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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-KSB

|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
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|                                             |  |                                
|-------------------------------------------- |  | -------------------------------
|For the fiscal year ended September 30, 2001 |  | Commission File Number: 0-17192

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REVCARE, INC.(Name of small business issuer in its charter)

Nevada(State or other jurisdiction of
incorporation or organization)

84-1061382(IRS Employer
Identification No.)5400 Orange Avenue, Suite 200, Cypress, California 90630(Address of principal executive offices) (Zip Code)


Issuer's
Telephone Number:(714) 995-0627

Securities registered under Section 12(b) of the Exchange Act:(Title of each class)

(Name of each exchange on
which registered)NONE

NONE


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

(Title
of class) COMMON STOCK

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

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. /x/

State
issuer's revenues for its most recent fiscal year: $14,158,744

State
the aggregate market value of the voting stock held by nonaffiliates of the registrant: $783,229.

State
the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 21,526,909 shares of Common Stock issued and outstanding as of
September 30, 2001.

Transitional
Small Business Disclosure Format (Check one): Yes / /    No /x/

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ITEM 1 DESCRIPTION OF BUSINESS

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-KSB ARE FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES (SUCH FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS USING SUCH WORDS AS "MAY," "POTENTIAL," "EXPECTS," "BELIEVES," "ESTIMATES," "PLANS," "INTENDS,"
"ANTICIPATES" AND SIMILAR EXPRESSIONS). FOR A DISCUSSION OF CERTAIN FACTORS WHICH MAY AFFECT THE OUTCOMES PROJECTED IN SUCH STATEMENTS, SEE "RISK FACTORS" ON PAGES 8 TO 11 OF THIS ANNUAL REPORT ON
FORM 10-KSB. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED. THESE FORWARD-LOOKING STATEMENTS REPRESENT OUR JUDGMENT AS OF THE DATE OF THE FILING OF THIS ANNUAL REPORT ON FORM
10-KSB. WE DISCLAIM, HOWEVER, ANY INTENT OR OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS.

Our Company

RevCare, Inc. is one of the leading providers of revenue cycle management services in California, Nevada and Hawaii. We have traditionally focused our
services on three segments of the accounts receivable management industryhealthcare, banking and retail. However, with our acquisition of four healthcare revenue cycle management
companies in August 2000, we are now concentrating on offering our comprehensive and integrated suite of services to manage the revenue cycle of healthcare providers. We now have the ability to
provide the services required by our healthcare clients to manage all phases of their revenue cycle, which include:



We
have significant presence in the Southern California, Las Vegas and Hawaii healthcare markets. We provide services to approximately 1065 healthcare facilities in these geographic
areas. We currently manage over $1.9 billion in receivables for our billing and collections clients on an annual basis. We have contracts to provide reimbursement maximization projects to
approximately 160 healthcare facilities in the western region of the United States. We provide back-office temporary staffing and outsourcing to approximately 24 facilities in Southern
California.

We
believe our recent acquisitions will allow us to continue to access various sources of capital to fund our ongoing growth, which may include additional acquisitions of companies in
geographic areas where there is a demand for our services. Our immediate goal is to become the most prominent provider of revenue cycle management services to healthcare providers in the western
region of the United States. We have continued development on two important initiatives that will enhance our client service delivery processes:



While
we are directing our services primarily to the healthcare industry, we also continue to provide national receivable management services to certain non-healthcare
companies in the financial

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services, auto and retail industries. Our clients in these industries primarily utilize our delinquent debt recovery and litigation management services.

We
have discontinued purchasing charged-off receivable portfolios and do not intend to participate in this business.

Our Business Strategy

Our business strategy focuses on positioning ourselves as a strategic partner and business advisor to healthcare organizations for their revenue cycle management
needs. Key elements in our strategy include:



Fundamental
to our strategy is our attention to:



Our History

In August 2000, we completed our acquisition of California Professional Services, Inc., or CPS, which was founded in 1974 and primarily provides
collections services to healthcare clients. As part of our acquisition of CPS, CPS acquired the assets of Insource Medical Solutions, or Insource, Hospital Employee Labor Pool, or HELP, and
RBA-RemCare, or RBA. Insource, a physician and hospital billing company, started its operations in 1996. HELP, a staffing and back office outsourcing firm, started its operations in 1988.
RBA, a healthcare reimbursement maximization consulting company, was formed in 1990.

On
May 30, 2000, FBR Financial Fund II, L.P., now known as FBR Financial Services Partners, or FBR, purchased newly issued shares representing approximately 70% of our outstanding
stock for $7.5 million. With the proceeds of this investment, we were able to complete our acquisition of CPS,

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Insource, HELP and RBA in August 2000. We have combined these companies with our previously owned subsidiaries Medical Control Services, Inc. and Lien Solutions, Inc., which specialize
in the healthcare industry and Merchants Recovery Services, Inc., which focuses on non-healthcare clients. These subsidiaries started their operations at various times from 1977
through 1982. As part of the transition we also changed our name to RevCare, Inc. We believe the combination of experience and knowledge acquired through the addition of these companies will
allow us to provide an integrated and comprehensive suite of services to manage the revenue cycle of most healthcare providers. We also extended our geographic presence to the Nevada and Hawaii
markets with these acquisitions.

Our Services to the Healthcare Industry







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Our Services to Non-Healthcare Clients

We have been providing recovery services to the financial services, retail, and commercial industries for over twenty years. We have developed a particular
expertise in the handling of accounts financed by automotive finance companies, which comprise a large portion of our client base in this area. Most of our services involve the earlier stages of
recovery of our clients' delinquent accounts receivable.

