     5,214     7,257     7,383       8,755
       Depreciation and
        amortization.......    1,680     2,176     2,563     2,682       6,040
       Interest expense:
         Related parties...       88       279       826       936         643
         Other.............    1,301     1,366     1,357     1,028       1,905
         Loss on sale of
          receivables......       --        --        --       885         640
       Other income, net...     (169)     (115)     (175)     (637)       (723)
       Loss on sale of
        division...........       --        --        --        --      31,112
                             -------------------------------------------------
     Total costs and
      expenses.............   23,002    31,563    40,052    45,451     117,273
                             -------------------------------------------------
 
     Income (loss) before
      minority interest
      income taxes and
      extraordinary
      charge...............    8,074     8,523    12,214    13,433     (18,158)
 
     Minority interest.....      668       995     1,947       831       1,171
                             -------------------------------------------------
 
     Income (loss) before
      income taxes and 
      extraordinary
      charge...............    7,406     7,528    10,267    12,602     (19,329)
 
     Provision for income
      taxes................    1,735     1,058     1,704     2,404      10,613
     Cumulative effect of
      change in income
      tax status...........       --        --        --        --       1,277
                             -------------------------------------------------
     Total provision for
      income taxes.........    1,735     1,058     1,704     2,404      11,890
                             -------------------------------------------------
     Income (loss) before
      extraordinary charge.  $ 5,671   $ 6,470   $ 8,563   $10,198    $(31,219)
 
     Extraordinary charge
      for early
      extinguishment
      of debt (net of
      income taxes $85)....       --        --        --        --         127
                             -------------------------------------------------
 
     Net income (loss).....  $ 5,671   $ 6,470   $ 8,563   $10,198    $(31,346)
                             =================================================
 
     Earnings per share:
       Net loss before
        extraordinary
        charge.............                                           $  (1.13)
       Extraordinary
        charge for early
        extinguishment
        of debt............                                              (0.01)
                                                                      --------
       Net loss............                                           $  (1.14)
                                                                      ========
</TABLE>

                                       19
<PAGE>
 
<TABLE>
<S>                                                        <C>           <C>           <C>             <C>            <C>
     Weighted average shares outstanding.................                                                               27,577,000
 
     Supplemental unaudited pro forma information:
       Net income, as above..............................         $   5,671    $     6,470     $     8,563   $    10,198
       Pro forma adjustment to income tax
         expense.........................................             1,654          2,211           3,330         3,391
                                                                  ------------------------------------------------------
       Pro forma net income..............................         $   4,017    $     4,259     $     5,233   $     6,807
                                                                  ======================================================
 
       Pro forma net income per share....................         $    0.19    $      0.20     $      0.25   $      0.33
                                                                  ======================================================
 
       Pro forma weighted average shares 
        outstanding......................................        20,784,000     20,784,000      20,784,000    20,784,000
                                                                ========================================================
</TABLE> 

<TABLE> 
<CAPTION>  
                                                                                  Year Ended December 31,
                                                              ---------------------------------------------------------------------
                                                                                      (in thousands)
                                                                   1992          1993            1994          1995          1996
                                                                   ----          ----            ----          ----          ----
     <S>                                                        <C>           <C>             <C>           <C>           <C> 
     Balance Sheet Data:
     Cash and cash equivalents...........................       $   1,554      $   1,824       $   2,565     $     824    $ 27,010
     Intangibles.........................................              --             --           1,224         1,664       5,490
     Total assets........................................          20,380         24,262          27,361        20,579      71,591
     Long-term debt and capital lease obligations, less
       current portion...................................          11,431         11,593          13,034        10,349       5,829
     Stockholders' equity(deficit).......................          (1,733)        (2,304)         (4,091)      (10,145)     35,464
</TABLE>

                                       20
<PAGE>
 
     ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

          The following discussion and analysis should be read in conjunction
     with the financial statements and notes thereto included elsewhere herein.

          Some of the information presented in this Form 10-K constitutes
     forward looking statements within the meaning of the Private Securities
     Litigation Reform Act of 1995.  Although the Company believes that its
     expectations are based on reasonable assumptions within the bounds of its
     knowledge of its business and operations, there can be no assurance that
     actual results of the Company's physician practice management operations
     and acquisition strategy and their effect on the Company's results of
     operations will not differ materially from its expectations.  See "ITEM 1.
     BUSINESS - Important Factors Regarding Forward-Looking Statements."

          Overview

          The predecessor companies of the Oncology Group and of EquiMed
     commenced operation in February 1987.  As of December 31, 1995, the
     Oncology Group owned or operated a total of 30 radiation oncology centers
     located in Arizona, Florida, Illinois, Maryland, New Jersey, New York,
     North Carolina, Ohio and Pennsylvania.  The Oncology Group also managed
     four radiation oncology centers in Maryland, New Jersey, New York and
     Pennsylvania and planned to open an additional center in Massachusetts.

          The Oncology Group was formed for the purpose of effecting the Merger
     and, immediately prior to consummation of the Merger, acquired all of the
     stock or assets of various corporations and certain partnership interests
     which owned or controlled 30 radiation oncology centers.  In addition, the
     Oncology Group entered into Management Agreements with the Affiliated
     Medical Practices associated with such centers.  See "ITEM 1.  BUSINESS -
     Company History."

          The Management Agreements are for an initial 40-year term and provide
     for successive automatic renewals.  While EquiMed can terminate the
     Management Agreements without cause, the Affiliated Medical Practices can
     terminate the Management Agreements only in the event of non-payment by
     EquiMed of certain obligations of the Affiliated Medical Practices.
     EquiMed has the unilateral right to not extend the renewal provisions of
     the Management Agreements.  Because of the provisions of the Management
     Agreements, the Company currently records all revenue, expenses and results
     of operations of the Affiliated Medical Practices in its financial
     statements.

          Dr. Colkitt has granted to the Company, or its designee, an
     irrevocable option to acquire for a nominal amount the common stock of each
     of the Affiliated Medical Practices that he owns.  The exercise periods of
     these option agreements coincide with the duration of the related
     Management Agreements.

          EquiMed and its predecessor companies have grown principally through
     the development of new Oncology Centers either alone or jointly with other
     entities such as hospitals.  Such development is based on EquiMed's
     internal assessment of market feasibility, design and construction of
     centers, physician and staff recruitment and acquisition of equipment.  In
     addition, EquiMed acquired existing radiation oncology centers in Tampa,
     Florida, Brooklyn, New York, Salisbury, North Carolina and Southampton,
     Pennsylvania and expects that this strategy will become a more significant
     factor in generating future

                                       21
<PAGE>
 
     growth.  More recently, the Company has become a holding company for a
     variety of entities providing a range of information technology,
     transcription and outsourcing services.

          The table below indicates, as of the dates noted, the number of
     Oncology Centers operated by EquiMed and its predecessor companies and
     full-time oncologists contracting with or employed by Affiliated Medical
     Practices associated with such centers with which the Company has
     Management Agreements.  In 1996, the Company acquired interests in
     one Oncology Center and entered into Management Agreements with two
     complementary subspecialty medical practices in urology and internal
     medicine.
<TABLE>
<CAPTION>
 
                              1993              1994              1995              1996
                         Q1  Q2  Q3  Q4    Q1  Q2  Q3  Q4    Q1  Q2  Q3  Q4    Q1  Q2  Q3  Q4
     <S>                 <C>               <C>               <C>               <C> 
     Oncologists         22  24  26  28    29  33  34  35    37  37  36  36    38  38  39  40
     Oncology Centers    20  22  23  24    25  26  27  28    30  30  30  30    32  32  33  34
</TABLE>

          A substantial portion of EquiMed's revenue is derived from government
     health care reimbursement programs, commercial insurance carriers and other
     third party payors, all of which payors have instituted cost containment
     measures designed to limit payments made to health care providers such as
     EquiMed.  Continued cost containment efforts by private and government
     insurers may have a material adverse effect on EquiMed.  For example, the
     recently implemented Medicare RBRVS payment system has reduced Medicare
     reimbursement rates for certain of the procedures performed at the Oncology
     Centers and Affiliated Medical Practices.  Future implementation of such a
     system with respect to third party payors, which has been advocated, would
     adversely affect EquiMed's operating margins to the extent that the cost of
     providing medical services could not be concomitantly reduced.

          Results of Operations

          The following table sets forth certain financial data of the Company
     for the three years ended December 31, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
 
                                                                 Year Ended
                                                                December 31,
                                           -------------------------------------------------------------
                                                 1994                1995                    1996
                                                 ----                ----                    ----        
                                                           (dollars in thousands)
                                              $        %           $        %             $         %
                                           --------  ------     --------  ------      ----------  ------
<S>                                        <C>       <C>        <C>       <C>         <C>         <C>
                                                                                
     Net Revenues                          $52,266   100.0%     $58,884   100.0%       $ 99,115   100.0%
     Costs and Expenses:                                                        
      Professional expenses                 13,486    25.8       15,054    25.6          26,479    26.7
      Center operating expenses             14,738    28.2       18,120    30.8          42,422    42.8
      General and administrative                                                
        expenses                             7,257    13.9        7,383    12.5           8,755     8.8
      Depreciation and amortization          2,563     4.9        2,682     4.6           6,040     6.1
      Interest expense                       2,183     4.2        2,849     4.8           3,188     3.2
      Other (income) expense,                                                   
        net                                   (175)   -0.3         (637)   -1.1            (723)   -0.7
      Loss on sale of division                   -     0.0            -     0.0          31,112    31.4
                                           -------   -----      -------   -----        --------   -----
     Total costs and expenses               40,052    76.6       45,451    77.2         117,273   118.3
</TABLE>

                                       22
<PAGE>
 
<TABLE>
<CAPTION> 
<S>                                        <C>       <C>     <C>       <C>     <C>         <C>
     Income (loss) before income taxes
       and minority interest                12,214    23.4    13,433    22.8     (18,158)  -18.3
     Minority interest                       1,947     3.7       831     1.4       1,171     1.2
                                           -------   -----   -------   -----    --------   -----
     Income (loss) before income taxes
       and extraordinary charge             10,267    19.6    12,602    21.4     (19,329)  -19.5
     Provision for income taxes              1,704     3.3     2,404     4.1      11,890    12.0
     Extraordinary charge for
       early extinguishment
       of debt                                  --     0.0         -     0.0         127     0.1
                                           -------   -----   -------   -----    --------   -----
 
     Net Income (Loss)                     $ 8,563    16.4%  $10,198    17.3%   $(31,346)  -31.6%
</TABLE>

      Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

       At December 31, 1996, the Company owned, operated or managed 34 Oncology
     Centers and managed the Affiliated Medical Practices associated therewith,
     compared with 30 owned, operated or managed Oncology Centers at December
     31, 1995.

       Net revenues increased for the year ended December 31, 1996 as compared
     to December 31, 1995 by $40,231,000 or 68.3% from $58,884,000 in 1995 to
     $99,115,000 in 1996. The increased net revenues in 1996 includes
     $42,200,000 attributable to the Merger with EquiVision that was consummated
     on February 2, 1996 and $2,100,000 in net revenues associated with the MSO
     Division which was first established by the Company in 1996. Effective
     November 1, 1996, the Company sold its Ophthalmology Division, formerly
     doing business as EquiVision. Excluding revenues from the Ophthalmology
     Division, net revenues of the Company decreased in 1996 as compared to 1995
     by $1,969,000 or 3.3%. The decrease was due to (i) a reduction in
     reimbursements from third party payors for services rendered, and (ii) the
     discontinuance of the diagnostic radiology department associated with one
     of the existing Oncology Centers. This reduction in revenues was partially
     offset by the acquisition and opening of four additional Oncology Centers
     in 1996.

       Professional expenses increased in 1996 by $11,425,000 or 75.9% as
     compared to 1995.  The increase was entirely attributable to the Merger.
     As a percentage of net revenues, professional expenses were 26.7% in 1996
     as compared to 25.6% in 1995.  Professional expenses excluding those
     associated with the Merger decreased to $14,262,000 in 1996 as compared to
     $15,054,000 in 1995, a decrease of 5.3%.  This decrease corresponded to the
     decrease in net revenues for the year ended December 31, 1996.  Most of the
     physicians affiliated with the Company are compensated under a contractual
     formula based upon the profitability of the center at which they provide
     medical services, and accordingly, professional expenses are directly
     affected by revenue generation.

       Center operating expenses for the oncology and ophthalmology centers
     increased from $18,120,000 in 1995 to $42,422,000 in 1996, an increase of
     $24,302,000 or 134.1%. This increase in expenses was attributable to the
     ophthalmology centers acquired through the Merger. As a percentage of net
     revenues, center operating expenses were 42.8% in 1996 as compared to 30.8%
     in 1995. The increase in percentage was due to the higher costs associated
     with operating ophthalmology centers as compared to Oncology Centers.
     Excluding the ophthalmology centers, center operating expenses, increased
     from $18,120,000 in 1995 to $18,761,000 in 1996, an increase of $641,000 or
     3.5%. Such increase in expenses primarily resulted from the expenses
     associated with the four additional Oncology Centers acquired or

                                       23
<PAGE>
 
     opened in 1996 and the offsetting decrease in expenses associated with the
     diagnostic radiology department discontinued.

       General and administrative expenses consist of legal, accounting,
     billing, development and corporate administrative expenses.  General and
     administrative expenses increased to $8,755,000 in 1996 from $7,383,000 in
     1995, an increase of $1,372,000 or 18.6%.  As a percentage of net revenues,
     general and administrative expenses decreased from 12.5% in 1995 to 8.8% in
     1996.  Excluding the general and administrative expenses associated with
     the ophthalmology centers, expenses decreased to $6,756,000 in 1996 as
     compared to $7,383,000 in 1995, a decrease of 8.5%.  This decrease resulted
     primarily from the cost reduction efforts instituted by the Company in 
     response to the reduction in net revenues.

       Depreciation expense relates to property and equipment.  Amortization
     consists primarily of the excess costs of acquired businesses over the fair
     value of the net identifiable assets acquired in connection with
     acquisitions.  Depreciation and amortization increased to $6,040,000 in
     1996 from $2,682,000 in 1995, an increase of $ 3,358,000 or 125.2%.  Of
     such increase, $3,224,000, or 96%, was attributable to the ophthalmology
     centers acquired in the Merger and sold in connection with the Company's
     sale of its Ophthalmology Division.

       Interest expense increased from $2,849,000 in 1995 to $3,188,000 in 1996,
     an increase of 11.9%.  The Merger accounted for $1,279,000 of the 1996
     interest expense.  Excluding these costs, interest expense decreased from
     1995 to 1996 by $940,000, or 33.0%.  This decrease resulted from the
     elimination of certain debt and capital lease obligations paid with
     proceeds received from the sale of Common Stock in the February 1996 public
     offering.

       Other income increased from $637,000 in 1995 to $723,000 in 1996, an
     increase of $86,000 or 13.5%.  Other income includes income generated from
     management fees along with interest income earned on investments.  The
     increase from 1995 to 1996 was realized through an increase in interest
     income, primarily earned through the investment of the proceeds received
     from the sale of the Ophthalmology Division in November 1996.

       For the year ended December 31, 1996, the Company recorded a loss on sale
     of $31,112,000 related to the sale of the Ophthalmology Division effective
     November 1, 1996.

       Minority interest represents equity interests in individual Oncology
     Centers held by entities other than the Company.  Such entities include
     hospitals and other health care providers which enter into affiliation
     arrangements with the Company.  Minority interest in the earnings of such
     centers increased by $340,000 or 40.9% in 1996 as compared to 1995 due to
     improved performance of these centers.

       The Company has provided for income taxes of approximately $5,456,000 for
     an estimated difference between the carrying amount of the assets sold for
     financial reporting and tax purposes.  For the year ended December 31,
     1996, the Company also recorded a cumulative adjustment of approximately
     $1,277,000 to establish deferred income taxes.  Effective January 1, 1996,
     certain of the entities which comprised the Oncology Group ceased to
     qualify as S corporations and became subject to corporate income taxes.
     The change from S corporation to C corporation status required the Company
     to record the cumulative effect of deferred taxes due to this change in tax
     status.

                                       24
<PAGE>
 
      Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

       At December 31, 1995, the Oncology Group owned, operated or managed 30
     Oncology Centers and managed the Affiliated Medical Practices associated
     therewith, compared with 28 Oncology Centers at December 31, 1994.  In
     1995, the Oncology Group acquired one existing center and developed one new
     center.