Support Services

To provide effective and thorough services to our clients, we also offer the following services and systems to support our core operations:





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Marketing and Advertising

Our marketing strategy is focused on three goalsbuilding brand awareness, acquiring specifically targeted clients in the western region of the United
States and cross selling our value-added services to our existing client base. We pursue these goals through a combination of:



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Our
advertising focuses on building awareness of the RevCare brand and related services and positioning ourselves as a strategic partner and business advisor to our clients.
We place print advertisements in various industry publications and our website incorporates a description of the comprehensive suite of services that we now provide to our clients.

Government Regulation

Our healthcare billing services are covered by various regulations prescribed by Medicare, Medicaid, TRICARE and the Health Care Financing Administration, and
each major federal healthcare payment program has it own set of complex and sometimes conflicting regulations. Additionally, regulations have been mandated by the Balanced Budget Act and the Health
Insurance Portability and Accountability Act (HIPAA), each of which could have a significant impact on our business. Several states have also imposed significant regulatory programs applicable to
billing and payment for healthcare services. The Office of Inspector General of the Department of Health and Human Resources has issued compliance guidelines for third-party billing companies,
recommending components for an effective billing company
compliance program and identifying several risk areas associated with medical billing. Such risk areas include routine waiver of copayments and deductibles, unbundling, billing for undocumented
services, and upcoding. The continual implementation of measures to restrict payments for healthcare services by governmental and private payors may result in a decrease in revenue to our provider
clients, and as a result, a decrease in revenue derived by us from such clients as well as an increase in the cost of providing services.

Our
recovery operation is regulated by the Fair Debt Collection Practice Act and the Telephone Consumer Protection Act, which are enforced by the Federal Trade Commission. In 1996, the
HIPAA was passed, which addresses the compliance requirements to safeguard patient information that is shared and communicated during the various billing and recovery processes. In this regard, we
devote continuous efforts through ongoing training and monitoring to provide ethical, innovative, high quality receivable management services, which meet the needs of our clients and comply with
applicable laws.

Although
we believe that we are in compliance with all applicable laws and regulations, there can be no assurance that we will always be able to maintain such compliance. Our failure to
comply with such statutes and regulations could have a material adverse effect on us. Furthermore, the adoption of additional statutes and regulations, changes in interpretation and enforcement of
current statutes and regulations, or the expansion of our business into jurisdictions that have more stringent regulatory requirements than those in which we currently conduct business could have a
material adverse effect on us.

Competition

All aspects of our business are highly competitive. We compete directly with a broad range of companies with operations similar to ours. Many of our competitors
have far greater resources and have access to capital markets that may be unavailable to us.

We
believe that the principal competitive factors affecting our business are performance, price, and quality of service provided. We believe that our strategic focus and innovative
approaches will allow us to compete effectively with current providers of like services.

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Employees

As of September 30, 2001, we had 229 full time employees and 27 part time employees. A total of 241 of these employees are based in Southern California, 4
are based in Las Vegas, and 11 are based in Hawaii. None of our employees is subject to a collective bargaining agreement. We believe that our relations with our employees are good.

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RISK FACTORS

WE WISH TO CAUTION READERS THAT THE FOLLOWING IMPORTANT FACTORS, AMONG OTHERS, IN SOME CASES HAVE AFFECTED, AND IN THE FUTURE COULD AFFECT, OUR ACTUAL RESULTS AND
COULD CAUSE OUR ACTUAL CONSOLIDATED RESULTS FOR FUTURE PERIODS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY US OR ON OUR BEHALF. WE EXPRESSLY DISCLAIM ANY
OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN OUR EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN
EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.

One of our shareholders holds a large percentage of our common stock and controls our board of directors.

Two of our directors, George L. McCabe and Edward Wheeler, are managing directors of our majority shareholder, FBR Financial Services Partners, which beneficially
owns approximately 70% of the outstanding shares of our common stock as of September 30, 2001. Accordingly, FBR and Messrs. McCabe and Wheeler are able to control us and our affairs and
business, including any future issuances of common stock or other securities, merger and acquisition decisions, declaration of dividends and the election of directors. In addition, our stock price and
our ability to raise capital could be injured if FBR was to sell a significant portion of its holdings on the open market. Generally, FBR may either sell its shares under a registration statement or
in compliance with the volume limitations and other requirements imposed by Rule 144 adopted by the SEC.

We may need additional capital, which may be unavailable.

Our growth strategy, including our proposed technological enhancements, may require greater expenditures than expected in our current business plan. Our capital
requirements will depend on numerous factors, including:



We
may be unable to predict accurately the timing and amount of our capital requirements. We may be required to raise additional funds through public or private financing, bank loans,
collaborative relationships or other arrangements earlier than expected. It is possible that banks, venture capitalists and other investors may perceive our capital structure, financial performance or
reliance on the healthcare industry and new technology as too great a risk to bear. As a result, additional funding may not be available on attractive terms, or at all. If we cannot obtain additional
capital when needed, we may be forced to agree to unattractive financing terms, to change our method of operation or to curtail our operations. In addition, we have $171,500 in notes due on
August 14, 2002 and $3,503,500 in notes from the acquisition of CPS due January 2, 2003.

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Our common stock is subject to price volatility.

The number of shares of our common stock that was traded daily on the OTC Bulletin Board during 2001 averaged less than 5% of the average outstanding common stock
during 2001. As a result of our low trading volume and various other factors beyond our control, the market price for our common stock is volatile. Some of the factors that may subject our stock price
to wide fluctuations include:



In
addition, the stock market has experienced significant price and volume fluctuations that have affected the market price of the stock of many companies and that often have been
unrelated to the operating performance of such companies. These broad market fluctuations may directly influence the market price of our common stock.

We operate in a regulated business and if we fail to comply with government regulations our ability to conduct business may be suspended or terminated which would have a
materially adverse effect on us.

The accounts receivable management and telemarketing industries are regulated under various United States federal and state laws and regulations. Many states
require that we be licensed as a debt collection company. If we fail to comply with applicable laws and regulations, it could result in the suspension or termination of our ability to conduct accounts
receivable management or telemarketing services which would have a materially adverse effect on us. In addition, new federal or state laws or regulations, or changes in the ways these rules or laws
are interpreted or enforced, could limit our activities in the future or significantly increase the cost of regulatory compliance.

The
healthcare industry and some of the other industries served by us are also subject to varying degrees of government regulation. Although our clients are generally responsible for
complying with
these regulations, we could be subject to a variety of enforcement or private actions for its failure or the failure of our clients to comply with these regulations.

We compete with approximately 6,000 providers in the accounts receivable management industry which could reduce our market share and have a materially adverse effect on our
future financial results.

We compete with approximately 6,000 providers in providing accounts receivable management services. We compete with large national corporations as well as many
regional and local firms. We may lose existing or prospective business to competitors that have established and larger marketing and sales organizations, significantly greater financial and technical
resources and a larger base of customers or operate in broader geographic areas than we do. Because of the large numbers of providers, in the future we may have to reduce our collection fees to remain
competitive. Many larger clients retain multiple accounts receivable management providers, which exposes us to continuous competition in order to remain a preferred vendor.

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Our business is dependent on the healthcare and financial services industries.

Our business is dependent on clients in the healthcare and financial services sectors. If either of these sectors performs poorly, clients in these sectors may
have fewer or smaller accounts to refer to us or they may elect to perform accounts receivable management services in-house. If there are any trends in either of these sectors to reduce or
eliminate the use of third-party accounts receivable management services, the volume of referrals to us would decrease. Further, the healthcare industry is undergoing fundamental changes resulting
from political, economic and regulatory influences. Significant changes in healthcare systems could have a substantial impact on the manner in which we conduct our business and could require us to
revise our strategies.

Our failure to introduce value added services and products in a timely manner may affect our ability to compete effectively.

Our success depends in large part on sophisticated telecommunications and computer systems. We use these systems to identify and contact large numbers of account
debtors and to record the results of the collection effort. If we are not able to respond to technological changes in telecommunications and computer systems in a timely manner, we may not be able to
remain competitive. We have made a significant investment in technology to remain competitive and anticipate that it will be necessary to
continue to do so in the future. Computer and telecommunication technologies are changing rapidly and are characterized by short product life cycles, so that we must anticipate technological
developments. If we are not successful in anticipating, managing or adopting any technological changes on a timely basis or if we do not have the capital resources available to invest in new
technologies, our business would be materially adversely affected.

If our telecommunications and computer systems fail or become unavailable, it could have a materially adverse effect on our business.

As noted above, our business is highly dependent on our telecommunications and computer systems. These systems could be interrupted by natural disasters, power
losses, or similar events. Our business also is materially dependent on service provided by various local and long distance telephone companies. If our equipment or systems cease to work or become
unavailable, or if there is any significant interruption in telephone services, we may be prevented from providing services. Because we generally recognize income only as accounts are collected, any
failure or interruption of services would mean that we would continue to incur payroll and other expenses without any corresponding income.

We may not be able to manage growth.

If successful, we will experience a period of growth that could place a significant strain upon our managerial, financial and operational resources. Our
infrastructure, procedures and controls may not be adequate to support our operations and to achieve the execution necessary to successfully market our services. To continue our future growth, we will
also be required to improve our operational and financial systems and obtain additional management, operational and financial resources. If we are unable to manage future expansion effectively, our
business, results of operations and financial condition will suffer, our senior management will be less effective, and our revenues may decrease.

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ITEM 2 DESCRIPTION OF PROPERTY

We own our office building and property located at 5400 Orange Avenue, Cypress, California, where we conduct our primary operations. The office building, which
was purchased in 1993, contains approximately 50,000 square feet of office space. Currently, we occupy approximately 37,000 square feet for our operations, and the remainder of the building is
available for lease to third party tenants. Our mortgage note was restructured in December 2000 by another financial institution for a total borrowing of $2,990,000 at a variable interest rate
that had an initial rate of 8.4% and is indexed to the ISDA
mid-market swap rate for a swap period of five (5) years. The note is to be repaid based on a 20-year amortization schedule and is due in January 2021. We also
have leased offices located at 2235 E. Flamingo Road, Suite 405, Las Vegas, NV 89119; and at 46-001 Kamehameha Hwy, Suites 308 and 309, Kaneohe, HI 96744.

ITEM 3 LEGAL PROCEEDINGS

We are involved, from time to time, in litigation that is incidental to our collection business. We regularly initiate legal proceedings as a plaintiff in
connection with our routine collection activities. In management's opinion, none of these legal matters will have a material adverse effect on our financial position or the results of our operations.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended September 30, 2001.

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PART II

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock, $.001 par value, is traded under the symbol "RVCR" through the OTC Electronic Bulletin Board maintained by the National Association of Security
Dealers, Inc. The OTC Electronic Bulletin Board has no financial eligibility standards and is totally separate from the Nasdaq Stock Market. The OTC Electronic Bulletin Board does not
constitute an active trading market and trading in our common stock is limited and sporadic. The following table sets forth the range of high bid and low bid quotations for our common stock for the
periods indicated. The quotations are inter-dealer prices in the over-the-counter market without retail mark-ups, markdowns or commissions, and may not represent
actual transactions.

2001

2000High

Low

High

Low4th Quarter ending 9/30

.290

.120

.969

.4693rd Quarter ending 6/30

.400

.180

1.060

.7502nd Quarter ending 3/31

.625

.218

1.250

.6251st Quarter ending 12/31

.625

.187

1.500

.750


As
of September 30, 2001 there were 1,479 holders of record of our common stock.

Dividend Policy

We have never paid a dividend and do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to provide funds to
finance future growth.

ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-KSB ARE FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES (SUCH FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS USING WORDS SUCH AS "MAY," "POTENTIAL," "EXPECTS," "BELIEVES," "ESTIMATES," "PLANS," "INTENDS,"
"ANTICIPATES" AND SIMILAR EXPRESSIONS). THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES, INCLUDING THOSE SET FORTH BELOW AND IN ITEM 1 OF THIS ANNUAL REPORT ON FORM
10-KSB UNDER THE CAPTION "RISK FACTORS," THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THOSE PROJECTED. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE HEREOF. WE
EXPRESSLY DISCLAIM ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN OUR EXPECTATIONS WITH REGARD
THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED. THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE
READ IN CONJUNCTION WITH OUR CONSOLIDATED FINANCIAL STATEMENTS (AND NOTES THERETO) CONTAINED ELSEWHERE HEREIN.

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Overview

Business

The following discussion and analysis of our financial condition and results of our operations are based on the consolidated results of businesses, which include
the results of operations of the subsidiary and related businesses we acquired on August 14, 2000. A more detailed discussion of the accounting principles used to consolidate the assets,
liabilities, and results of operations of the businesses and the specific entities included in the consolidation is set forth in Note One (1) to our consolidated financial statements included
in this report.

Revenues

Commissions and fees, which account for most of our total revenues, include commissions earned from billing, recovery, revenue maximization projects and
consulting services that we provide to our clients. Commissions and fees for our billing and recovery operations are primarily affected by the quality and age of the receivable pool we are asked to
manage. In general, commissions and fees for our billing and recovery services fluctuate based on the number of accounts we process and manage. Accounts we manage have declined 41% to
$1.0 billion as of September 30, 2001 from approximately $1.7 billion as of September 30, 2000. The decline was primarily due to balances that became uncollectible during
the fiscal year ended September 30, 2001. The growth was primarily due to new contracts obtained during the fiscal year ended September 30, 2001. Fees for our special projects and
consulting services depend largely on the type of service or project we perform and, therefore, are arranged on a case-by-case basis. Such fees are primarily affected by the
quality and age of the receivable pools as well as the efficiency of our clients' back office operations. These services are provided by the acquired businesses. Accordingly, we did not perform these
services prior to August 14, 2000.

We
previously purchased charged-off accounts receivable portfolios. Collections from these portfolios represented a portion of our revenues. Portions of these portfolios were
also sold to provide additional revenues. We discontinued purchasing these portfolios in 1999 and subsequent to September 30, 2001, we sold our remaining portfolios and assets included in the
Company's 1998 securitization. The terms of the sale included an immediate payment of $100,000 and a contingency payment of up to $350,000. The contingent payment is dependent upon the success of the
buyer in collecting the portfolio and therefore, we are unable at this time to predict the timing of all or any of this payment. Collectively, the sales are not expected to have a material impact on
our results of operations. We also earn revenues from temporary staffing and placement services provided specifically to the healthcare industry. Revenues from our temporary staffing services are
generated based on hourly and/or per diem rates charged to our clients. These rates vary according to the level of skills and technical knowledge of
our staff. Placement fees are negotiated on a case-by-case basis and are predominantly determined by a percentage of the annual salaries of the placed employees. These services
are provided by one of the acquired businesses. Accordingly, we did not perform these services prior to August 14, 2000.

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While our primary market going forward will be healthcare providers, a portion of our revenues in 2001 consisted of commissions and fees earned from non-healthcare clients.
The following is a summary of our revenues:

2001

2000Commissions and Fees:Healthcare Clients

$
12,875,785

$
3,813,970Non-Healthcare Clients


896,124


1,418,359$
13,771,909

$
5,232,329Purchased Portfolios:Collections


386,835


554,151Total revenues

$
14,158,744

$
5,786,480


Operating Expenses

Our largest operating expense is employee compensation and benefits, which includes salaries and wages, incentive compensation and related employee benefits and
taxes. Our compensation program for recovery specialists includes incentives based on the amount of net fees they individually generate; as such, compensation expense for this group will vary directly
with the amount of fees generated by our
recovery business. Most of our managers receive annual incentive compensation based on the overall operating results of our operations in each of our business lines as well as their individual
performance. Therefore, a significant portion of compensation and benefits expense will fluctuate based on our operating results. Compensation expense may also reflect stock options granted to our
employees under our stock option plan.

Included
in selling, general and administrative expenses are postage and telephone expenses that account for the next largest components of our operating expenses. These expenses will
fluctuate based on the volume of accounts we manage and, correspondingly, with the commissions and fees we generate. These expenses reflect our primary methods of communication with our clients'
customers and they include costs to send customer/payor invoices and statements as well as telecommunication costs incurred in various negotiation activities with such customers.

We
ratably allocate the cost of purchased loans receivable portfolios on an account by account basis. Collections received from any one account are applied to the basis of the respective
account before revenue is recognized. Integral to our collection operations is the timely identification of accounts that are deemed uncollectible. The uncollectability of an account is primarily
based on the current status of the account (such as bankrupt or deceased) and the historical experience of the specific portfolio as well as similar portfolios. We record an amortization reflecting
the accumulated costs allocated to those accounts deemed uncollectible to properly reflect management's estimate of the remaining net proceeds to be realized from a given portfolio. As previously
mentioned, we have not purchased any portfolios since 1999 and we will be departing from this line of business. Accordingly, we expect this cost to decline as the remaining unamortized cost basis of
the purchased portfolios are realized through collections or sale of such portfolios. Subsequent to September 30, 2001 we sold the remaining portfolios and discontinued amortizing costs related
to the portfolios.