       Net revenues increased for the year ended December 31, 1995 as compared
     to December 31, 1994 by 13% to $58,884,000.  The increase in 1995 was
     primarily attributable to an increase in volume as measured by treatments
     rendered.  Treatment volume in 1995 exceeded that of 1994 by approximately
     19%, with 42% of such increase produced by centers newly opened or acquired
     during 1995.

       Professional expenses increased in 1995 by 12% as compared to 1994,
     rising from $13,486,000 to $15,054,000.  This increase corresponded
     closely with the increase in net revenues for the period.  The affiliated
     physicians are compensated under a contractual formula based upon the
     profitability of the center at which they perform services and,
     accordingly, professional expenses are directly affected by revenue
     generation.

       Center operating expenses increased 23% in 1995 as compared to 1994,
     rising from $14,738,000 to $18,120,000.  Of this increase of $3,382,000 (i)
     approximately 69% resulted from an increase in non-personnel costs related
     to new centers, (ii) approximately 23% resulted from an increase in the
     number of non-physician personnel required to support both new centers and
     an increase in volume at certain existing centers, and (iii) approximately
     8% resulted from an increase in compensation earned by non-physician
     personnel.

       General and administrative expenses consist of legal, accounting,
     billing, development and corporate administrative expenses.  General and
     administrative expenses increased to $7,383,000 in 1995 from $7,257,000 in
     1994, or an increase of 2%.  This increase resulted primarily from
     increased volume and the number of centers, increased development efforts
     and the effect of the engagement of NMFS to provide billing and accounting
     services at a fee of 4% of cash collections.  As a percentage of net
     revenues, general and administrative expenses decreased to 12.5% in 1995
     from 13.9% in 1994.

       Depreciation consists of depreciation of property and equipment.
     Amortization consists primarily of the excess costs of acquired businesses
     over the fair value of the net identifiable assets acquired in connection
     with acquisitions.  Depreciation and amortization increased to $2,682,000
     in 1995 from $2,563,000 in 1994 or an increase of 4.6%.

       Interest expense increased in 1995 compared to 1994 as a result of
     interest charges relating to the Company's factoring of its accounts
     receivable during 1995.

       Minority interest represents interests in individual oncology centers
     held by entities other than the Oncology Group. Such entities have included
     hospitals or other such health care providers which affiliate with the
     Oncology Group. Minority interests in the earnings of such centers
     decreased 57% in 1995 as compared to 1994. This decrease of $1,116,000 was
     primarily the result of the Oncology Group acquiring increased ownership in
     several such practices.

                                       25
<PAGE>
 
       Liquidity and Capital Resources

       At December 31, 1996, the Company had cash and cash equivalents of
     $27,010,000.  The Company also had outstanding debt balances of $7,586,000,
     which consisted of long-term debt and capital lease obligations.

       During the year ended December 31, 1996, the Company used cash in
     operating activities of $1,085,000, generated cash of $38,603,000 in
     investing activities, and used $11,332,000 in cash through financing
     activities. Cash flow from operating activities during the period ended
     December 31, 1996 included adjustments for the loss on sale of the
     Company's Ophthalmology Division of $31,112,000 and depreciation and
     amortization of $6,040,000 offset by an increase in receivables from
     affiliates of $8,960,000, an increase in accounts receivable of $1,319,000
     and an increase in prepaid expenses and other current assets of $949,000.
     Net cash from investing activities of approximately $38,603,000 related
     primarily to the sale of the Company's Ophthalmology Division. The
     consideration consisted of approximately $55,077,000 in cash and the
     elimination of approximately $16,611,000 of liabilities related to the
     Ophthalmology Division. The Company used approximately $14,845,000 and
     $5,456,000 of the proceeds from the sale to pay off its line of credit
     facility with First Union National Bank relating to its Ophthalmology
     Division's operations and to pay taxes relating to the tax gain the Company
     realized on the sale of its Ophthalmology Division, respectively. The
     Company did not enter into any other credit facilities in 1996. Cash used
     in its investing activities principally reflected payments of $4,622,000
     for Oncology Centers and Affiliated Medical Practices acquired and
     approximately $3,715,000 in purchases of property and equipment. Cash used
     in financing activities primarily related to repayments of long-term debt
     of $42,141,000 and repayments of obligations under capital leases totaling
     $4,884,000 offset by proceeds from issuance of common stock of $24,227,000
     and proceeds from long-term debt of $15,879,000.

       The Company partially factors its accounts receivable. Proceeds to the
     Company from receivables sold under its accounts receivable purchase
     agreement with a factoring company were $27,393,000 and $45,726,000 for the
     years ended December 31, 1995 and 1996, respectively. During 1995 and 1996,
     the Company failed to comply with certain covenants of the receivable
     purchase agreement. Remedies available to the purchaser of its accounts
     receivable for these events of noncompliance include termination of the
     accounts receivable purchase agreement. The balance of the receivables
     transferred that remain uncollected was $4,250,000 and $4,896,000 at
     December 31, 1995 and 1996, respectively.

       At December 31, 1995, the Oncology Group had cash and cash equivalents of
     $824,000.  The Oncology Group also had outstanding debt balances of
     $14,589,000, of which $10,349,000 consisted of long-term debt and capital
     lease obligations.

       During the period ended December 31, 1995, the Oncology Group generated
     cash from operating activities of $18,196,000 and used cash of $328,000 and
     $19,609,000 in investing and financing activities, respectively.  Cash flow
     from operating activities during the period ended December 31, 1995
     principally included net income of $10,198,000 as well as $2,682,000 of
     depreciation and amortization adjustments.  Cash used in investing
     activities principally reflected purchases of property and equipment.  Cash
     used in financing activities reflected the repayment of long-term debt and
     capital lease obligations as well as distributions to the principal owner
     and minority holders.

                                       26
<PAGE>
 
       At December 31, 1995, the Oncology Group had a capital deficiency of
     $10,145,000, primarily as a result of distributions and deemed
     distributions of available cash to the Oncology Group's shareholders and
     partners.

       In 1995, the Oncology Group made no material capital expenditures.

       In 1995, the Oncology Group acquired or developed two Oncology Centers
     and related Affiliated Medical Practices.

       The Company believes that income from operations will be sufficient to 
     fund its capital expenditures and working capital requirements.

      Effects of Recent Accounting Pronouncements

       In June 1996, the Financial Accounting Standards Board issued Statement
     of Accounting Standard No. 125 "Accounting for Transfers and Servicing of
     Financial Assets and Extinguishment of Liabilities" which becomes effective
     for transactions occurring after December 31, 1996.  The adoption of this
     standard is not expected to have a material effect on the Company's
     financial position or results of operations.

       In February 1997, the Financial Accounting Standards Board issued
     Statement of Financial Accounting Standard No. 128 "Earnings per Share"
     ("SFAS 128"), which will change the current method of computing earnings
     per share. The new standard requires presentation of "basic earnings per
     share" and "diluted earnings per share" amounts, as defined. SFAS 128 will
     be effective for the Company's quarter and year ending December 31, 1997,
     and upon adoption, all prior-period earnings and per share data presented
     will be restated to conform with the provisions of the new pronouncement.
     Application earlier than the Company's quarter ending December 31, 1997 is
     not permitted. The Company does not believe the application of the new
     standard will materially impact the financial statements.

     ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

       The financial statements and supplementary financial data required by
     this Item 8 are set forth following Item 14 of this Form 10-K.


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

          None.

                                       27
<PAGE>
 
                                    PART III
                                    --------
                                        


     ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          The executive officers, directors and other significant employees of
the Company are as follows:
<TABLE>
<CAPTION>
 
     Name                            Age      Position
     ----                            ---      --------
<S>                                  <C>  <C>
 
Douglas R. Colkitt, M.D.(1)(3)        43  Chairman of the Board of Directors and
                                          Chief Executive Officer
Larry W. Pearson(1)                   50  President and Director
Gene E. Burleson                      56  Director
Jerome Derdel, M.D.                   46  Director
Brian C. Smith(2)                     38  Director
Daniel Beckett                        38  Chief Financial Officer
Marcy L. Colkitt, Esquire             34  Secretary and General Counsel

</TABLE>
------------------ 
     (1)  Member of the Compensation Committee.
     (2)  Member of the Audit Committee.
     (3)  Dr. Colkitt resigned as a member of the Audit Committee effective
          January 1, 1997.

          The following sets forth certain information with respect to the
     members of the Board of Directors, the executive officers and other 
     significant employees of the Company.

          Douglas R. Colkitt, M.D. has been the Chairman of the Board of
     Directors of the Company since the Merger in February 1996 and Chief
     Executive Officer since January 1997.  Prior to the Merger, Dr. Colkitt was
     the Chairman of the Board of Directors of EquiVision since its inception in
     October 1991.  In addition to practicing medicine as a board certified
     oncologist since 1979, Dr. Colkitt owns several medical businesses,
     including the businesses comprising Colkitt Oncology Group, Inc. where he
     served as Chairman, President and Chief Executive Officer from 1986 until
     the Merger in February 1996.  Dr. Colkitt is the Chairman of National
     Medical Financial Services Corporation, a publicly traded company engaged
     in medical billing services.  Dr. Colkitt received a B.A. from Washington
     and Jefferson College, an M.D. from the University of Pennsylvania and an
     M.B.A. from the Wharton School of the University of Pennsylvania.

          Larry W. Pearson has been President and a director of the Company
     since the Merger in February 1996.  From February 1996 until December 1996,
     Mr. Pearson was also Chief Executive Officer of the Company.  Mr. Pearson
     was a founder of EquiVision and was President, Chief Executive Officer and
     a director of EquiVision from its inception in October 1991 until the
     Merger in February 1996.  Mr. Pearson is a graduate of Georgia Institute of
     Technology.  Mr. Pearson has resigned his positions as President and a
     director of the Company effective June 15, 1997.

          Gene E. Burleson has been a director of the Company since December
     1996.  Mr. Burleson is Chairman of the Board, President and Chief Executive
     Officer of GranCare, Inc. Mr. Burleson served as President and Director of
     GranCare, Inc. from 1989 through December 1990 when he was named Chief

                                       28
<PAGE>
 
     Executive Officer.  Mr. Burleson became the Chairman of the Board of
     GranCare, Inc. in 1994.  GranCare, Inc., a publicly traded company,  is a
     leading provider of specialty medical services and long term care,
     operating 139 skilled nursing facilities in 15 states.  Mr. Burleson is
     also Chief Executive Officer and a director of Vitalink Pharmacy Services,
     Inc., a publicly traded company that provides pharmacy services to skilled
     nursing facilities.  Mr. Burleson is also a director of Alternative Living
     Services, Inc., Deckers Outdoor Corporation and Walnut Financial Services.
     Mr. Burleson is a graduate of East Tennessee State University where he
     received his B.S. in accounting.  Mr. Burleson received his M.B.A. from the
     University of Tennessee, in Knoxville, Tennessee.  Mr. Burleson has
     resigned as a director of the Company effective June 22, 1997.

          Jerome Derdel, M.D. has been a director of the Company since June
     1996.  Dr. Derdel is a board certified radiation oncologist since 1983 and
     currently serves as the Medical Director of the Radiation Oncology
     Department at Centre Community Hospital in State College, Pennsylvania.
     Dr. Derdel is a graduate of John Carroll University in Cleveland, Ohio,
     where he received his B.S. in Physics. Dr. Derdel received his M.D. from
     the University of Bologna, Italy.

          Brian C. Smith has been a director of the Company since the Merger in
     February 1996 and prior thereto served as a director of EquiVision from
     November 1993 until February 1996.  Since June 1994, Mr. Smith has served
     as President and Chief Executive Officer of B. Castle Smith & Company, a
     managed care advisory services firm.  From 1988 until June 1994, Mr. Smith
     served as Vice President, Network Development for Health Net, a federally
     qualified HMO based in Woodland Hills, California. Mr. Smith received a
     B.S. from the University of California at Riverside. Mr. Smith has resigned
     as a director of the Company effective June 15, 1997.

          Daniel L. Beckett has served as the Chief Financial Officer of the
     Company since November 1996 having previously served from May through
     November 1996 as Controller.  From February through May 1996, Mr. Beckett
     was in charge of financial analysis for the Company. Mr. Beckett previously
     served as the Controller for Oncology Services Corporation, a corporation
     affiliated with the Oncology Group prior to the Merger, from October 1991
     to February 1996. Mr. Beckett is a graduate of Grace College in Winona
     Lake, Indiana where he received his B.S. degree in Business Administration
     and Accounting.

          Marcy L. Colkitt, Esq. has served as Secretary of the Company since
     November 1996 and as its general counsel since February of that year. Prior
     to assuming the role as general counsel to the Company, Ms. Colkitt served
     as general counsel to Oncology Services Corporation, a corporation
     affiliated with the Oncology Group prior to the Merger, from 1992 through
     1996. From 1988 through 1992 Ms. Colkitt was an associate of the Pittsburgh
     law firm of Reed, Smith, Shaw & McClay. Ms. Colkitt currently participates
     as a board member in several charitable cancer organizations and is a
     member of the Pennsylvania and American Bar Associations. Ms. Colkitt is a
     graduate of Washington and Jefferson College in Washington, Pennsylvania,
     where she received dual degrees including a B.A. in Chemistry and a B.A. in
     Business Administration. Ms. Colkitt received her J.D. from the University
     of Pennsylvania in Philadelphia, Pennsylvania.

          Stephen F. Brint, M.D., a director of EquiVision and a director of the
     Company since the Merger in February 1996 resigned as a director of the
     Company in November 1996 in connection with the sale of the Ophthalmology
     Division to PRG.

                                       29
<PAGE>
 
     Classes of Directors

          The Board of Directors currently has five members and is divided into
     two classes.  Class I Directors will serve until the Annual Meeting of
     Stockholders in 1998 and thereafter for terms of two years until their
     successors have been elected and qualified.  Class II Directors will serve
     until the Annual Meeting of Stockholders in 1997 and thereafter for terms
     of two years until their successors have been elected and qualified.
     Currently, Larry W. Pearson, Brian C. Smith and Jerome Derdel, M.D. are
     Class I Directors and Douglas R. Colkitt and Gene E. Burleson are Class II
     Directors.

     Meetings and Committees of the Board of Directors

          The Company has an Audit Committee and a Compensation Committee, but
     does not have a Nominating Committee.

          In 1996, the Audit Committee consisted of Mr. Smith and Dr. Colkitt.
     The functions of the Audit Committee generally include reviewing with the
     Company's independent auditors the scope and results of their engagement
     and reviewing the adequacy of the Company's systems of internal accounting
     controls.  The Audit Committee held one meeting in 1996.  Beginning as of
     January 1, 1997, the Audit Committee consisted of Mr. Smith until his
     resignation from the Board of Directors when Dr. Derdel will serve as the
     member of the Audit Committee.  The Board of Directors intends to appoint
     additional independent directors and anticipates appointing new members to
     the Audit Committee at that time.

          In 1996, the Compensation Committee consisted of Mr. Pearson, Dr.
     Derdel and Dr. Colkitt.  Mr. Pearson resigned from the Compensation
     Committee on March 2, 1996. The functions of the Compensation Committee are
     to review and evaluate the compensation of the Company's executive
     officers, administer the Company's Stock Option Plan and establish
     guidelines for compensation of other personnel. The Compensation Committee
     held two meetings in 1996.

          The Board of Directors held one regular meeting and six special
     meetings in 1996 and acted by written consent 25 times.  Each director
     attended at least 75% of the aggregate number of meetings of the Board of
     Directors and committees on which he served while a member of the board or
     such committee.

     Compensation of Directors

          No compensation is currently paid by the Company to its outside
     directors but such directors are reimbursed for expenses incurred for
     attendance at meetings. From time to time, however, outside directors have
     been and may be granted options to purchase shares of Common Stock. In
     1996, the Company issued to Dr. Derdel options to purchase 1,000 shares of
     Common Stock, at an exercise price of $8.63 per share and to Mr. Smith
     options to purchase a total of 15,500 shares of Common Stock at exercise
     prices ranging from $8.00 to $13.13 per share as compensation for services
     rendered as a director of the Company.

                                       30
<PAGE>
 
     Section 16(a) Beneficial Ownership Reporting Compliance

          Section 16(a) of the Exchange Act requires the directors, certain
     officers of the Company and beneficial owners of more than ten percent of
     the Common Stock to file reports of securities ownership and changes in
     such ownership with the Securities and Exchange Commission. Based solely
     upon a review of the copies of such forms furnished to the Company and the
     representations made by such persons to the Company, the Company believes
     that during the last fiscal year its directors, officers and ten-percent
     beneficial owners complied with all filing requirements under Section 16(a)
     of the Exchange Act, except that Larry W. Pearson and P. Craig Hethcox, who
     was Chief Operating Officer of the Company, had late filings related to
     stock option regrants; Gene E. Burleson, David Crane, who was a director of
     the Company, and Daniel L. Beckett had late filings related to appointments
     as directors or executive officers of the Company; and Jerome Derdel, M.D.,
     Brian C. Smith and Richard Holdren, who was a director of the Company, had
     late filings related to stock option grants.
                                            

                                       31
<PAGE>
 
     ITEM 11.  EXECUTIVE COMPENSATION

     Summary Compensation Table

          The following table sets forth certain information with respect to
     compensation paid or accrued by the Company subsequent to the date of the
     Merger and by EquiVision prior to the date of the Merger for the years
     ended December 31, 1996, 1995 and 1994 to the Company's Chief Executive
     Officer and to each of the Company's other executive officers:
<TABLE>
<CAPTION>
                                                             Annual                         Long Term
                                                         Compensation                      Compensation
                                                      -----------------------------    ----------------------
                                                                                       Securities      All Other
                                                                                       Underlying     Compensation
        Name and Principal Position                   Year    Salary($)    Bonus($)    Options(#)        ($)(1)
        ---------------------------                   ----    ---------    --------   -----------     -----------
     <S>                                              <C>     <C>          <C>        <C>             <C>
     Larry W. Pearson...............................  1996    269,340            --         9,375          8,973
       President and Chief Executive Officer(2)(3)    1995    193,803        25,000       509,375(4)       9,240
                                                      1994    195,058            --            --          7,985
                                                                                    
     P. Craig Hethcox...............................  1996    117,500            --         3,516          7,500
       Chief Operating Officer(2)(5)                  1995    141,250         9,375       203,516(4)       8,750
                                                      1994     73,365            --        25,000             --
                                                                                    
     William E. Pritts II...........................  1996    119,103            --        50,000          9,500
       Chief Financial Officer (2)(6)                 1995     12,500            --        50,000(4)          --
</TABLE>

     _______________________
     (1)  Amounts shown reflect contributions to the 401(k) plan of the Company
          or of EquiVision as a pre-tax salary deferral.
     (2)  The compensation disclosed for the years ended December 31, 1995 and
          1994 reflect compensation paid to the named executive officers by
          EquiVision, the legal predecessor to the Company.
     (3)  Mr. Pearson resigned as Chief Executive Officer of the Company as of
          January 1, 1997 and as President of the Company effective June 15,
          1997.
     (4)  Of the stock options granted in 1995 to Messrs. Pearson, Hethcox and 
          Pritts, 9,375, 3,516 and 50,000, respectively, were forfeited in
          return for stock option regrants issued as of June 26, 1996.
     (5)  Mr. Hethcox joined EquiVision in July 1994 and resigned from the
          Company in November 1996.
     (6)  Mr. Pritts joined EquiVision on December 1, 1995 at an annual salary
          of $150,000 and resigned from the Company in November 1996. In
          November 1996, Daniel L. Beckett was named as Chief Financial Officer
          of the Company.
          
                                       32
<PAGE>
 
                          Stock Option Grants in 1996(1)
     <TABLE> 
     <CAPTION>
 
                                              Individual Grants
                               --------------------------------------------
                                                                           
                                           % of Total                            Potential Realizable Value
                               Number of     Options                             at Assumed Annual Rates
                                 Shares    Granted to                            of Stock Price Appreciation
                               Underlying   Employees                            for Option Term(3)
                                Options      During     Exercise  Expiration  -------------------------------
          Name                  Granted(2) Fiscal Year   Price      Date            5%            10%
          ----                 ----------  -----------  --------  ----------  -------------   -------------
     <S>                       <C>         <C>          <C>       <C>         <C>             <C>
 
     Larry W. Pearson........     9,375        3.7%     $ 8.00       6/06       $  47,156       $ 119,531
 
     P. Craig Hethcox(4).....     3,516        1.4        8.00       6/06          17,685          44,829
 
     William E. Pritts II(4)..   50,000       19.5       11.26       6/06         354,000         897,500
     </TABLE>
     -----------------------
     (1)  The option grants disclosed in this table do not reflect options
          granted to the named executive officers prior to 1996 by EquiVision,
          the legal predecessor to the Company prior to the Merger and assumed
          by the Company pursuant to the Merger. For financial reporting
          purposes, such options are treated as being granted in 1996.
     (2)  The options granted in 1996 to the named executive officers were 
          regrants based on the forfeiture of identical grants of stock options
          issued between June 2, 1995 and November 29, 1995.
     (3)  These amounts represent certain assumed rates of appreciation only.
          Actual gains, if any, on stock option exercises are dependent on the
          future performance of the price of the Common Stock and overall market
          conditions.  The amounts reflected in this table may not necessarily
          be achieved.
     (4)  The stock options previously granted to Messrs. Hethcox and Pritts 
          were not exercised prior to their resignations and have been
          forfeited.

                   Aggregated Stock Option Exercises in 1996
                  and Stock Option Values at December 31, 1996
     <TABLE>
     <CAPTION>
 
                                                         Number of Securities           Value of Unexercised
                                                        Underlying Unexercised             In-the-Money
                                                           Options at FY-End             Options at FY-End
                                Number of             --------------------------    -----------------------------
                                Shares on   Value     
           Name                 Exercise   Realized   Exercisable  Unexercisable    Exercisable     Unexercisable
           ----                 --------   --------   -----------  -------------    -----------     -------------        
     <S>                        <C>        <C>        <C>          <C>              <C>             <C>
 
     Larry W. Pearson               0          0        501,875         7,500           $0                $0
     P. Craig Hethcox (1)           0          0              0             0            0                 0
     William E. Pritts II(1)        0          0              0             0            0                 0
     </TABLE>
     -------------------
     (1)  The stock options previously granted to Messrs. Hethcox and Pritts
          were not exercised prior to their resignations and have been
          forfeited.

     Employment Agreements

          Effective January 1, 1996, EquiVision entered into a employment
     agreement with Larry W. Pearson (assumed by the Company in connection with
     the Merger), pursuant to which Mr. Pearson served as President and Chief
     Executive Officer of EquiVision and subsequently served as President and
     Chief Executive Officer of the Company until December 31, 1996.  Effective
     January 1, 1997, Mr. Pearson served as President of the Company and
     effective June 15, 1997, Mr. Pearson has resigned that position. The
     agreement provided for an annual salary of not less than $300,000 per year
     plus a bonus of up to 50% of base salary, subject to the approval of the
     Board of Directors, benefits and reimbursement of

                                       33
<PAGE>
 
     expenses.  In addition, Mr. Pearson was entitled to severance and other
     payments following the termination of his employment in certain
     circumstances, including a breach by the Company of the agreement or a
     change in control of the Company if, as a result of such change in control,
     Mr. Pearson was required to accept a decrease in salary or responsibility
     or a geographical relocation.  Mr. Pearson will not be entitled to receive
     severance pursuant to his voluntary resignation.  The agreement contains
     noncompetition and nonsolicitation provisions for up to one year following
     termination of employment.  In recognition of Mr. Pearson's contributions
     to the development of the Company since its founding, on July 26, 1995, the
     Compensation Committee of the Board of Directors granted to Mr. Pearson
     options to purchase up to 500,000 shares of the Company's Common Stock at
     an exercise price equal to the market value of the Common Stock. The 
     options are fully vested.

          The Company has no other employment agreements (other than
     arrangements terminable by the Company "at will") with any other officers
     or employees.

     Compensation Committee Interlocks and Insider Participation

          The Compensation Committee is currently comprised of Dr. Colkitt.
     None of the executive officers of the Company currently serves on the
     compensation committee of another entity or on any other committee of the
     board of directors of another entity performing similar functions.

          In connection with the Merger, Dr. Colkitt, the Company's Chairman,
     CEO and principal stockholder and the former Chairman and principal
     stockholder of the Oncology Group, received 19,321,571 shares of Common
     Stock, representing 81.5% of the shares of Common Stock outstanding
     immediately following the Merger and 75.2% upon completion of a subsequent
     public offering by the Company in February 1996 in which Dr. Colkitt sold
     95,000 shares.

          Pursuant to the terms of the merger agreement executed in connection
     with the Merger, Dr. Colkitt has agreed to indemnify the Company against
     certain losses that may arise in connection with the representations and
     warranties of the Oncology Group and, as security for such obligation, has
     agreed to pledge shares of Common Stock having a value of $7,500,000. This
     indemnification is in addition to Dr. Colkitt's indemnification relating to
     certain pending litigation.

          Dr. Colkitt and the entities that were merged into the Company
     pursuant to the Merger believe that they have meritorious defenses to the
     allegations of the former minority stockholders described under "ITEM 3.
     LEGAL PROCEEDINGS." Dr. Colkitt has entered into an agreement with the
     Company to fully indemnify the Company, among other things, against any
     damage, loss, expense or liability, including attorneys' fees and expenses,
     incurred by the Company resulting from the litigation with the former
     minority stockholders, which indemnity was to be secured, pursuant to a
     pledge agreement, by a pledge of the number of shares of Common Stock
     having a value of $25,000,000.

          The pledge agreements provide that in the event the closing trading
     price of the Common Stock increases or decreases such that the aggregate
     value of the shares pledged pursuant to the pledge agreements fall below or
     exceed the values required by the pledge agreements, an adjustment will be
     made in the number of shares subject to the pledges to add shares to the
     pledges in the event the closing trading price decreases or to release
     shares from the pledges in the event the closing trading price increases.
     At the time the pledge agreements were executed, Dr. Colkitt pledged to the
     Company a total 2,888,889 shares of Common Stock with an aggregate value of
     approximately $32,500,000. As of June 6, 1997, approximately 4,900,000
     shares of Common Stock owned by Dr. Colkitt are held by the Company subject
     to both pledge agreements. Based on the closing trading price of the Common
     Stock as of May 30, 1997 (which was $3.28125), the value of such pledged
     stock is approximately $16,080,000. The Company believes the value of such
     pledged shares is sufficient based on the Company's estimate of any
     potential damages, costs, expenses or liability, including attorneys' fees
     and expenses, which may be incurred by the Company resulting from the
     former minority stockholder litigation and income tax liability not
     reflected in the financial statements of the Oncology Group related to any
     period or periods prior to the Merger. However, there can be no assurance
     that such potential damages, costs, expenses or liability will not exceed
     the Company's good faith estimate or that the value of the pledged shares
     will not decrease based on a decrease in the market price of the Common
     Stock. Because of the Company's estimate of any potential liability related
     to the former minority stockholder litigation and the resolution of certain
     other litigation and tax events for which Dr. Colkitt has indemnified the
     Company, Dr. Colkitt intends to ask the Company's Board of Directors to re-
     evaluate the terms of the pledge agreements.

          Pursuant to the terms of the merger agreement, Dr. Colkitt is required
     to vote all of his shares of Common Stock to elect not less than three
     independent members to the Board of Directors so long as Dr. Colkitt owns
     in excess of 20% of EquiMed's outstanding Common Stock.

          On July 1, 1993, in consideration of the substantial investment Dr.
     Colkitt made in EquiVision, EquiVision granted Dr. Colkitt an option to
     purchase 500,000 shares of EquiVision common stock at an

                                       34
<PAGE>
 
     exercise price of $50 per share.  The option became exercisable on June 30,
     1995 and expires on June 30, 2003.

          Dr. Colkitt owns the common stock of six ophthalmic professional
     corporations which entered into services agreements to be managed by
     EquiVision and has an irrevocable option to acquire the common stock of 12
     professional corporations for an exercise price of $1.00.  Following the
     Merger and prior to the sale of the Ophthalmology Division in November
     1996, the Company was entitled to exercise an irrevocable option granted by
     Dr. Colkitt to EquiVision, or its designee to acquire the common stock of
     the six professional corporations he owns for an exercise price of $1.00
     and an assignment of the stock option agreements with respect to the
     professional corporations that he does not own.  Prior to November 1996,
     the Company's President and Chief Executive Officer had the authority to
     exercise this right on behalf of the Company without prior approval of the
     Board of Directors.  The Company has no further rights under such options
     subsequent to the November 1996 sale of the Ophthalmology Division to PRG.

          On November 1, 1994, EquiVision entered into a 40-year services
     agreement with an ambulatory surgery center ("ASC") in Chevy Chase,
     Maryland that is 50% owned by Dr. Colkitt.  Under the agreement, the
     Company, as successor to EquiVision, managed the operations of the ASC
     until November 1996 for a monthly fee of $4,000.  In addition, in 1996 the
     Company was entitled to receive the first $1,000,000 of the ASC's operating
     income and 50% of the ASC's net income thereafter.  Effective with the
     November 1, 1996 sale of the Ophthalmology Division to PRG, the Company has
     no further obligations or rights under the services agreement.

          Dr. Colkitt owns the common stock of 30 of the Affiliated Medical
     Practices which have entered into Management Agreements with the Company
     and has granted the Company, or its designee, an irrevocable option to
     acquire the common stock of the Affiliated Medical Practices for an
     exercise price of $1.00.  The term of the option agreements coincide with
     the term of the related Management Agreements, which are for a initial 40-
     year term and provide for successive automatic renewals.  In 1996, the
     Company's President and Chief Executive Officer had the authority to
     exercise this option agreement on behalf of the Company without prior
     approval of the Board of Directors.  The Company's policy requires a
     majority of the Company's independent directors to approve transactions
     between the Company and Dr. Colkitt.  Accordingly, there are limitations on
     Dr. Colkitt's ability to amend or terminate any Management Agreements or
     option agreements granted to the Company related to the common stock of the
     Affiliated Medical Practices.

          On June 1, 1996, EquiMed India, a wholly owned subsidiary of the
     Company formed to obtain contracts for accounting and billing services,
     began operations in Madras, India.  EquiMed India had revenues and net
     income of approximately $2,100,000 and $1,900,000, respectively,
     principally related to a contract for accounting and billing services with
     Anesthesia Solutions, Inc., a company wholly owned by Dr. Colkitt.  Prior
     to April 1, 1997, EquiMed India subcontracted with Nittany Decisions
     Services Private Limited ("Nittany"), a company 80% owned by Dr. Colkitt,
     to provide the accounting and billing services for Anesthesia Solutions,
     Inc.  According to the contract terms, EquiMed India retains approximately
     10% of the revenues billed for Anesthesia Solutions, Inc. and pays Nittany
     its costs and an agreed upon rate of return.  Effective April 1, 1997, the
     Company acquired Dr. Colkitt's interest in Nittany as part of its
     acquisition of the Management Services Companies.  See "ITEM 1. BUSINESS -
     Recent Developments."  EquiMed India is exempt from income taxes payable to
     agencies of the Indian government and the local provincial government based
     upon agreements with these agencies when EquiMed India was incorporated.
     At December 31, 1996, EquiMed India has trade receivables of

                                       35
<PAGE>
 
     approximately $2,000,000 which primarily represent receivables for the
     services from ASI. On February 2, 1997, the Company entered into an
     agreement to acquire ASI.

          In 1996, Dr. Colkitt was the Chairman and sole stockholder of George
     Washington and Thomas Jefferson, which corporations lease premises occupied
     by certain of the Oncology Centers.  The Company made lease payments to
     George Washington and Thomas Jefferson in the aggregate amount of $568,846.
     In January 1997, the Company acquired George Washington and Thomas
     Jefferson from Dr. Colkitt.  See "ITEM 1.  BUSINESS - Recent Developments."

          In 1996, the Company leased certain equipment from D&T Leasing Limited
     Partnership ("D&T") and Nixon, both controlled by Dr. Colkitt. The Company
     made payments to D&T, in the aggregate, of $113,812 in 1996. The Company
     made payments to Nixon, in the aggregate, of $160,040 during 1996. During
     1996, the Company repaid approximately $3,218,000 of the principal amount
     under these capital leases, thereby reducing its monthly payment
     obligations. In January 1997, the Company acquired Nixon from Dr. Colkitt
     for approximately $400,000. See "ITEM 1. BUSINESS - Recent Developments."

          The Affiliated Medical Practices have contracts with NMFS for the
     provision of billing, collection and accounts receivable management
     services, as well as certain accounting services.  The centers paid to
     NMFS a aggregate of $2,619,470 during 1996 for such services.  NMFS is a
     publicly traded company of which Dr. Colkitt is the Chairman and principal
     stockholder.