Depreciation
expense relates primarily to the building facility we own where we conduct a significant portion of our operations. In addition, we have invested and will continue to invest
in technology and telecommunication equipment that will continue to impact this expense item. In accordance with our plan, we have also acquired new businesses to rapidly expand our operations and
geographic presence. Goodwill relating to our major acquisitions is generally being amortized over a period of 20 years from date of acquisition.

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The most significant component of other income and expense relates primarily to net proceeds received from rental of the portion of our building that we do not occupy.

We
have experienced substantial changes in our business and operations since we completed the acquisition of certain companies in August, 2000. Developmental spending which includes,
among other things, product and service rollouts, and certain information technology systems improvements, is
expected to be discretionary and will vary in response to various market conditions. However, a significant portion of our expenses, such as administrative salaries and wages, occupancy and equipment,
depreciation and amortization of goodwill should not vary, at least in the short term, with fluctuations in our revenues. We expect to continue to experience periods of rapid change in the future. Our
current expansion has placed, and any future expansion would place, significant demands on our administrative, operational, financial and other resources.

Result of Operation and Financial OverviewYears ended September 30, 2001 and 2000

2001

2000RevenuesCommissions and Fees

$
13,771,909

$
5,232,329Collections from Owned Portfolios


386,835


554,151$
14,158,744

$
5,786,480Operating ExpensesEmployee compensation and benefit


11,259,949

$
4,068,836Selling, general and administrative


3,723,136


1,964,810Amortization of Loan Portfolios


241,381


341,645Depreciation and amortization


888,029


279,868Income (Loss) From Operations


(1,953,751
)

(868,679
)Other Income (Expense)


(482,596
)

(17,993
)Net Income (Loss)


(2,436,347
)

(886,672
)


Revenues

Commissions and fees earned by us increased by $8,539,580 or 163% to $13,771,909 for the year ended September 30, 2001 from $5,232,328 for the year ended
September 30, 2000. The increase is primarily due to the mergers in August 2000 and new contracts signed during the year. Collections and sales from owned portfolios decreased by
$167,316 or 30% to $386,835 for the year ended September 30, 2001 from $554,151 for the year ended September 30, 2000. As previously discussed, we did not replenish the paid and
cancelled accounts out of this portfolio, which ordinarily result from collection activities, in conformance with our plan not to pursue this line of business.

Operating Expenses

Our operating expenses increased by $9,457,336 or 142% to $16,112,495 for the year ended September 30, 2001 from $6,655,159 for the year ended
September 30, 2000. The increase was due in large part to approximately $7,191,113 in increases in salaries and wages as a result of the August 2000 mergers and our investments in
infrastructure.

Other Income and Expenses

Interest expenses increased $427,303 primarily as a result of additional borrowings to fund technology and equipment acquisitions as well as interest paid related
to the notes payable to the sellers of the acquired subsidiaries. Rental income net of related expenses, decreased $37,303 as a result of a reduction in leasing to third parties of space in the
Company's facility.

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Net Loss

As a result of the various items discussed above, net loss for the year increased approximately $1,500,000, or 175% to $2,436,347 for the year ended
September 30, 2001 from a loss of $886,672 for the year ended September 30, 2000.

Liquidity and Capital Resources

Historically, we have financed our operations through cash flows generated by operations and borrowings from credit facilities that are in place. Capital
expenditures and investments in new technology have been primarily financed through non-cancelable capital leases, which expire at various times through fiscal year 2006. As of
September 30, 2001, we have outstanding long-term debt with a financial institution in the form of a mortgage note on our building facility with a remaining balance of approximately
$2,946,900 at a variable interest rate that approximates 8.5% and is due in January 2021. As of September 30, 2001, our net working capital aggregated approximately $(972,304). On
September 28, 2001, the Company entered into a revolving line of credit agreement with two officers of the Company. The agreement permits borrowings up to $350,000 at the bank reference rate
plus one percent. The line of credit is unsecured and expires on January 2, 2003. At September 30, 2001 this line of credit had not been used. Additionally, subsequent to
September 30, 2001, we sold our remaining portfolios and assets included in the Company's 1998 securitization. The terms of the sale included an immediate payment of $100,000 and a contingency
payment of up to $350,000. The contingent payment is dependent upon the success of the buyer in collecting the portfolio and therefore, we are unable at this time to predict the timing of all or any
of this payment. Collectively, the sales are not expected to have a material impact on our results of operations. On November 19, 2001, the Company entered into a secured line of credit, which
permits borrowing up to one million dollars at the bank reference rate plus five percent.

Management
believes that anticipated cash flows from operations as well as existing credit facilities, will be sufficient to meet the working capital needs required to pursue its
strategic goals during the fiscal year 2002.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" as
amended in June 1999 by SFAS No. 137, "Accounting for Derivative Instruments and Hedging ActivitiesDeferral of the Effective Date of FASB Statement No. 133," and in
June 2000, by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," (collectively SFAS No. 133). SFAS No. 133 is effective for all
fiscal years beginning after June 15, 2000, with earlier application encouraged. SFAS No. 133 requires that an entity recognize all derivative instruments as either assets or liabilities
on its balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction,
and, if it is, the type of hedge transaction. Adoption of this standard did not have a material impact on the Company's financial position or results of operations.

In
March 2000, the FASB issued FASB Interpretation No. 44 (FIN44), "Accounting for Certain Transactions Involving Stock Compensation." The provisions of FIN44, which were
effective on July 1, 2000, have not had a material effect on the Company's financial position or results of operations.

In
September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
replaces SFAS No. 125. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over
most of SFAS No. 125's provisions. SFAS No. 140 will not have a material impact on our results of operations or financial condition.