          The Company entered into a receivable purchase agreement in April
     1995. Under the terms of the agreement, receivables are transferred to
     Oncology Funding Corporation (a company that is wholly owned by Dr.
     Colkitt) which then factors the receivables with an unrelated financing
     company, John Alden Asset Management Company ("Alden"). The factored
     receivables may be denied by Alden for various reasons including nonpayment
     by the payor. The transfer of receivables to Alden is recognized as a sale,
     and the difference between the sales price (adjusted for the accrual of
     probable adjustments) and the net receivables is recognized as a gain or
     loss on the sale of receivables. Proceeds to the Company from receivables
     sold under this agreement were approximately $45,726,000 for the year ended
     December 31, 1996. During 1995 and 1996, the Company failed to comply with
     certain covenants of the receivable purchase agreement. Remedies available
     to Alden due to these events of noncompliance include termination of the
     receivable purchase agreement. The balance of the receivables transferred
     that remain uncollected was approximately $4,896,000 at December 31, 1996.

                                       36
<PAGE>
 
     ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          The following table sets forth certain information regarding the
     beneficial ownership of shares of Common Stock as of April 30, 1997 by (i)
     each person known by the Company to be the beneficial owner of more than 5%
     of the outstanding shares of Common Stock, (ii) each of the Company's
     directors, (iii) each executive officer named in the table under the
     caption "Executive Compensation" and (iv) all directors and executive
     officers as a group.
     <TABLE>
     <CAPTION>
 
     Name and Address of
     Beneficial Owner (1)(2)                        Number      Percent
     -----------------------                        ------      ------- 
     <S>                                          <C>           <C>
 
     Douglas R. Colkitt, M.D/(3)/                 20,889,880     73.9%
     Larry W. Pearson/(4)/                         1,121,802      3.9
     Brian C. Smith/(5)/                              36,250      *
     Jerome Derdel, M.D./(6)/                          1,000      *
     Gene E. Burleson                                  1,000      *
     All directors and executive officers as a
       group (5 persons)/(7)/                     22,049,932     76.6
     </TABLE>

     --------------------------
     *    Less than 1%.
     (1)  The addresses of all such owners is in care of the Company at 2171
          Sandy Drive, State College, PA  16803.
     (2)  A person is deemed to be the beneficial owner of securities that can
          be acquired by such person within 60 days upon the exercise of options
          or warrants.  Each beneficial owner's number of shares is determined
          by assuming that options or warrants that are held by such person (but
          not those held by any other person) and that are exercisable within 60
          days have been exercised.  The total outstanding shares used to
          calculate each beneficial owner's percentage includes such options and
          warrants.  Unless otherwise noted, the Company believes that all
          persons named in the table have sole voting and investment power with
          respect to all shares of Common Stock beneficially owned by them.
     (3)  Includes exercisable options to purchase 500,000 shares of Common
          Stock at an exercise price of $50 per share.  Does not include
          1,247,517 shares owned by Dr. Colkitt's spouse, of which Dr. Colkitt
          disclaims beneficial ownership.
     (4)  Includes exercisable options to purchase 501,875 shares of Common
          Stock at exercise prices ranging from $8.00 to $10.50 per share.
     (5)  Includes exercisable options to purchase 35,500 shares of Common Stock
          at exercise prices ranging from $7.00 to $10.50 per share.
     (6)  Includes exercisable options to purchase 1,000 shares of Common Stock
          at an exercise price of $8.63 per share.
     (7)  Includes exercisable options to purchase 1,038,375 shares of Common
          Stock.

                                       37
<PAGE>
 
     ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          The Company is the legal successor to EquiVision, which merged with
     the Oncology Group on February 2, 1996 pursuant to the Merger.  See "ITEM
     1.  BUSINESS - Company History."  EquiVision, the Oncology Group and the
     Company have been parties to a number of transactions with their respective
     officers and directors and individuals or entities which are affiliated
     with such officers and directors.  Pursuant to the Merger, the Company
     succeeded to all continuing obligations and benefits of these transactions.
     Effective November 1, 1996, the Company sold its Ophthalmology Division to
     PRG.  See "ITEM 1.  BUSINESS - General Overview."  This Item 13 describes
     certain relationships and related transactions of which the Company had
     some obligation or benefit in the year ended December 31, 1996.  In the
     future, any transactions between the Company and related parties, other
     than the defense of actions for which Dr. Colkitt has indemnified the
     Company, will be approved by a majority of the Company's independent
     directors.  See "ITEM 11. EXECUTIVE COMPENSATION - Compensation Committee
     Interlocks and Insider Participation" for a description of certain
     relationships and related transactions between the Company and Dr. Colkitt.

          In connection with the Merger, the Company assumed the option plans of
     EquiVision and converted those options into options to receive shares of
     Common Stock.  All EquiVision options described herein have been adjusted
     to reflect the one-for-two reverse stock split of EquiVision common stock.

          During 1996 and prior to the November 1, 1996 sale of the
     Ophthalmology Division to PRG, the Company paid $95,184 as lease expenses
     for a corporate office to a partnership in which Mr. Pearson is a general
     partner.  Effective November 1, 1996, the Company's obligations under the
     lease were assigned to and assumed by PRG.

          On September 1, 1992, EquiVision acquired certain assets of The Eye
     Surgery Center of Louisiana, a professional medical corporation wholly
     owned by Stephen F. Brint, M.D., a director of the Company from February
     until November 1996.  In 1996, the Company leased equipment from Dr. Brint
     and employed Dr. Brint as Medical Director of the Eye Surgery Center of
     Louisiana.  During the year ended December 31, 1996, Dr. Brint received
     compensation of $427,557.  In addition, Dr. Brint is a limited partner of
     the Ambulatory Eye Surgery Center of Louisiana of which the Company was a
     general partner prior to November 1996.  During the year ended December 31,
     1996, Dr. Brint received partnership distributions of $52,900.

          On November 12, 1993, in consideration of his election to the Board of
     Directors of EquiVision, Brian C. Smith received an option to purchase
     10,000 shares of EquiVision common stock at an exercise price of $7.00 per
     share.  The option became exercisable November 12, 1994 and expires
     November 12, 2000. EquiVision entered into a one-year, renewable agreement
     effective July 1, 1994 with B. Castle Smith & Co., Inc. ("BCSI"), a
     consulting firm whose principal stockholder is Mr. Smith.  The agreement
     provides for BCSI to assist the Company with the development and
     implementation of its managed care strategy.  In connection with the
     agreement, BCSI has been granted options covering an aggregate of 15,000
     shares of EquiVision common stock.  The options are exercisable on the
     first anniversary date of their issuance and expire on the seventh
     anniversary of issuance.  For stock options granted by the Company to Mr.
     Smith in 1996, see "ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE
     REGISTRANT - Compensation of Directors."

                                       38
<PAGE>
 
          The Company retained the services of Parkwood Motors, a corporation
     owned by Sharon Pearson, Larry Pearson's wife, to assist in the sale of the
     ophthalmic practices to PRG.  Parkwood engaged financial staffing to gather
     due diligence and other information regarding entities to be acquired.
     Parkwood was entitled to a commission equal to 5% of the earn-out received
     by EquiMed from PRG.  In 1996, such commission totalled $150,000.

          Certain legal services are provided on behalf of the Company by Marcy
     L. Colkitt & Associates, P.C., a firm of which Marcy Colkitt, Secretary and
     General Counsel of the Company and the sister of Dr. Colkitt, is a partner.
     In addition to compensation of approximately $134,000 received by Ms.
     Colkitt in 1996 for her services as General Counsel of the Company, Marcy
     L. Colkitt & Associates, P.C. received $132,263 during 1996 for the legal
     service provided by the firm. Fees for legal services were at a rate
     commensurate with those available from independent third parties.

                                       39
<PAGE>
 
     ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
               FORM 8-K

     (a)  Financial Statement Schedules
          -----------------------------

     II   Valuation and Qualifying Accounts

     Note: All other schedules for which provision is made in the applicable
     accounting regulation of the Securities and Exchange Commission are not
     required under the related instructions or are inapplicable and have
     therefore been omitted.

     (b)  Forms 8-K
          ---------

          The Company filed the following Current Reports on Form 8-K during the
     quarter ended December 31, 1996 and through May 31, 1997:
     <TABLE>
     <CAPTION>
 
     Date of Report                     Items Reported
     --------------                     --------------
     <S>                                <C>
 
     October 7, 1996                    5 and 7
     October 10, 1996                   5 and 7
     January 24, 1997                   5
     May 28, 1997                       2 and 7
     </TABLE>
     
     (c)  Exhibits
          --------
     <TABLE> 
     <CAPTION> 

     Exhibit No.  Description
     -----------  -----------
     <S>          <C> 
     2.1          Agreement and Plan of Merger by and among Douglas R. Colkitt,
                  Colkitt Oncology Group, Inc., EquiVision, Inc. and the Company,
                  as amended*
     3.1          Certificate of Incorporation of the Company*
     3.2          By-laws of the Company*
     4.1          Form of certificate evidencing Common Stock, par value $.0001
                  per share, of the Company*
     10.10        Form of Option to Purchase Stock of Professional Corporation,
                  as amended*
     10.11        Employment Agreement between EquiVision, Inc. and Larry W.
                  Pearson dated January 1, 1996*
     10.12        Stock Option Agreement between EquiVision, Inc. and Douglas R.
                  Colkitt, M.D. dated July 1, 1993**
     10.13        Master Equipment Lease dated February 19, 1993 between D&T
                  Leasing Limited Partnership and EquiVision, Inc.**
     10.14        Form of Billing Services Agreement with National Medical
                  Financial Services Corporation*
     10.15        Form of Cancer Treatment Center Management Services Agreement*
     10.16        Form of Practice Management Services Agreement (Type I)*
     10.17        Form of Practice Management Services Agreement (Type II)*
     10.18        Form of Stock Option Agreement*
     10.19        Form of Master Assignment of the Stock Option Agreements*
     10.20        Form of Stock Pledge Agreement between Colkitt and the
                  Company*
     10.21        Asset Purchase Agreement dated as of October 9, 1996 by and
                  among EquiMed, Inc., Physicians Resource Group, Inc. and PRG
                  Georgia, Inc.***
     10.22        Stock Purchase Agreement dated as of April 1, 1997 by and
                  among EquiMed, Inc., Russell Data Services, Inc. and Douglas
                  R. Colkitt, M.D.****
     </TABLE> 

                                       40
<PAGE>
 
     <TABLE> 
     <S>          <C> 
     10.23        Stock Purchase Agreement dated as of April 1, 1997 by and
                  among EquiMed, Inc., Billing Services, Inc. and Douglas R.
                  Colkitt, M.D.****
     10.24        Stock Purchase Agreement dated as of April 1, 1997 by and
                  among EquiMed, Inc., Trident International Accounting, Inc.
                  and Douglas R. Colkitt, M.D.****
     10.25        Stock Purchase Agreement dated as of April 1, 1997 by and
                  among EquiMed, Inc., Tiger Communications International Ltd.
                  and Douglas R. Colkitt, M.D.****
     10.26        Stock Purchase Agreement dated as of April 1, 1997 by and
                  among EquiMed, Inc., Nittany Decisions Services Private
                  Limited and Douglas R. Colkitt, M.D.****
     10.27        Stock Purchase Agreement dated January 8, 1997 among ALR
                  Reporting, Inc. Charles Shapiro and Walter Shapiro
     10.28        Asset Purchase Agreement dated as of January 1, 1997 among
                  Transcriptions International Inc., Prophecy Health Information
                  Management, Inc. and Edward J. Bilotti
     10.29        Stock Purchase Agreement dated as of January 1, 1997 among
                  EquiMed, Inc., Thomas Jefferson Real Estate Corporation and
                  Douglas R. Colkitt, M.D.
     10.30        Stock Purchase Agreement dated as of January 1, 1997 among
                  EquiMed, Inc., George Washington Real Estate Corporation and
                  Douglas R. Colkitt, M.D.
     10.31        Stock Purchase Agreement dated as of January 1, 1997 among
                  EquiMed, Inc., Nixon Equipment Corporation and Douglas R.
                  Colkitt, M.D.
     11.1         Statement re: computation of net earnings per share
     21           Subsidiaries of the Registrant
     23.1         Consent of Ernst & Young LLP
     </TABLE> 
     ---------------------------------
     *      Incorporated by reference to the exhibit on the Company's
            Registration Statement on Form SB-2 (No. 33-98058).
     **     Incorporated by reference to the exhibit on the Company's
            Registration Statement on Form SB-2 (No. 33-66510-A).
     ***    Incorporated by reference to the exhibit on the Company's current
            report on Form 8-K filed October 10, 1996.
     ****   Incorporated by reference to the exhibit on the Company's Current
            Report on Form 8-K filed May 28, 1997.

                                       41
<PAGE>
 
                                   SIGNATURES

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

                                         EQUIMED, INC.

                                         /s/  DOUGLAS R. COLKITT
                                         -----------------------
                                         By:  Douglas R. Colkitt, Chairman of
                                              the Board and Chief Executive
                                              Officer

          Pursuant to the requirements of the Securities Exchange Act of 1934,
     this report has been signed below by the following persons on behalf of the
     registrant and in the capacities and on the dates indicated.
<TABLE> 
<CAPTION> 

          Signatures                  Title                        Date
          ----------                  -----                        ----

     <S>                       <C>                             <C> 
     /s/ DOUGLAS R. COLKITT    Chairman of the Board and       __________, 1997
     ----------------------    Chief Executive Officer                  
     Douglas R. Colkitt        (Principal Executive Officer) 
                                                             


     /s/ DANIEL L. BECKETT     Chief Financial Officer         __________, 1997
     ---------------------     (Principal Financial and                     
     Daniel L. Beckett         Accounting Officer)                          


     /s/ LARRY W. PEARSON      Director                        __________, 1997
     --------------------                                               
     Larry W. Pearson


     /s/ GENE E. BURLESON      Director                        __________, 1997
     --------------------                                               
     Gene E. Burleson


     /s/ BRIAN C. SMITH        Director                        __________, 1997
     ------------------                                                 
     Brian C. Smith


     /s/ JEROME DERDEL         Director                        __________, 1997
     --------------------                                               
     Jerome Derdel, M.D.
     </TABLE> 

                                       42
<PAGE>
 
                       Consolidated Financial Statements

                                 EquiMed, Inc.


                  Years ended December 31, 1994, 1995 and 1996



                                    Contents

<TABLE>
<CAPTION>
 
<S>                                                                     <C>
Report of Independent Auditors........................................  F-1
 
Consolidated Financial Statements
 
Consolidated Balance Sheets...........................................  F-2
Consolidated Statements of  Operations................................  F-4
Consolidated Statements of Stockholders' Equity and Retained Deficit..  F-6
Consolidated Statements of Cash Flows.................................  F-7
Notes to Consolidated Financial Statements............................  F-9
 
</TABLE>
<PAGE>
 
                         Report of Independent Auditors

To the Board of Directors and Stockholders of EquiMed, Inc.

We have audited the accompanying consolidated balance sheets of EquiMed, Inc. as
of December 31, 1995 and 1996 and the related consolidated statements of
operations, stockholders' equity and retained deficit, and cash flows for each
of the three years in the period ended December 31, 1996.  These consolidated
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EquiMed, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.



Atlanta, Georgia
May 21, 1997

                                      F-1
<PAGE>
 
                                 EquiMed, Inc.

                          Consolidated Balance Sheets
                                 (In thousands)

<TABLE>
<CAPTION>
 
                                                                 December 31
                                                               1995      1996
                                                            --------------------
<S>                                                         <C>       <C>  
Assets
Current assets:
   Cash and cash equivalents                                $    824  $ 27,010
   Accounts receivable, less allowance for doubtful              
    accounts of $2,922 in 1995 and $4,787 in 1996              4,988     6,307
   Receivables from affiliates                                     -     9,718
   Deferred income taxes                                         547     3,171
   Prepaid expenses and other current assets                     658     1,607
                                                            --------------------
Total current assets                                           7,017    47,813
 
 
 
Property and equipment, at cost:
   Land                                                           29        29
   Buildings                                                   3,446     5,230
   Leasehold improvements                                      1,728     1,380
   Equipment                                                  17,973    20,252
                                                            --------------------
                                                              23,176    26,891
   Less accumulated depreciation and amortization             11,839    14,512
                                                            --------------------
Net property and equipment                                    11,337    12,379
 
 
Advances to principal stockholder                                  -     5,025
Management agreements net of accumulated amortization
   of $44 in 1995 and $58 in 1996                              1,664     5,490
Deferred income taxes                                            273         -
Other assets, net                                                288       884
                                                            --------------------
Total assets                                                $ 20,579  $ 71,591
                                                            ====================

</TABLE> 

                                      F-2
<PAGE>
 
<TABLE>
<CAPTION>
                                                                December 31
                                                             1995         1996
                                                          ----------------------
<S>                                                       <C>          <C> 
Liabilities and capital deficiency
Current liabilities:
    Note payable to related parties                       $    725     $      -
    Accounts payable                                         1,377        1,312
    Accrued salaries and benefits                              249          883
    Accrued contractual fees payable                         2,874        2,360
    Other accrued expenses                                   1,997        6,006
    Income taxes payable                                     7,236        7,921
    Payable to affiliates                                      506        7,815
    Current portion of long-term debt                        2,048          686
    Current portion of obligations under capital leases:
      Related parties                                          596          354
      Other                                                  1,596          717
                                                          ----------------------
Total current liabilities                                   19,204       28,054
 
Long-term debt                                               3,188        2,431
 
Obligations under capital leases:
    Related parties                                          4,518        1,545
    Other                                                    2,643        1,853
 
Deferred income taxes                                            -          771
 
Minority interest                                            1,171        1,473
 
Stockholders' Equity:
    Common stock, 0.0001 par value, 100,000,000 shares 
      authorized and 28,591,474 issued and outstanding             
      as of December 31, 1996                                    -            3
    Additional paid-in capital                               1,105       81,600
    Partners' Capital                                          657          657
    Retained deficit                                       (11,907)     (46,796)
                                                          ----------------------
Total stockholders' equity (deficit)                      $(10,145)    $ 35,464
                                                          ======================
Total liabilities and stockholders' equity (deficit)      $ 20,579     $ 71,591
                                                          ======================
</TABLE>

See accompanying notes.

                                      F-3
<PAGE>
 
                                 EquiMed, Inc.

                        Consolidated Income Statements
                                (In thousands)

<TABLE> 
<CAPTION> 

                                                      Year ended December 31
                                                  1994        1995          1996
                                               -------------------------------------   

<S>                                             <C>      <C>            <C>
Net revenues                                    $52,266  $    58,884    $   99,115    
                                                                                      
Costs and expenses:                                                                   
  Professional expenses                          13,486       15,054        26,479    
  Center operating expenses (including $896,                                          
    $860 and $ 481 of lease expenses with                                             
    related parties in 1994, 1995 and 1996,                                           
    respectively)                                14,738       18,120        42,422    
  General and administrative expenses                                                 
    (including $1,632, $2,532 and $2,255 of                                           
    expenses with related parties in 1994,                                            
    1995 and 1996, respectively)                  7,257        7,383         8,755    
  Depreciation                                    2,400        2,496         3,829    
  Amortization                                      163          186         2,211    
  Interest expense:                                                                   
   Related parties                                  826          936           643    
   Other                                          1,357        1,028         1,905    
   Loss on sale of receivables                        -          885           640    
  Other income, net                                (175)        (637)         (723)   
  Loss on sale of division                            -            -        31,112    
                                               -------------------------------------   
Total costs and expenses                         40,052       45,451       117,273    
                                               -------------------------------------   
                                                                                      
Income (loss) before minority interest,                                               
  income taxes and extraordinary charge          12,214       13,433       (18,158)   
                                                                                      
Minority interest                                 1,947          831         1,171    
                                               -------------------------------------   
                                                                                      
Income (loss) before income taxes and                                                 
extraordinary charge                             10,267       12,602       (19,329)   
                                                                                      
Provision for income taxes                        1,704        2,404        10,613    
Cumulative effect of change in income tax                                             
status                                                -            -         1,277    
                                               -------------------------------------   
Total provision for income taxes                  1,704        2,404        11,890    
                                               -------------------------------------   
Income (loss) before extraordinary charge       $ 8,563     $ 10,198    $  (31,219)    

</TABLE>

                                      F-4
<PAGE>
 
                                 EquiMed, Inc.

                  Consolidated Income Statements (continued)
                                (In thousands)

<TABLE> 
<CAPTION> 

                                                  Year ended December 31
                                             1994         1995          1996
                                        ---------------------------------------
<S>                                       <C>           <C>          <C>
Income (loss) before extraordinary        
  charge                                  $  8,563      $10,198      $(31,219)
 
Extraordinary charge for early
  extinguishment of debt (net of 
  income taxes of $ 85)                          -            -           127
                                        ---------------------------------------
 
Net income (loss)                         $  8,563      $10,198      $(31,346)
                                        =======================================
 
Earnings per share:
  Net loss before extraordinary charge                               $  (1.13)
  Extraordinary charge for early                                          
   extinguishment of debt                                               (0.01)
                                                                  -------------
  Net loss                                                           $  (1.14)
                                                                  =============
 
  Weighted average shares outstanding                              27,577,000
                                                                  =============
 
Supplemental unaudited pro forma 
 information:
  Net income, as above                    $  8,563      $10,198
  Proforma adjustment to income tax 
   expense                                   3,330        3,391
                                        --------------------------
  Proforma net income                     $  5,233      $ 6,807
                                        ==========================
 
Pro forma net income per share            $   0.25      $  0.33
                                        ==========================
Pro forma weighted average shares          
 outstanding                            20,784,000   20,784,000
                                        ==========================

</TABLE>

See accompanying notes.

                                      F-5
<PAGE>
 
                                 EquiMed, Inc.

                Consolidated Statements of Stockholders' Equity
                             and Retained Deficit
                                (In thousands)

<TABLE> 
<CAPTION> 

                                            Common Stock
                                 -----------------------------------
                                                                       Additional 
                                                                        Paid-in           Partners'       Retained              
                                       Shares            Amount         Capital            Capital        Deficit           Total
                                 ---------------------------------------------------------------------------------------------------

<S>                                <C>                   <C>              <C>               <C>           <C>             <C>
Balance at December 31, 1993                -            $    -               -             $ 277         $ (2,581)       $ (2,304)
 Net income                                 -                 -               -                 -            8,563           8,563
 Cash and deemed distributions
  to Dr. Colkitt and affiliates             -                 -               -                 -          (10,730)        (10,730)
 Capital contributions by Dr.
  Colkitt and affiliates                    -                 -                               380                -             380
                                 ---------------------------------------------------------------------------------------------------

Balance at December 31, 1994                -                 -               -               657         $ (4,748)       $ (4,091)
 Net income                                 -                 -               -                 -           10,198          10,198
 Cash and deemed distributions
  to Dr. Colkitt and affiliates             -                 -               -                 -          (17,357)        (17,357)
 Capital contributions by Dr.
  Colkitt and affiliates                    -                 -           1,105                 -                -           1,105
                                 ---------------------------------------------------------------------------------------------------

Balance at December 31, 1995                -                 -           1,105               657          (11,907)        (10,145)
 Cash and deemed distributions
  to Dr. Colkitt and affiliates             -                 -               -                 -           (3,543)         (3,543)
 Acquisition of EquiVision, Inc.   25,122,464                 3          45,578                 -                -          45,581
 Issuance of Common Stock in
  connection with public            
  offering, net of issuance cost    2,000,000                 -          24,200                 -                -          24,200
 Issuance of Common Stock in
  connection with acquisitions      1,464,078                 -          10,690                 -                -          10,690
 Issuance of Common Stock               4,932                 -              27                 -                -              27
 Net loss                                   -                 -               -                 -          (31,346)        (31,346)
                                 ---------------------------------------------------------------------------------------------------
Balance at December 31, 1996       28,591,474            $    3        $ 81,600             $ 657         $(46,796)       $ 35,464
                                 ===================================================================================================


</TABLE>

See accompanying notes.

                                      F-6
<PAGE>
 
                                 EquiMed, Inc.

                     Consolidated Statements of Cash Flows
                                (In thousands)

<TABLE> 
<CAPTION> 

                                                      Year ended December 31
                                                   1994       1995        1996
                                                --------------------------------
<S>                                              <C>        <C>        <C>  
Cash flows from operating activities
Net income(loss)                                 $ 8,563    $10,198    $(31,346)
Adjustments to reconcile net income to net 
  cash provided by operating activities:
    Depreciation and amortization                  2,563      2,682       6,040
    Deferred income taxes                            496        127      (1,580)
    Minority interest                              1,947        831       1,171
    Loss on sale of Ophthalmology Division             -          -      31,112
    Changes in operating assets and liabilities, 
      net of acquired businesses:
      Accounts receivable, net                      (844)     2,169      (1,319)
      Receivables from/payables to affiliates     (1,449)       874      (8,960)
      Prepaid expenses and other current assets     (507)       428        (949)
      Accounts payable                               (22)       899         (68)
      Accrued salaries and benefits                  381       (530)        634
      Accrued contractual fees payable             1,994     (1,984)       (514)
      Other accrued expenses                         352        161       4,009
      Income taxes payable                           902      2,341         685
                                                --------------------------------
Net cash provided by (used in) operating 
 activities                                       14,376     18,196      (1,085)
 
 
Cash flows from investing activities
Proceeds from sale of Ophthalmology Division           -          -      55,077
Payments for acquisition of oncology centers, 
 net of cash acquired                             (2,000)         -      (4,622)
Purchase of property and equipment                  (620)      (446)     (3,715)
Increases in advances to principal stockholder         -          -      (5,025)
Decrease (increase) in other assets                   74        118      (3,112)
                                                --------------------------------
Net cash provided by (used in) investing          
 activities                                       (2,546)      (328)     38,603

</TABLE>

                                      F-7
<PAGE>
 
                                 EquiMed, Inc.

               Consolidated Statements of Cash Flows (continued)
                                (In thousands)

<TABLE> 
<CAPTION> 

                                                     Year ended December 31
                                                   1994       1995       1996
                                                --------------------------------
<S>                                             <C>         <C>        <C> 
Cash flows from financing activities
Proceeds from long-term debt                    $  1,473    $     -    $ 15,879
Repayment of long-term debt                       (1,173)      (576)    (41,416)
Net payments under line of credit                    (25)         -           -
Proceeds from related party sale-leaseback         
 transactions                                      2,709          -           -
Repayment of obligations under capital leases:
  Related parties                                   (622)      (570)     (3,215)
  Other                                           (1,321)    (1,240)     (1,669)
Repayment of note payable                              -          -        (725)
Proceeds from issuance of common stock                 -          -      24,227
Capital contributions:
  Primary owner                                      380        230           -
  Minority owners                                    250          -           -
Distributions:
  Primary owner                                  (10,730)   (17,357)     (3,543)
  Minority owners                                 (2,030)       (96)       (870)
                                                --------------------------------
Net cash used in financing activities            (11,089)   (19,609)    (11,332)
                                                --------------------------------
 
 
Net increase (decrease) in cash and cash        
 equivalents                                         741     (1,741)     26,186
Cash and cash equivalents, beginning of       
 period                                            1,824      2,565         824
                                                --------------------------------
Cash and cash equivalents, end of period        $  2,565   $    824    $ 27,010
                                                ================================
 
Supplemental disclosure of non cash investing 
 and financing activities
Related party capital lease obligations 
 incurred to acquire equipment:                 $    152   $      -    $      - 
Issuance of capital stock for acquisitions      $      -   $      -    $ 56,271
Liabilities assumed by the purchaser of the     
 Ophthalmology Division                         $      -   $      -    $ 16,611

</TABLE> 

See accompanying notes.

                                      F-8
<PAGE>
 
                                 EquiMed, Inc.

                  Notes To Consolidated Financial Statements


1. Business, Organization and Basis of Presentation

On February 2, 1996, Colkitt Oncology Group, Inc. (the "Oncology Group") merged
with and into EquiVision, Inc. ("EquiVision") and, immediately thereafter,
effected an immediate reincorporation in Delaware and a 1-for-2 reverse stock
split through a merger (the "Reincorporation Merger") with and into EquiMed,
Inc. ("EquiMed" or the "Company"), a newly-formed Delaware subsidiary of
EquiVision, formed for the purpose of effecting the Reincorporation Merger and
reverse stock split. The Oncology Group was formed prior to consummation of the
Merger to acquire all of the stock or assets of various corporations,
partnerships and joint ventures which owned or controlled 30 radiation oncology
centers. All share and per share amounts in this report reflect the 1-for-2
reverse stock split that was effected upon consummation of the Reincorporation
Merger. The merger between the Oncology Group and EquiVision and the
Reincorporation Merger are referred to collectively as the "Merger". The
business combination was accounted for as a reverse purchase. As a result, the
Oncology Group is considered the acquiror. The combined financial statements of
the Oncology Group as the acquiring Company constitute the historical 1995 and
1994 financial statements of the Company. The consolidated financial statements
of EquiVision are included in the consolidated financial statements for the
period subsequent to February 2, 1996. The stockholder of the Oncology Group
received 20,783,633 shares of the common stock of EquiVision as consideration in
the Merger.

The purchase price of EquiVision was approximately $45,600,000 and has been
allocated to the assets purchased and the liabilities assumed based upon fair
market value at the date of acquisition. The excess of purchase price over the
fair market value of the net assets was approximately $38,000,000 and has been
recorded as goodwill.

On January 1, 1996, certain of the entities which comprised the Oncology Group
ceased to qualify as S corporations and became subject to corporate income
taxes. As a result, the Company recorded a cumulative adjustment of $1,277,000
to establish deferred income taxes for the change in tax status. These deferred
taxes represent the cumulative temporary differences between financial reporting
and tax reporting.

Subsequent to the Merger, long-term debt and capital lease obligations were
prepaid. As a result of this prepayment, the Company incurred approximately
$212,000 in prepayment fees which have been reflected as a $127,000
extraordinary charge, net of income taxes.

In order to effect the Merger and in connection therewith, the stockholders
approved an increase of the shares of common stock of the Company from
20,000,000 shares to 100,000,000 shares.

On February 14, 1996, the Company consummated the sale of 2,000,000 shares of
common stock in connection with a public offering at $14 per share. Net proceeds
from the offering were approximately $24,200,000. On October 15, 1996, the
Company registered 10,000,000 shares of its common stock, par value $ .0001 per
share.

                                      F-9
<PAGE>
 
                                 EquiMed, Inc.

            Notes To Consolidated Financial Statements (continued)


1. Business, Organization and Basis of Presentation (continued)

Effective November 1, 1996, the Company consummated the sale of the
ophthalmology physician practice management and ambulatory center business of
the Company, formerly doing business as EquiVision (hereafter referred to as the
"Ophthalmology Division"), effective as of October 31, 1996. The consideration
consisted of approximately $55,077,000 in cash and the elimination of
approximately $16,611,000 of liabilities related to the Ophthalmology Division.
As a result of the sale, the Company recorded a loss of approximately
$31,112,000. Included in the loss on the sale of the Company's Ophthalmology
Division is an impairment charge of approximately $24,200,000 which the Company
previously reflected in its September 30, 1996 interim financial statements
based upon its estimate of the expected consideration to be received upon the
consummation of the sale on November 5, 1996. The operating results of the
Ophthalmology Division included in the Company's 1996 results of operations are
as follows:

<TABLE>
<CAPTION>
 
                                                           1996
                                                           ----
              <S>                                        <C>
              Net revenues                              $ 42,250
              Costs and expenses
               Professional expenses                      12,217
               Center operating expenses                  23,787
               General and administrative expenses         1,783
               Depreciation and amortization               3,224
               Interest expense                            1,279
               Other income, net                             (29)
               Loss on sale of division                   31,112
                                                       -----------
              Total costs and expenses                    73,373
                                                       -----------
 
              Loss before income taxes                   (31,123)
              Provision for income taxes                   5,456
                                                       -----------
              Net loss                                  $(36,579)
                                                       ===========
 
              Net loss per share                        $  (1.33)
                                                       ===========

</TABLE>

Since the date of the Merger and prior to the consummation of the sale, the
Ophthalmology Division acquired various ophthalmology medical practices for
approximately $12,880,000. The pro forma results of these acquisitions have not
been presented as they are not reflective of the Company's ongoing operations.

                                     F-10
<PAGE>
 
                                 EquiMed, Inc.

            Notes To Consolidated Financial Statements (continued)


1. Business, Organization and Basis of Presentation (continued)

The Company is comprised of radiation and medical oncology centers and
affiliated medical practices located in Pennsylvania, New York, New Jersey,
Illinois, Florida, North Carolina, Arizona, Massachusetts and Maryland. Certain
of the centers are structured as limited partnerships. A corporation, wholly-
owned by Dr. Colkitt, principal shareholder of the Company, Oncology Services
Corporation ("OSC"), provided accounting, technical and management services
through the date of the Merger to the centers and has charged the centers a
management fee. OSC was not included in the Oncology Group and all of the
services previously provided by OSC were included within the Oncology Group,
except for accounting, billing and collections as disclosed in Note 13. For
purposes of the accompanying consolidated financial statements, the actual
expenses of OSC, which pertain to the Oncology Group are recorded in these
consolidated financial statements through the date of the Merger, and the
difference between the management fee charged by OSC and its actual expenses are
recorded as distributions to Dr. Colkitt.