17

---

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 addresses financial
accounting and reporting for business combinations and is effective for all business combinations after June 30, 2001. SFAS No. 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets and is effective for fiscal years beginning after December 15, 2001, with early adoption permitted for entities with fiscal years beginning after
March 15, 2001, provided that the first interim financial statements have not previously been issued. The Company is in the process of determining its planned adoption date, as well as the
expected impact on earnings and existing goodwill and other intangibles upon adoption, which will include elimination of goodwill amortization and may include additional goodwill impairment. As of
September 30, 2001, goodwill totaled $10,773,940 and is being amortized over 20 years.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses the financial
accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of and is effective for fiscal years beginning after
December 15, 2001. This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of;"
however, it retains the fundamental provisions of SFAS No. 121 for (i) recognition and measurement of the impairment of long-lived assets to be held and used and
(ii) measurement of long-lived assets to be disposed of by sale. This statement also supersedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for the disposal of a
segment of a business. The Company does not believe SFAS No. 144 will have a material impact on the Company's financial position or results of operations.

Management Changes

On January 2, 2001, our Board of Directors appointed Fred McGee as chief financial officer and secretary. He replaces Ken Leighton who resumed his position
as chief information officer.

On
July 31, 2001, Diane Dales resigned from the Board of Directors due to other commitments.

ITEM 7 FINANCIAL STATEMENTS

See "Index to Consolidated Financial Statements" for a listing of the consolidated financial statements filed with this report.

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

None.

18

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PART III

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

Information required by this item will be contained in our proxy or information statement to be filed with the Securities and Exchange Commission within
120 days after September 30, 2001 and is incorporated herein by reference.

ITEM 10 EXECUTIVE COMPENSATION

The information required by this item will be contained in our proxy or information statement to be filed with the Securities and Exchange Commission within
120 days after September 30, 2001 and is incorporated herein by reference.

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item will be contained in our proxy or information statement to be filed with the Securities and Exchange Commission within
120 days after September 30, 2001 and is incorporated herein by reference.

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item will be contained in our proxy or information statement to be filed with the Securities and Exchange Commission within
120 days after September 30, 2001 and is incorporated herein by reference.

19

---

PART IV

ITEM 13 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



Report of Arthur Andersen LLP, Independent Public Accountants

F-2Consolidated Balance Sheets as of September 30, 2001 and 2000

F-3Consolidated Statements of Operations for the Years ended September 30, 2001 and 2000

F-4Consolidated Statements of Shareholders' Equity for the Years Ended September 30, 2001 and 2000

F-5Consolidated Statements of Cash Flows for the Years Ended September 30, 2001 and 2000

F-6Notes to Consolidated Financial Statements

F-7 to F-20






None
filed

The
exhibits listed below are required by Item 601 of Regulation S-B.

|Exhibit |  | Name of Exhibit                                                                                                                                                                                                                                
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1     |  | Definitive Purchase Agreement and Plan of Reorganization dated September 12, 1995 (incorporated by reference from September 12, 1995 Form 8-K, Exhibit 7(b)(i))                                                                                
|2.2     |  | Purchase Agreement by and among RevCare, CPS, Impact, RBA, Insource, Russell Mohrmann, Suzette Mohrmann, Robert Perez, Barbara Perez and Maureen Brooks dated May 30, 2000 (incorporated by reference from June 14, 2000 Form 8-K,
Exhibit 2.1)
|2.3     |  | Asset Purchase Agreement by and among RevCare, CPS, HELP, Russell Mohrmann, Suzette Mohrmann and Allen Berman dated May 30, 2000 (incorporated by reference from June 14, 2000 Form 8-K, Exhibit 2.2)                                          
|3.1     |  | Amended and Restated Articles of Incorporation as filed with the Secretary of State of Nevada on December 7, 1995 (incorporated by reference from December 20, 1995 Form 8-K, Exhibit 3.1)                                                     

20

---

|3.2    |  | Bylaws of RevCare (incorporated by reference from RevCare's registration statement on Form S-18 (SEC No. 233-12361-LA) filed on March 18, 1987, Exhibit 3.2)                                                                               
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.3    |  | Certificate of Determination re: Series A Preferred Stock (incorporated by reference from December 27, 1996 Form 10-KSB, Exhibit 3.3)                                                                                                      
|3.4    |  | Certificate of Amendment of Articles of Incorporation as filed with the Secretary of State of Nevada on August 9, 2000 (incorporated by reference from August 29, 2000 Form 8-K, Exhibit 4.3)                                              
|4.1    |  | Specimen of Common Stock of RevCare (incorporated by reference from RevCare's Form 8-K filed on December 20, 1995, Exhibit 4.2)                                                                                                            
|4.2    |  | Investor's Rights Agreement by and among RevCare and FBR Financial Fund II, L.P., dated May 30, 2000 (incorporated by reference from June 14, 2000 Form 8-K, Exhibit 99.2)                                                                 
|4.3    |  | Investors' Rights Agreement by and among RevCare, CPS, RBA, Insource, HELP, Russell Mohrmann, Suzette Mohrmann, Robert Perez and Barbara Perez dated August 14, 2000 (incorporated by reference from August 29, 2000 Form 8-K,
Exhibit 4.4)
|10.1   |  | 1995 Stock Option Plan of RevCare (incorporated by reference from RevCare's Form 8-K filed on December 20, 1995, Exhibit 10.2)                                                                                                             
|10.2   |  | Preferred Stock Purchase Agreement dated September 30, 1996 (incorporated by reference from RevCare's Form 10-KSB filed on December 27, 1996)                                                                                              
|10.3   |  | Warrant to Purchase 400,000 Shares of Common Stock dated February 12, 1999 issued to Batchelder & Partners, Inc. (incorporated by reference from RevCare's Form 10-QSB filed on February 12, 1999)                                         
|10.4   |  | Employment Agreement between CPS and Russell Mohrmann dated August 14, 2000 (incorporated by reference from August 29, 2000 Form 8-K, Exhibit 10.1)                                                                                        
|10.5   |  | Employment Agreement between RevCare and Robert Perez dated August 14, 2000 (incorporated by reference from August 29, 2000 Form 8-K, Exhibit 10.2)                                                                                        
|10.6   |  | Employment Agreement between RevCare and Manuel Occiano dated May 30, 2000 (incorporated by reference from RevCare's Form 10-KSB filed on January 15, 2001)                                                                                
|10.7   |  | Common Stock Purchase Agreement by and between RevCare and FBR Financial Fund, II, L.P., dated May 30, 2000 (incorporated by reference from June 14, 2000 Form 8-K, Exhibit 10.1)                                                          
|10.8   |  | Voting Agreement by and among the Company, FBR Financial Fund II, L.P. and Pacific Life Insurance Company, dated May 30, 2000 (incorporated by reference from RevCare's June 14, 2000 Form 8-K, Exhibit 99.1)                              
|10.9   |  | Forms of Secured Convertible Promissory Notes issued by the Company dated August 14, 2000 (incorporated by reference from August 29, 2000 Form 8-K, Exhibit 4.5)                                                                           
|*10.10 |  | Employment Agreement between RevCare and Fred McGee dated January 2, 2001                                                                                                                                                                  
|*10.11 |  | Revolving Note issued by the Company September 24, 2001                                                                                                                                                                                    
|*10.12 |  | First Amendement to Promissory note issued by the Company September 24, 2001 extending maturity date to January 2, 2003                                                                                                                    
|*10.13 |  | Forms of First Amendment to Secured Convertible Promissory Notes issued by the Company dated August 14, 2000 extending maturity date to January 2, 2003                                                                                    