In addition, the Company has entered into long term management agreements with
certain professional corporations ("PCS") owned or controlled by the Company.
These PCs employ physicians, who provide professional medical care to patients.
Under the terms of the management agreements, the Company is responsible for
billing and collecting the receivables of the PCs. Although the PCs have legal
title to all receivables, the Company is an agent of the PCs and, accordingly,
receivables, revenues and professional services of the PCs are included in the
consolidated financial statements.

Options to purchase two of the Company's oncology centers are presently held by
third parties, exercisable prior to 1999. The option price in each case is
derived from a market-value formula based on the center's income.

On June 1, 1996, EquiMed India Private Limited ("EquiMed India"), a subsidiary
of the Company formed to obtain contracts for accounting and billing services,
began operations in Madras, India. The Company had earnings in India from this
subsidiary of $1,881,000 during the year ended December 1996. As discussed in
Note 13, these earnings were derived from a contract to provide accounting and
billing services to Anesthesia Solutions, Inc., a company wholly-owned by Dr.
Colkitt. The United States dollar is the functional currency for EquiMed India.

All significant intercompany accounts and transactions have been eliminated.

Certain amounts in the 1995 and 1994 financial statements have been reclassified
to conform to the 1996 presentation.

                                     F-11
<PAGE>
 
                                 EquiMed, Inc.

            Notes To Consolidated Financial Statements (continued)


2. Summary of Significant Accounting Policies

Cash Equivalents

Cash equivalents include investments in highly liquid instruments with a
maturity of three months or less at the date of purchase.

Accounts Receivable

Accounts receivable include receivables from patients for medical services
provided. Such amounts are recorded net of contractual allowances and estimated
bad debts. These receivables are geographically dispersed throughout the United
States and are paid by government sponsored health care plans (primarily
Medicare and Medicaid), insurance companies, employer self-insurance plans, and
self-insured patients.

Concentration of Credit Risk

The Company's principal financial instrument subject to potential concentration
of credit risk is trade accounts receivable for which the Company does not
generally require collateral. The concentration of credit risk with respect to
trade accounts receivable is limited due to the large number of payors and their
dispersion across many different government sponsored health care plans,
insurance companies, individuals and geographic locations. Substantially all
accounts receivable at December 31, 1995 and 1996 are due from third party
payors.


Property and Equipment


Property and equipment are recorded at cost. Equipment under capital leases is
recorded at the net present value of the future minimum lease payments at the
inception of the related leases. Depreciation of property and equipment (which
includes amortization of assets under capital leases) is provided using the
straight-line method over the estimated useful lives (or the term of the related
lease, if less) ranging from five to eight years for equipment, from five to 15
years for leasehold improvements and from 30 to 39 years for buildings.

                                     F-12
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


2. Summary of Significant Accounting Policies (continued)

Other Assets

Other assets consist primarily of costs of obtaining management agreements and
non-compete agreements. Costs of obtaining management agreements are amortized
on a straight-line basis over the non-cancelable term of the agreements, 40
years for the Company's current agreements. Non-compete agreements are amortized
on a straight-line basis over periods ranging from three to five years, which
represent the shorter of the economic value or the term of the respective
agreements. The carrying value of intangible assets and other long-lived assets
is reviewed whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If this review indicates
that the asset will not be recoverable, as determined based on the undiscounted
cash flows of the operating entity or asset over the remaining amortization
period, the carrying value of the asset will be reduced to its fair value.

Accrued Contractual Fees

Physicians associated with the Company received compensation in accordance with
a contractual formula based upon cash receipts. Accrued contractual fees of
approximately $950,000, $1,395,000 and $1,638,000 at December 31, 1994, 1995 and
1996, respectively, represent fees based on accounts receivable at the
respective dates.

Income Taxes

Prior to January 1, 1996, certain of the entities comprising the Company were S
corporations or partnerships. For these entities, the owners or partners assumed
responsibility for the income tax of such entities. Accordingly, income taxes
prior to January 1, 1996 excluded the taxable income of such entities. The
unaudited pro forma adjustment to income tax expense for the years ended
December 31, 1994 and 1995 represents the federal and state income taxes at the
applicable statutory rate for these entities.

For the entities comprising the Company that are C corporations or that are C
corporation subsidiaries, income taxes have been provided in accordance with
Statement of Financial Accounting Standards No. 109. Deferred taxes arise
primarily from the recognition of revenues and expenses in different periods for
income tax and financial reporting purposes. Effective January 1, 1996, the
Company became liable for income taxes for all of its subsidiaries and
accordingly provides for income taxes in accordance with Statement of Financial
Accounting Standards No. 109.

                                     F-13
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


2. Summary of Significant Accounting Policies (continued)

Capital Deficiency

Prior to the Merger, as part of the primary owner's cash management strategy,
available cash generated at the centers comprising the Company was generally
transferred from the centers to OSC and other affiliates of Dr. Colkitt. Such
transfers have been treated as deemed distributions. In addition, for those
centers comprising the Oncology Group requiring cash for operations, cash was
generally transferred from OSC or other affiliates of Dr. Colkitt. These cash
transfers were recorded on the centers' books as amounts due to or from
affiliates. No interest income or expense was applied to these receivables and
payables. On a combined basis, the Oncology Group has been a net provider of
cash to OSC and other affiliates of Dr. Colkitt. As it is not the owner's
intention to repay or request repayment of certain of these amounts, such
amounts have been reflected as deemed distributions to Dr. Colkitt.

Stock-Based Compensation

The Company grants stock options for a fixed number of shares to employees with
an exercise price equal to the fair value of the shares at the date of grant.
The Company accounts for stock option grants in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees," and, accordingly, recognizes no
compensation expense for the stock option grants. A recently issued accounting
standard encourages, but does not require companies to record compensation cost
for stock-based employee compensation plans at fair value. The Company has
chosen to continue to account for stock-based compensation using the intrinsic
value method prescribed in previously issued standards.

Earnings Per Share

Earnings per share of common stock for 1996 is computed on the basis of the
weighted average shares of common stock outstanding plus common equivalent
shares arising from the effect of dilutive stock options using the treasury
stock method. The weighted average number of shares of common stock and common
equivalent shares outstanding for the calculation of primary and fully diluted
earnings per share was 27,577,000 in 1996.

                                     F-14
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


2. Summary of Significant Accounting Policies (continued)

Pro Forma Financial Information (Unaudited)

Net income per share for the years ending December 31, 1994 and 1995 reflects
pro forma adjustments to income tax expense of $3,330,000 and $3,391,000,
respectively. The weighted average number of shares used to calculate the 1994
and 1995 pro forma net income per share amounts represent the number of shares
of EquiVision common stock that the Oncology Group received as part of the
Merger.

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 amounts reported in the financial statements and accompanying notes.
Actual results inevitably will differ from those estimates and such differences
may be material to the financial statements.

Accounting Pronouncements

In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard no. 125 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities" which becomes effective for
transactions occurring after December 31, 1996. The adoption of this standard is
not expected to have a material effect on the Company's financial position or
results of operations.

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard no. 128 "Earnings per Share" ("SFAS 128"), which
will change the current method of computing earnings per share. The new standard
requires presentation of "basic earnings per share" and "diluted earnings per
share" amounts, as defined. SFAS 128 will be effective for the Company's quarter
and year ending December 31, 1997, and upon adoption, all prior-period earnings
and per share data presented will be restated to conform with the provisions of
the new pronouncement. Application earlier than the Company's quarter ending
December 31, 1997 is not permitted. The Company does not believe the application
of the new standard will materially impact the financial statements.

                                     F-15
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


3. Net Revenues

Net revenues are recorded at established rates reduced by allowances for
contractual adjustments. Contractual adjustments arise due to the difference
between the Company's established rates for services and the amounts allowed for
such services by government sponsored healthcare programs and by others.

The following represents amounts included in the determination of net revenues
(in thousands):

<TABLE>
<CAPTION>
                                            1994      1995      1996
                                        ------------------------------ 
            <S>                            <C>       <C>      <C>
            Gross revenues                 $73,210   $93,525  $159,944
            Less provision for
             contractual adjustments        20,944    34,641    60,829
                                        ------------------------------ 
            Net revenues                   $52,266   $58,884  $ 99,115
                                        ==============================

</TABLE>

The Group derived approximately 48%, 51% and 46% of its net revenue from
services provided under the Medicare and state Medicaid programs in 1994, 1995,
and 1996, respectively. Substantially all of the Company's accounts receivable
at December 31, 1994, 1995, and 1996 are due from third party payors. The
Company does not provide significant charity care to patients.

                                     F-16
<PAGE>
 
                                 EquiMed, Inc.

            Notes To Consolidated Financial Statements (continued)


4. Acquisitions

In March 1994, the Company acquired substantially all the assets, other than
accounts receivable, of a radiation oncology and a diagnostic oncology practice
located in Brooklyn, New York. The selling physician entered into a non-compete
agreement for an aggregate consideration of $2,000,000 in cash and $1,000,000 in
notes. Concurrent with this acquisition, the equipment acquired with an
estimated fair value of $1,500,000 was sold to a related party for $2,709,000 in
cash. These cash proceeds were used to fund the cash portion of the Company's
consideration for the acquisition and for working capital of the Brooklyn
center. The equipment was leased from the related party under capital leases
with an aggregate obligation of $2,709,000. For purposes of the accompanying
financial statements, a gain was not recognized on the initial sale of the
equipment to the related party.

On January 1, 1995, the property and equipment of a radiation oncology practice
located in Tampa, Florida were acquired by a leasing company owned by Dr.
Colkitt. The Company purchased the accounts receivable of the center for
$250,000 and is leasing, under operating leases, the property and equipment of
the Tampa center from the related party leasing company.

On June 1, March 1, and August 29, 1996, the Company acquired the primary
operating assets of three medical practices and obtained 40 year management
agreements with the professional corporations of these medical practices for
approximately $5.5 million consisting of approximately 315,000 shares of the
Company's common stock with a market value at the time of acquisition of
approximately $3.0 million and $2.5 million in cash. Approximately $3,864,000 of
the consideration paid has been allocated to the management agreements and is
being amortized over the term of the management agreements.

The 1996 acquisitions were accounted for using the purchase method. The
financial results of the acquisitions have been included in the consolidated
financial statements of the Company from the date of their acquisition. The
unaudited pro forma effect of the acquisitions as if they occurred on January 1
of the year preceeding the year of acquisition are as follows (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                           1995       1996
                                         -------------------
<S>                                       <C>      <C>
Net revenue                               $61,554   $100,401
                                          =======   ========
Net income/(loss) before                
  extraordinary charge                    $11,148   $(30,757)
                                          =======   ========
Net income/(loss)                         $11,148   $(30,884)
                                          =======   ========
Net income/(loss) per share               $  0.53   $  (1.11)
                                          =======   ========
</TABLE>

                                     F-17
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


4. Acquisitions (Continued)

Since the date of the Merger and prior to the consummation of the sale, the
Ophthalmology Division acquired various ophthalmology medical practices for
approximately $12,880,000. The pro forma results of these acquisitions have not
been presented as they are not reflective of the Company's ongoing operations.

5. Amendment of Revolving Credit Agreement

On May 14, 1996, the Company entered into an amendment of its $20,000,000
revolving Credit Agreement ("Credit Agreement") with a bank. The amendment
shortened the remaining term of the Credit Agreement to November 30, 1996 and
limited (i) future borrowings under the facility to $15,000,000 and (ii)
acquisitions to an aggregate of $50,000,000. In connection with the sale of the
Ophthalmology Division on November 5, 1996, the Company used a portion of the
proceeds from this transaction to repay and terminate the Credit Agreement.

                                      F-18
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


6. Long-Term Debt

Long-term debt consists of the following at December 31, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
                                            December 31
                                            1995     1996
                                        --------------------
    <S>                                  <C>     <C>
     Mortgages payable to               
      various institutional             
      lenders; bearing interest         
      at 7.19% to 10.96%;               
      payable in monthly                  
      installments of principal         
      and interest ranging from         
      $3,000 to $12,000 due at          
      various dates through 2001          $1,617   $1,972
     Notes payable to various           
      institutional lenders and         
      former minority                   
      shareholders; bearing             
      interest at 10.22% to             
      11.5%; payable in monthly           
      installments of principal         
      and interest ranging from         
      $4,000 to $14,000; due at         
      various dates through 2001           1,569   $1,145
     Term notes payable; bearing        
      interest at 8%; payable in        
      monthly installments of          
      principal and interest               
      ranging from $3,000 to            
      $7,000; due in 1999                  1,213        -
     Other                                   837        -
                                        -----------------
                                           5,236    3,117
     Less amounts due within one year      2,048      686
                                        -----------------
                                          $3,188   $2,431
                                        =================
</TABLE>

The above debt is secured by assets with a net book value of $2,405,000 and
$2,473,000 at December 31 1995 and 1996, respectively.

Certain debt obligations contain restrictive covenants which limit, among other
things, change of ownership of the centers.  As of December 31, 1996, the
Company has complied with existing loan covenants.

                                      F-19
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


6. Long-Term Debt (continued)

As of December 31, 1996, the aggregate amounts of annual principal maturities of
long-term debt (excluding capital lease obligations) are as follows (in
thousands):
<TABLE>
<CAPTION>
                              December 31, 1996
              --------------------------------------------
 
               <S>                                <C>
                1997                               $  686
                1998                                  452
                1999                                  790
                2000                                  175
                2001                                  879
                Thereafter                            135
                                                  --------
                                                   $3,117
                                                  ========
 
</TABLE>

Interest paid (including interest paid on capital lease obligations) during the
years ended December 31, 1994, 1995 and 1996 was $2,093,000, $3,081,000, and
$1,864,000 respectively.

7. Leases

The Company leases office space as well as certain equipment and automobiles
under capital leases and noncancelable operating lease agreements which expire
at various dates. Certain of these leases are with entities in which Dr. Colkitt
is the sole shareholder or a principal shareholder.

The Oncology Group, predecessor entity to the Company, entered into several 
sale-leaseback transactions with D&T Leasing Limited Partnership ("D&T"), a
partnership in which Dr. Colkitt is the general and controlling partner. In
connection with this transaction, the Oncology Group, predecessor entity to the
Company, sold to D&T property and equipment with a net book value of
approximately $316,000 for cash consideration of approximately $1,359,000 and
leased the property and equipment back from D&T under capital leases. Due to the
related party nature of the sale-leaseback transactions, the property and
equipment are shown in the accompanying balance sheets at their historical cost
of $965,000 and are being depreciated based upon this historical cost and their
original purchase dates. The related capital lease obligation was approximately
$1,113,000 and $631,000 at December 31, 1995 and 1996, respectively and is
included in obligations under capital leases in the accompanying balance sheets.
No gain was recognized in the accompanying consolidated financial statements in
connection with these transactions

                                      F-20
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

7. Leases (continued)

The Company is the lessee in two capital leases under which the lessor has the
option to require the Company to purchase the leased assets in 1998 for
approximately $1,273,000. In addition, the Company has the option to purchase
the leased assets in 1998 for approximately $1,403,000. The Company's obligation
under the lessor's put option is included in capital lease obligations in the
accompanying balance sheets.

At December 31, 1996, minimum annual lease commitments under capital leases are
as follows (in thousands):
<TABLE>
<CAPTION>
 
                                            Related
                                            Parties    Others
                                          ---------------------
      <S>                                   <C>       <C>
      1997                                  $   694   $ 1,066
      1998                                      657     1,751
      1999                                      651       113
      2000                                      788        67
      2001                                        -        67
      Thereafter                                  -       112
                                          ---------------------
      Total minimum lease payments            2,790     3,176
      Less - amounts representing 
       interest                                 891       606
                                          --------------------- 
      Present value of minimum capital 
       lease payments                         1,899     2,570 
      Less - current portion of
       obligations under capital leases         354       717
                                          ---------------------  
      Long-term obligations under capital
       leases, net of current portion       $ 1,545   $ 1,853
                                          =====================
</TABLE> 
 
Assets under capital leases at December 31, 1995 and 1996 are as follows (in
 thousands):
<TABLE> 
<CAPTION> 
                                            1995      1996
                                        ----------------------
        <S>                             <C>         <C> 
        Buildings                         $ 1,579   $  1,579
        Equipment                          14,494      9,590
                                        ----------------------
                                           16,073     11,169
        Accumulated amortization           (8,028)    (6,939)
                                        ----------------------
                                          $ 8,045   $  4,230
                                        ======================
</TABLE>

                                      F-21
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

7. Leases (continued)

At December 31, 1996, minimum annual rental commitments under noncancelable
operating leases with terms in excess of one year are (in thousands):
<TABLE>
<CAPTION>
                                             Related       
                                             Parties         Others
                                           ---------------------------
         <S>                                <C>            <C>
          1997                                $1,144         $ 1,273
          1998                                   584           1,174
          1999                                   412           1,083
          2000                                    84           1,091
          2001                                    84           1,080
          Thereafter                           1,229           6,859
                                           ---------------------------
                                              $3,537         $12,560
                                           ===========================
</TABLE>

Rent expense related to all operating leases amounted to approximately
$2,075,000, $2,119,000 and $3,937,000 in 1994, 1995 and 1996, respectively.
Rent expense under operating leases with related parties amounted to
approximately $896,000, $860,000 and $575,000 in 1994, 1995 and 1996,
respectively.

                                      F-22
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

8. Partnerships

At December 31, 1994 and 1995, and through the date of the Merger, the Oncology
Group, predecessor entity to the Company, included the accounts of 45 and 49
corporations, respectively. Each of these corporations had 1,500 authorized
common shares at no par value and had 100 common shares issued and outstanding
for which only nominal amounts were paid. Through the date of the Merger, the
Oncology Group, predecessor entity to the Company, also included partnerships of
which Dr. Colkitt or an entity wholly owned by Dr. Colkitt was the sole general
partner. Under the terms of the partnership agreements, Dr. Colkitt or an entity
wholly owned by Dr. Colkitt exercised unilateral control over these
partnerships. Effective with the Merger, the Company became the sole general
partner of these new partnerships. These partnerships were capitalized as
follows at December 31, 1995.
<TABLE>
<CAPTION>
 
                                                                    Company's
                                                 Partnership       Portion of
                               Outstanding      Units Owned by     Partnership
                               Partnership       the Company       Capital (in
    Name of Partnership           Units                            thousands)
--------------------------------------------------------------------------------
<S>                          <C>               <C>               <C>
Albemarle Regional Cancer 
 Center Limited Partnership        100                50              $201
                           
Lawnwood Regional Cancer 
 Center Limited Partnership        100                50              $352
                           
Jefferson Radiation Oncology 
 Center Limited Partnership         40                20               $85
                      
St. Lucie County Radiation 
 Oncology Limited Partnership      100                50                $-
                       
Greenbelt Cancer Treatment 
 Center                            100                50               $19
</TABLE>

                                      F-23
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

9. Stockholders' Equity

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

Upon the acquisition of EquiVision, the Company adopted and amended the stock
based compensation plans of EquiVision to include all of its employees,
consultants, and directors. In connection with the adoption of these plans, the
chairman of the Company was granted nonqualified stock options to purchase
500,000 shares of the Company's stock at $50.00 per share. The options are
exercisable and expire in 2003. The Company granted a total of 1,092,500 options
including the options granted to the chairman of the Company, to certain
employees, directors and consultants to purchase shares of the Company's stock
in connection with the merger at prices ranging from $7.00 to $50.00. These
options expire in years beginning 2003 through 2006. The Company granted
subsequent to the merger non-qualified stock options to purchase 56,500 shares
of stock at prices ranging from $8.63 to $13.13 per share to directors and
consultants. These options vest within a one year period from the date of the
grant and expire in 2006.

Also in connection with the Merger, the Company adopted and maintains the former
EquiVision Stock Option Plan (the "Plan"). The Plan permits the Company to grant
up to 1,000,000 options to employees, directors and consultants at the fair
value of shares on the effective date of grant. In connection with the merger,
the Company granted 492,966 options to purchase shares of the Company's common
stock at prices ranging from $2.84 to $15.10. These options vest within a one
year period and expire in ten years. During 1996, the Company granted an
additional 199,358 options to purchase shares of the Company's stock at prices
ranging from $11.50 to $15.10. These options vest within a one year period and
expire in ten years. In connection with the sale of the Company's Ophthalmology
Division approximately 572,000 options were not exercised and subsequently
forfeited by the Company's former Ophthalmology Division employees. At December
31, 1996, there were approximately 10,000 options outstanding to employees and
directors, respectively, under the Plan. At December 31, 1996, approximately
990,000 shares were available for future grants under the Plan.

                                      F-24
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

9. Stockholders' Equity (continued)

Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The Company did
not grant stock options prior to January 1, 1996. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1996: risk-free
interest rate of 6.7%; a dividend yield of 0%; volatility factors of the
expected market price of the Company's common stock of .464; and a weighted-
average expected life of the option of five years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information):
<TABLE>
<CAPTION>
 
                                            1996
                                            ----
        <S>                             <C>
        Pro forma net loss               $(31,419)
        Pro forma net loss per share     $ ( 1.14)
</TABLE>

A summary of the Company's stock option activity, and related information for
the year ended December 31, 1996 follows:
<TABLE>
<CAPTION>
                                              Options    Weighted-Average 
                                               (000)      Exercise Price
                                               -----      --------------
        <S>                                   <C>        <C>
        Outstanding-beginning of year              -          $    -
        Granted                                1,841           21.98
        Exercised                                 (5)           5.47
        Forfeited                               (769)          10.31
                                              ------          ------
         
        Outstanding-end of year                1,067          $28.79
                                              ======          ======
         
        Exercisable at end of year             1,065          $28.83
         
        Weighted-average fair value of
         options granted during the year       $4.71
</TABLE>

                                      F-25
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

      9. Stockholders' Equity (continued)

      Exercise prices for options outstanding as of December 31, 1996 ranged
      from $5.68 to $50.00. The weighted-average remaining contractual life of
      those options is 8 years.

      In 1995, the Company issued to the bank a stock purchase warrant to
      purchase 150,000 shares of its common stock at an exercise price of $4.31
      per share.  The warrant expires in February 2005 and may be exercised at
      any time at the option of the warrant holder.  Under the terms of the
      warrant agreement, the warrant holder has certain registration rights and
      antidilution protection from future equity securities issued at below fair
      market value, and can restrict the payment of dividends to any class of
      capital stock.

      10. Income Taxes

      Effective January 1, 1996, certain entities comprising the Oncology Group,
      predecessor to the Company, terminated their election to be taxed as S
      corporations.  As a result of these terminations, the Company became
      liable for income taxes relating to these entities.  Accordingly, as a
      required by generally accepted accounting principles, the Company recorded
      deferred tax assets and liabilities on temporary differences between the
      income tax basis and book basis of certain assets and liabilities.  The
      effect of recording these net deferred tax liabilities upon the results of
      operations for the year ended December 31, 1996 was approximately
      $1,277,000 ($0.05 per share). The provision (benefit) for income taxes
      includes the following components (in thousands):

<TABLE>
<CAPTION>
 
                                     1994           1995          1996
                                -------------------------------------------
                <S>             <C>           <C>           <C> 
 
                Current:
                 Federal           $  942          $1,822         $12,005
                 State                266             455           2,119
                Deferred:
                 Federal              382             102          (2,984)
                 State                114              25            (527)
                                -------------------------------------------
                Total              $1,704          $2,404         $10,613
                                ===========================================
</TABLE> 
                                

                                      F-26
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


      10. Income Taxes (continued)

      A reconciliation between reported income tax expense and the amount
      computed by applying the statutory federal income tax rate of 34% is as
      follows (in thousands):


<TABLE>
<CAPTION>
 
                                            1994      1995       1996
                                          ------------------------------
            <S>                           <C>       <C>        <C>
            Computed tax
             expense/(benefit)            $ 4,148   $ 4,567    $(6,572)
            State taxes                       251       336     (1,160)
            Nondeductible loss related
             to sale of the
             Ophthalmology Division             -         -     17,967
            Income earned in
             jurisdictions not taxed in
             the United States                  -         -       (752)
            Tax effect of S corporation
             and partnership income        (3,330)   (3,391)         -
            Federal pro forma benefit
             for certain losses               429         -          -
            State tax effect of S
             corporation and
             partnership income               500       500          -
            Minority interest pro 
             forma taxes                     (514)     (134)         -
            Penalties and interest            303       902      1,199
            Other, net                        (83)     (376)       (69)
                                        ------------------------------      
            Total                         $ 1,704   $ 2,404    $10,613
                                        ==============================
</TABLE>

                                      F-27
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


      10. Income Taxes (continued)

      Deferred income taxes reflect the net tax effects of temporary differences
      between the carrying amounts of assets and liabilities for financial
      reporting purposes and the amounts for income tax purposes.  Significant
      components of the Company's deferred tax liabilities and assets as of
      December 31, 1995 and 1996 are (in thousands):

      <TABLE>
      <CAPTION>
 
                                            December 31
                                           1995    1996
                                         -----------------
 
 
             <S>                         <C>        <C>
             Deferred tax assets: 
              Accrued physicians'         $ 175   $   936
               compensation
              Accounts payable and
               other accrued liabilities    475       497
              Accrued liability
               relating to the sale of   
               the Ophthalmology
               Division                       -     2,000
              Property and equipment        170         -
              Net operating losses           29         -
                                        -----------------
             Total deferred tax assets      849     3,433
 
             Deferred tax liabilities:
              Property and equipment          -       751
              Other                           -       282
                                        -----------------
                                              -     1,033
 
              Valuation allowance           (29)        -
                                        -----------------
             Net deferred tax assets      $ 820   $ 2,400
                                        =================
 
      </TABLE>

      The Company made federal and state income tax payments of approximately
      $397,000, $0, and $12,600,000 in 1994, 1995 and 1996, respectively.

      11. Employee Benefit Plans

      In connection with the Merger, the Company merged its qualified defined
      contribution plans with the qualified defined contribution plan of
      EquiVision.  The Company's merged qualified defined contribution plan
      covers substantially all of the employees of the Company.  The plan
      permits participants to make voluntary contributions.  The Company pays
      all general and administrative expenses of the plan and makes matching
      contributions on behalf of the employees.  The Company made contributions
      related to these plans totaling approximately $56,000, $57,000 and
      $158,000 in 1994, 1995 and 1996, respectively.

                                      F-28
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

      12. Commitments and Contingencies

      In connection with the Merger, Dr. Colkitt has indemnified the Company
      from any income tax liabilities, if any, not reflected in the financial
      statements of the Oncology Group related to any period or periods prior 
      to the Merger (the "General Indemnification Agreement").

      On March 21, 1996, the Company entered an appearance as a plaintiff to a
      declaratory judgment action commenced August 30, 1995, in the Delaware
      Court of Chancery. The litigation seeks a declaration that the merger of
      the non-professional component of eight oncology centers into the Oncology
      Group prior to the Merger was effected in accordance with applicable
      Delaware law and that the merger consideration was fair to the interests
      held by minority shareholders (the "Minority Holders") in connection with
      the purchase of their shares. The Minority Holders have filed answers and
      counterclaims in the Delaware action against the Company and other
      counterclaim defendants for breach of fiduciary duty, breach of contract,
      fraud and other violations of Delaware statutory law. The counterclaims
      seek rescision of the August 1995 mergers of the eight corporations and
      compensatory and / or rescissory damages. The Minority Holders allege that
      the value of their holdings that were cancelled pursuant to these mergers
      exceeded $50,000,000.

      While Dr. Colkitt and the entities that were merged into the Company
      pursuant to the Merger believe they have meritorious defenses to the
      allegations of the Minority Holders, Dr. Colkitt has entered into an
      agreement with the Company to fully indemnify the Company against any
      damage, loss, expense or liability, including attorneys' fees and
      expenses, incurred by the Company resulting from the litigation with the
      Minority Holders (the "MH Indemnification Agreement").

      As a part of the General and MH Indemnification Agreements, Dr. Colkitt is
      required to place shares of the Company's stock held by him with the
      Company. Dr. Colkitt has placed shares of the Company's stock with the
      Company based upon the Company's estimate of any potential damage, loss,
      expense or liability, including attorneys' fees and expenses, which may be
      incurred by the Company resulting from the litigation with the Minority
      Holders and from any income tax liabilities not reflected in the financial
      statements of the Oncology Group related to any period or periods prior to
      the Merger.

                                     F-29
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

      12. Commitments and Contingencies (continued)

      On May 15, 1997, the Company filed a Demand for Arbitration before the
      American Arbitration Association in Philadelphia, Pennsylvania to enforce
      certain terms of the Asset Purchase Agreement (the "Agreement") relating
      to the sale of the Company's Ophthalmology Division and to recover damages
      for breach of the Agreement by the purchaser of the Company's
      Ophthalmology Business (the "Purchaser").  Under the Agreement, the
      Company sold substantially all of the assets of its Ophthalmology Division
      to the Purchaser and also agreed, during the period beginning November
      1996 and ending April 1997, to assist the Purchaser in the acquisition of
      additional ophthalmology practices.  In return for such additional
      services, the Company is entitled to receive from the Purchaser certain
      fees and expenses based upon the status of such additional acquisitions as
      of May 15, 1997. The Purchaser failed to make the May 15, 1997 payment to
      the Company and has advised the Company that it does not intend to make
      such payment.  Under the Demand for Arbitration, the Company is also
      seeking damages in connection with the Purchaser's refusal to provide the
      Company's representatives with access to financial records of the
      Ophthalmology Division.  There can be no assurance that the Purchaser will
      not assert a material counterclaim against the Company.

      The Company is insured with respect to medical malpractice risks on a
      claims-made basis.  Should these claims-made policies not be renewed or
      replaced with equivalent insurance, claims based on occurrences during the
      term of the respective policies, but asserted subsequently would be
      uninsured.

      The Company has been named in two actions relating to professional
      liability claims at one of its ophthalmology centers.  The claims pertain
      to a period when the Company was partially self insured for that center.
      The Company intends to defend these claims vigorously and believes it has
      meritorious defenses.  Management believes the ultimate disposition of
      these matters will not have a material adverse effect on the Company's
      financial position or the results of operations.

                                      F-30
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

      12. Commitments and Contingencies (continued)

      At December 31, 1995 and 1996, the Company has several other malpractice
      claims outstanding which have arisen in the normal course of business.  In
      addition, it is possible that certain incidents may have occurred which
      have not been reported as of this date.  The Company has policies and
      procedures in place to track and monitor incidents of significance.

      Based on management's knowledge of the facts to date, consultation with
      its legal advisors and extent of existing insurance coverages, management
      believes the ultimate disposition of these matters will not have a
      material adverse effect on the Company's financial position or the results
      of operations.

      13. Related-Party Transactions

      The receivable from affiliates of approximately $9,718,000 as of December
      31, 1996 consists of amounts due from companies majority-owned by the
      Company's primary shareholder.

      The advances to the principal shareholder of $5,025,000 at December 31,
      1996 consists of amounts advanced for the acquisition of companies wholly
      owned by the principal shareholder.

      Included in payables to affiliates is approximately $6,555,000 payable to
      the principal owner of a medical practice acquired during 1996 which the
      Company purchased  for approximately $9,000,000 worth of the Company's
      common stock. In connection with this acquisition, the Company guaranteed
      that the market value of the common stock would not fall below the market
      value of the stock at the time of acquisition. The $6,555,000 represents
      amounts due as of December 31, 1996 in connection with the guarantee.

      In July 1995, the Company terminated its $1,000,000 line of credit with a
      bank. The outstanding balance of approximately $725,000 on the line of
      credit was repaid by OSC in exchange for a note from the Company due in
      one year and bearing interest at 9%.   The note was paid during 1996.

                                      F-31
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


      13. Related-Party Transactions (continued)

      On October 1, 1994, the Company contracted with National Medical Financial
      Services ("NMFS"), a public company in which Dr. Colkitt is the Chairman
      and primary and controlling shareholder, to perform billing services for
      the Company.  The contract provided that NMFS would receive a fee of 10%
      of collected revenues for these services.  In addition, NMFS agreed to
      collect the Company's outstanding accounts receivable at October 1, 1994
      for a fee of 3% of the amounts collected.  Concurrent with this
      transaction, the employees of the Company's in-house billing department
      were transferred to Billing Services, Inc. ("BSI"), a company in which Dr.
      Colkitt is the primary and controlling shareholder.  NMFS contracted with
      BSI to perform the billing services for the Company.  Effective
      January 1, 1995, the contract with NMFS was renegotiated and the fee for
      billing services was reduced to 3% of collected revenues.  In addition,
      NMFS agreed to begin performing accounting services for the Company for a
      fee of 1% of collected revenues.