21

---



SIGNATURES

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

|Date: January 15, 2002 |  | REVCARE, INC.
|---------------------- |  | -------------
|                       |  | By:          

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

|Signatures                              |  | Title                                                    |  | Date Signed     
|--------------------------------------- |  | -------------------------------------------------------- |  | ----------------
|                                        |  |                                                          |  |                 
|/s/GEORGE MCCABE, JR.George McCabe, Jr. |  | Director                                                 |  | January 15, 2002
|/s/EDWARD WHEELEREdward Wheeler         |  | Director                                                 |  | January 15, 2002
|/s/MANUEL OCCIANOManuel Occiano         |  | Chief Executive Officer                                  |  | January 15, 2002
|/s/FRED MCGEEFred McGee                 |  | Chief Financial Officer and Principal Accounting Officer |  | January 15, 2002

22

---



EXHIBIT INDEX

|Exhibit
Number |  | Description                                                                                                                                                                                                                                    
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Definitive Purchase Agreement and Plan of Reorganization dated September 12, 1995 (incorporated by reference from September 12, 1995 Form 8-K, Exhibit 7(b)(i))                                                                                
|2.2            |  | Purchase Agreement by and among RevCare, CPS, Impact, RBA, Insource, Russell Mohrmann, Suzette Mohrmann, Robert Perez, Barbara Perez and Maureen Brooks dated May 30, 2000 (incorporated by reference from June 14, 2000 Form 8-K,
Exhibit 2.1)
|2.3            |  | Asset Purchase Agreement by and among RevCare, CPS, HELP, Russell Mohrmann, Suzette Mohrmann and Allen Berman dated May 30, 2000 (incorporated by reference from June 14, 2000 Form 8-K, Exhibit 2.2)                                          
|3.1            |  | Amended and Restated Articles of Incorporation as filed with the Secretary of State of Nevada on December 7, 1995 (incorporated by reference from December 20, 1995 Form 8-K, Exhibit 3.1)                                                     
|3.2            |  | Bylaws of RevCare (incorporated by reference from RevCare's registration statement on Form S-18 (SEC No. 233-12361-LA) filed on March 18, 1987, Exhibit 3.2)                                                                                   
|3.3            |  | Certificate of Determination re: Series A Preferred Stock (incorporated by reference from December 27, 1996 Form 10-KSB, Exhibit 3.3)                                                                                                          
|3.4            |  | Certificate of Amendment of Articles of Incorporation as filed with the Secretary of State of Nevada on August 9, 2000 (incorporated by reference from August 29, 2000 Form 8-K, Exhibit 4.3)                                                  
|4.1            |  | Specimen of Common Stock of RevCare (incorporated by reference from RevCare's Form 8-K filed on December 20, 1995, Exhibit 4.2)                                                                                                                
|4.2            |  | Investor's Rights Agreement by and among RevCare and FBR Financial Fund II, L.P., dated May 30, 2000 (incorporated by reference from June 14, 2000 Form 8-K, Exhibit 99.2)                                                                     
|4.3            |  | Investors' Rights Agreement by and among RevCare, CPS, RBA, Insource, HELP, Russell Mohrmann, Suzette Mohrmann, Robert Perez and Barbara Perez dated August 14, 2000 (incorporated by reference from August 29, 2000 Form 8-K,
Exhibit 4.4)    
|10.1           |  | 1995 Stock Option Plan of RevCare (incorporated by reference from RevCare's Form 8-K filed on December 20, 1995, Exhibit 10.2)                                                                                                                 
|10.2           |  | Preferred Stock Purchase Agreement dated September 30, 1996 (incorporated by reference from RevCare's Form 10-KSB filed on December 27, 1996)                                                                                                  
|10.3           |  | Warrant to Purchase 400,000 Shares of Common Stock dated February 12, 1999 issued to Batchelder & Partners, Inc. (incorporated by reference from RevCare's Form 10-QSB filed on February 12, 1999)                                             
|10.4           |  | Employment Agreement between CPS and Russell Mohrmann dated August 14, 2000 (incorporated by reference from August 29, 2000 Form 8-K, Exhibit 10.1)                                                                                            
|10.5           |  | Employment Agreement between RevCare and Robert Perez dated August 14, 2000 (incorporated by reference from August 29, 2000 Form 8-K, Exhibit 10.2)                                                                                            
|10.6           |  | Employment Agreement between RevCare and Manuel Occiano dated May 30, 2000 (incorporated by reference from RevCare's Form 10-KSB filed on January 15, 2001)                                                                                    