      As a result of the above, a portion of the Company's accounting personnel
      were transferred to BSI.  The Company expensed $1,673,000, $2,534,000 and
      $2,255,000 for billing services provided by NMFS during the three months
      ended December 31, 1994 and the years ended December 31, 1995 and 1996,
      respectively.  Included in payables to affiliates is approximately 
      $817,000 owed to NMFS by the Company relating to these services.

      The actual costs of accounting, technical and management services provided
      by OSC, as described in Note 1, of approximately $5,690,000, $4,849,000
      and $595,000 for 1994, 1995, and for the month ended January 31, 1996,
      respectively, are included in general and administrative expenses.
      Subsequent to the Merger, these services were no longer provided by OSC.

      On June 1, 1996, EquiMed India, a wholly-owned subsidiary of the Company
      formed to obtain contracts for accounting and billing services, began
      operations in Madras, India.  EquiMed India had revenues and net income of
      approximately $2,100,000 and $1,900,000, respectively principally related
      to a contract for accounting and billing services with Anesthesia
      Solutions, Inc., a company wholly-owned by Dr. Colkitt.  EquiMed India
      subcontracts with Nittany Decisions Private LTD, a company 80% owned by
      Dr. Colkitt, to provide the accounting and billing services for Anesthesia
      Solutions, Inc.  According to the contract terms, EquiMed India retains
      approximately 10% of the revenues billed for Anesthesia Solutions, Inc.
      and pays Nittany Decisions Private LTD its costs and an agreed upon rate
      of return.  EquiMed India is exempt from income taxes payable to agencies
      of the Indian government and the local provincial government based upon
      agreements with these agencies when EquiMed India was incorporated.  At
      December 31, 1996, EquiMed India has trade receivables of approximately
      $2,000,000 which primarily represent receivables for the services from
      Anesthesia Solutions, Inc.

                                      F-32
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


      13. Related-Party Transactions (continued)

      The Company entered into a receivable purchase agreement in April 1995.
      Under the terms of the agreement, receivables are transferred to Oncology
      Funding Corporation (a company that is wholly-owned by Dr. Colkitt) which
      then factors the receivables with an unrelated financing company, John
      Alden Asset Management Company ("Alden").  The factored receivables may be
      denied by Alden for various reasons including nonpayment by the payor.
      The transfer of receivables to Alden is recognized as a sale, and the
      difference between the sales price (adjusted for the accrual of probable
      adjustments) and the net receivables is recognized as a gain or loss on
      the sale of receivables.  Proceeds to the Company from receivables sold
      under this agreement were approximately $27,393,000 and $45,726,000 for
      the years ended December 31, 1995 and 1996, respectively.  During 1995 and
      1996, the Company failed to comply with certain covenants of the
      receivable purchase agreement. Remedies available to Alden due to these
      events of noncompliance include termination of the receivables purchase
      agreement. The balance of the receivables transferred that remain
      uncollected was approximately $4,250,000 and $4,896,000 at December 31,
      1995 and 1996, respectively.

      The Company retained the services of Parkwood Motors, a company owned by
      the President and Chief Executive Officer's wife, to assist in the sale of
      the Ophthalmology Division.  Parkwood Motors provides staffing to gather
      due diligence and other information regarding entities to be acquired.
      Parkwood Motors was entitled to a commission equal to 5% of the earnout
      received by EquiMed from the purchaser of the Ophthalmology Division.  In
      the year ended December 31, 1996, such commissions approximated $150,000.

      Certain legal services are provided on behalf of the Company by a law firm
      in which Dr. Colkitt's sister is a partner.  This law firm received
      approximately $132,000 for these services during the year ended December
      31, 1996.

                                      F-33
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

      14. Financial Instruments

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

           Cash and Cash Equivalents, Accounts Receivable, Other Accounts
           Receivable, Prepaid Expenses and Other Current Assets, Accounts
           Payable and Accrued Expenses

           The carrying amount reported in the balance sheet for cash and cash
           equivalents, accounts receivable, other accounts receivable, prepaid
           expenses and other current assets, accounts payable and accrued
           expenses approximate fair values because of the short maturities of
           the financial instrument.

           Long Term Debt and Capital Leases

           The carrying amounts reported in the balance sheet for long term debt
           and capital leases approximate fair value since the debt and leases
           bear interest at rates which approximate current market rates.

                                      F-34
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)


      15.  Quarterly Financial Data (unaudited)

      The following is a summary of the unaudited quarterly financial
      information for the years ended December 31, 1996 and 1995 (in thousands
      except per share amounts).

      <TABLE>
      <CAPTION>
 
      Year ended December 31, 1996
      Quarters ended                March 31     June 30     Sept. 30   Dec. 31
      --------------------------------------------------------------------------
      <S>                          <C>         <C>          <C>        <C>  
      Net revenues                   $20,732    $29,410     $ 29,046   $ 19,927
      Net (loss) income before           
        extraordinary charge             508      2,711      (21,673)   (12,765) 
      Net (loss) income                  381      2,711      (21,673)   (12,765)
      (Loss) earnings per share:
        Net (loss) income before        
          extraordinary charge          0.02       0.10        (0.76)     (0.49) 
        Net (loss) income               0.02       0.10        (0.76)     (0.49)
              
      <CAPTION>   

      Year ended December 31, 1995  
      Quarters ended                March 31     June 30     Sept. 30   Dec. 31
      --------------------------------------------------------------------------
      <S>                          <C>         <C>          <C>        <C>   
      Net revenues                  $ 15,014   $ 15,188     $ 13,963   $ 14,719
      Net income                       2,977      3,043        2,631      1,547
      Pro forma net income             2,116      2,057        1,831        803
      Pro forma earnings per share      0.10       0.10         0.09       0.04
             
 
      </TABLE> 
 
      16. Loss on Sale of Division

      The Company has reflected in its financial statements a pretax loss of
      approximately $31,112,000 on the sale of its Opthalmology Division on
      November 5, 1996. The Company had previously reflected approximately
      $24,200,000 as an impairment charge in its September 30, 1996 interim
      financial statements based upon its expectation of the final sales price
      for this business.

      17.  Subsequent Events

      In January 1997, the Company formed two wholly-owned subsidiaries for the
      purpose of acquiring a medical transcription company and a court reporting
      company. The two companies were acquired in January 1997 for approximately
      $5,000,000 in cash plus a potential earn-out of $300,000 payable in cash.
      These acquisitions have been accounted for as purchases. Revenues related
      to these companies were approximately $5,200,000 for the year ended
      December 31, 1996.

                                      F-35
<PAGE>
 
                                 EquiMed, Inc.

            Notes to Consolidated Financial Statements (continued)

      17.  Subsequent Events (continued)

      In February 1997, the Company acquired the primary operating assets of two
      medical practices and obtained 40 year management agreements with the
      professional corporations of these medical practices for approximately
      $4,439,000 in cash. Approximately $4,100,000 of the consideration paid has
      been allocated to the management agreements. These acquisitions have been
      accounted for as purchases. Revenues related to these medical practices
      were approximately $5,604,000 million for the year ended December 31,
      1996.

      In addition, during February 1997, the Company acquired several equipment
      and real estate leasing companies wholly owned by Dr. Colkitt for
      approximately $2,739,000 in cash. These acquisitions have been accounted
      for as purchases. Revenues related to these equipment and real estate
      leasing companies were approximately $2,996,000 for the year ended
      December 31, 1996.

      In May 1997, the Company acquired Russell Data Services, Inc., Nittany
      Decisions Services Private Limited, Trident International Accounting,
      Inc., Billing Services, Inc., and Tiger Communications International LTD.
      for approximately $6,000,000 in cash and a potential earnout up to
      $9,300,000 payable in the Company's common stock. These acquisitions have
      been accounted for as purchases. Russell Data Services, Inc., Trident
      International Accounting, Inc., Billing Services, Inc., and Tiger
      Communications International LTD. were wholly owned by Dr. Colkitt. Dr.
      Colkitt owned eighty percent of Nittany Decisions Services Private
      Limited. These companies are engaged in a variety of businesses providing
      outsourcing for accounting, billing, data processing, collections, and
      other administrative services and had combined revenues for the year ended
      December 31, 1996 of approximately $9,565,000.

                                      F-36
<PAGE>
 
 
                        REPORT OF INDEPENDENT AUDITORS

We have audited the consolidated financial statements of EquiMed, Inc. as of 
December 31, 1996 and 1995 and for each of the three years in the period ended 
December 31, 1996, and have issued our report thereon dated May 21, 1997 
(included elsewhere in this Form 10-K).  Our audits also included the financial 
statement schedule listed in the index Item 14(a) of this Form 10-K.  This 
schedule is the responsibility of the Company's management.  Our responsibility
is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when 
considered in relation to the basic financial statements taken as a whole, 
presents fairly in all material respects the information set forth therein.


Atlanta, Georgia
May 21, 1997



<PAGE>

                                  EquiMed, Inc.
                 Schedule II - Valuation and Qualifying Accounts
<TABLE> 
<CAPTION> 

----------------------------------------------------------------------------------------------------------------------------------
                   Column A                           Column B               Column C               Column D       Column E
----------------------------------------------------------------------------------------------------------------------------------
                                                                             Additions
                                                                   -----------------------------
                                                                                   Charges to
                                                    Balance at     Charged to   Other Accounts-                   Balance at End
                                                     Beginning     Costs and        Describe     Deductions-        of Period
                  Description                        of Period      Expenses                      Describe
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>          <C>             <C>                <C> 

Year ended December 31, 1994:                   
Deducted from asset accounts:
Allowance for doubtful accounts                    $1,761,000    $  523,000                     $761,000 (a)     $1,523,000
Valuation allowance for deferred tax assets            45,000        26,000                                          71,000

Year ended December 31, 1995: 
Deducted from asset accounts:
Allowance for doubtful accounts                     1,523,000     1,472,000                       73,000 (a)      2,922,000
Valuation allowance for deferred tax assets            71,000                                     42,000 (d)         29,000

Year ended December 31, 1996: 
Deducted from asset accounts:
Allowance for doubtful accounts                     2,922,000     2,478,000     376,000 (c)      989,000 (b)      4,787,000
Valuation allowance for deferred tax assets            29,000                                     29,000 (d)              0


----------------------------------------------------------------------------------------------------------------------------------
</TABLE> 

(a)  Uncollectible accounts written off, net of recoveries

(b)  Allowance for doubtful accounts relating to the receivables of the
     Ophthalmology Business which were sold in November 1996 ($587,000) and
     uncollectible accounts written off, net of recoveries ($402,000)

(c)  Allowance for doubtful accounts relating to the receivables of the
     Ophthalmology Business which were purchased in February 1996

(d)  Use of net operating loss carryforwards relating to the valuation allowance
<PAGE>
 
                                   SIGNATURES

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

                                         EQUIMED, INC.

                                         /s/  DOUGLAS R. COLKITT
                                         -----------------------
                                         By:  Douglas R. Colkitt, Chairman of
                                              the Board and Chief Executive
                                              Officer

          Pursuant to the requirements of the Securities Exchange Act of 1934,
     this report has been signed below by the following persons on behalf of the
     registrant and in the capacities and on the dates indicated.
<TABLE> 
<CAPTION> 

          Signatures                  Title                        Date
          ----------                  -----                        ----

     <S>                       <C>                             <C> 
     /s/ DOUGLAS R. COLKITT    Chairman of the Board and       June 10, 1997
     ----------------------    Chief Executive Officer                  
     Douglas R. Colkitt        (Principal Executive Officer) 
                                                             


     /s/ DANIEL L. BECKETT     Chief Financial Officer         June 10, 1997
     ---------------------     (Principal Financial and                     
     Daniel L. Beckett         Accounting Officer)                          


     /s/ LARRY W. PEARSON      Director                        June 10, 1997
     --------------------                                               
     Larry W. Pearson


                               Director                        __________, 1997
     --------------------                                               
     Gene E. Burleson


                               Director                        __________, 1997
     ------------------                                                 
     Brian C. Smith


     /s/ JEROME DERDEL         Director                        June 10, 1997
     --------------------                                               
     Jerome Derdel, M.D.
     </TABLE> 
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------

     
<TABLE> 
<CAPTION> 

     Exhibit No.    Description
     -----------    -----------
     <S>            <C>  
     2.1            Agreement and Plan of Merger by and among Douglas R.
                    Colkitt, Colkitt Oncology Group, Inc., EquiVision, Inc. and
                    the Company, as amended*
     3.1            Certificate of Incorporation of the Company*
     3.2            By-laws of the Company*
     4.1            Form of certificate evidencing Common Stock, par value
                    $.0001 per share, of the Company*
     10.10          Form of Option to Purchase Stock of Professional
                    Corporation, as amended*
     10.11          Employment Agreement between EquiVision, Inc. and Larry W.
                    Pearson dated January 1, 1996*
     10.12          Stock Option Agreement between EquiVision, Inc. and Douglas
                    R. Colkitt, M.D. dated July 1, 1993**
     10.13          Master Equipment Lease dated February 19, 1993 between D&T
                    Leasing Limited Partnership and EquiVision, Inc.**
     10.14          Form of Billing Services Agreement with National Medical
                    Financial Services Corporation*
     10.15          Form of Cancer Treatment Center Management Services
                    Agreement*
     10.16          Form of Practice Management Services Agreement (Type I)*
     10.17          Form of Practice Management Services Agreement (Type II)*
     10.18          Form of Stock Option Agreement*
     10.19          Form of Master Assignment of the Stock Option Agreements*
     10.20          Form of Stock Pledge Agreement between Colkitt and the
                    Company*
     10.21          Asset Purchase Agreement dated as of October 9, 1996 by and
                    among EquiMed, Inc., Physicians Resource Group, Inc. and PRG
                    Georgia, Inc.***
     10.22          Stock Purchase Agreement dated as of April 1, 1997 by and
                    among EquiMed, Inc., Russell Data Services, Inc. and Douglas
                    R. Colkitt, M.D.****
     10.23          Stock Purchase Agreement dated as of April 1, 1997 by and
                    among EquiMed, Inc., Billing Services, Inc. and Douglas R.
                    Colkitt, M.D.****
     10.24          Stock Purchase Agreement dated as of April 1, 1997 by and
                    among EquiMed, Inc., Trident International Accounting, Inc.
                    and Douglas R. Colkitt, M.D. ****
     10.25          Stock Purchase Agreement dated as of April 1, 1997 by and
                    among EquiMed, Inc., Tiger Communications International Ltd.
                    and Douglas R. Colkitt, M.D.****
     10.26          Stock Purchase Agreement dated as of April 1, 1997 by and
                    among EquiMed, Inc., Nittany Decisions Services Private
                    Limited and Douglas R. Colkitt, M.D.****
     10.27          Stock Purchase Agreement dated January 8, 1997 among ALR
                    Reporting, Inc. Charles Shapiro and Walter Shapiro
     10.28          Asset Purchase Agreement dated as of January 1, 1997 among
                    Transcriptions International Inc., Prophecy Health
                    Information Management, Inc. and Edward J. Bilotti
     10.29          Stock Purchase Agreement dated as of January 1, 1997 among
                    EquiMed, Inc., Thomas Jefferson Real Estate Corporation and
                    Douglas R. Colkitt, M.D.
     10.30          Stock Purchase Agreement dated as of January 1, 1997 among
                    EquiMed, Inc., George Washington Real Estate Corporation and
                    Douglas R. Colkitt, M.D.
     </TABLE> 
<PAGE>
 
     <TABLE> 
     <S>            <C> 
     10.31          Stock Purchase Agreement dated as of January 1, 1997 among
                    EquiMed, Inc., Nixon Equipment Corporation and Douglas R.
                    Colkitt, M.D.
     11.1           Statement re: computation of net earnings per share
     21             Subsidiaries of the Registrant
     23.1           Consent of Ernst & Young LLP
     27             Financial Data Schedule
     </TABLE> 
     ---------------------------------
     *    Incorporated by reference to the exhibit on the Company's Registration
          Statement on Form SB-2 (No. 33-98058).
     **   Incorporated by reference to the exhibit on the Company's Registration
          Statement on Form SB-2 (No. 33-66510-A) .
     ***  Incorporated by reference to the exhibit on the Company's current
          report on Form 8-K filed October 10, 1996.
     **** Incorporated by reference to the exhibit on the Company's Current
          Report on Form 8-K filed May 28, 1997.