23

---

|10.7   |  | Common Stock Purchase Agreement by and between RevCare and FBR Financial Fund, II, L.P., dated May 30, 2000 (incorporated by reference from June 14, 2000 Form 8-K, Exhibit 10.1)                            
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8   |  | Voting Agreement by and among the Company, FBR Financial Fund II, L.P. and Pacific Life Insurance Company, dated May 30, 2000 (incorporated by reference from RevCare's June 14, 2000 Form 8-K, Exhibit 99.1)
|10.9   |  | Forms of Secured Convertible Promissory Notes issued by the Company dated August 14, 2000 (incorporated by reference from August 29, 2000 Form 8-K, Exhibit 4.5)                                             
|*10.10 |  | Employment Agreement between Revcare and Fred McGee dated January 2, 2001                                                                                                                                    
|*10.11 |  | Revolving Note issued by the Company September 24, 2001                                                                                                                                                      
|*10.12 |  | First Amendment to Promissory note issued by the Company September 24, 2001 extending maturity date to January 2, 2003                                                                                       
|*10.13 |  | Forms of First Amendment to Secured Convertible Promissory Notes issued by the Company dated August 14, 2000 extending maturity date to January 2, 2003                                                      

24

---



REVCARE, INC. AND SUBSIDIARIES

Consolidated
Financial Statements
As of September 30, 2001 and 2000

Index to Consolidated Financial Statements

|                                           |                                                                                                 | Page       
|------------------------------------------ | ----------------------------------------------------------------------------------------------- | -----------
|Report of Independent Public Accountants   |                                                                                                 | F-2        
|Financial Statements:                      |                                                                                                 |            
|                                           | Consolidated Balance Sheets as of September 30, 2001 and 2000                                   |            
|                                           | Consolidated Statements of Operations for the Years Ended September 30, 2001 and 2000           |            
|                                           | Consolidated Statements of Shareholders' Equity for the Years Ended September 30, 2001 and 2000 |            
|                                           | Consolidated Statements of Cash Flows for the Years Ended September 30, 2001 and 2000           |            
|Notes to Consolidated Financial Statements |                                                                                                 | F-7 to F-20

F1

---



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
the Shareholders of RevCare, Inc.:

We
have audited the accompanying consolidated balance sheets of RevCare, Inc. (formerly known as Cypress Financial Services, Inc.), a Nevada corporation, and subsidiaries
as of September 30, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity and cash flows for the years then ended. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RevCare, Inc. and subsidiaries as of
September 30, 2001and 2000, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

ARTHUR
ANDERSEN LLP

Orange
County, California
January 11, 2002

F2

---



REVCARE, INC. AND SUBSIDIARIES        Consolidated Balance SheetsSeptember 30, 2001 and 2000

|                                                                                                   |                                                                                                                                                                                          | 2001                       |            | 2000       |           
|-------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ---------- | ----------
|Assets                                                                                             |                                                                                                                                                                                         
|Cash                                                                                               |                                                                                                                                                                                          | $                          |           |            | $         
|Accounts receivable, net of allowance for doubtful accounts of $251,826 and $400,000, respectively |                                                                                                                                                                                          |                            | 1,705,538  |            |           
|Portfolio receivables, net                                                                         |                                                                                                                                                                                          |                            | 244,755    |            |           
|Property, net                                                                                      |                                                                                                                                                                                          |                            | 3,462,341  |            |           
|Notes receivable from officer                                                                      |                                                                                                                                                                                          |                            | 100,000    |            |           
|Prepaid expenses and other                                                                         |                                                                                                                                                                                          |                            | 99,919     |            |           
|Goodwill, net                                                                                      |                                                                                                                                                                                          |                            | 10,165,211 |            |           
|                                                                                                   |                                                                                                                                                                                          |                            |            |            |           
|                                                                                                   |                                                                                                                                                                                          | Total assets               |            | $          | 15,777,764
|                                                                                                   |                                                                                                                                                                                          |                            |            |            |           
|Liabilities and Shareholders' Equity                                                               |                                                                                                                                                                                         
|Bank overdraft                                                                                     |                                                                                                                                                                                          | $                          | 112,674    |            | $         
|Accounts payable                                                                                   |                                                                                                                                                                                          |                            | 491,304    |            |           
|Collection payables to customers                                                                   |                                                                                                                                                                                          |                            | 693,121    |            |           
|Accrued liabilities                                                                                |                                                                                                                                                                                          |                            | 1,074,995  |            |           
|Lines of credit                                                                                    |                                                                                                                                                                                          |                            | 125,221    |            |           
|Notes payable                                                                                      |                                                                                                                                                                                          |                            | 3,198,003  |            |           
|Capital lease obligations                                                                          |                                                                                                                                                                                          |                            | 280,950    |            |           
|Notes payable to related parties                                                                   |                                                                                                                                                                                          |                            | 3,675,000  |            |           
|                                                                                                   |                                                                                                                                                                                          | Total liabilities          |            |            | 9,651,268 
|                                                                                                   |                                                                                                                                                                                          |                            |            |            |           
|Commitments and Contingencies                                                                      |                                                                                                                                                                                          |                            |            |            |           
|Shareholders' Equity:                                                                              |                                                                                                                                                                                          |                            |            |            |           
|                                                                                                   | Series A convertible, redeemable preferred stock, $0.001 par value, stated at $2.00 liquidation preference per share, 5,000,000 shares authorized; 345,000 shares issued and outstanding |                            |            | 690,000    |           
|                                                                                                   | Common stock, $0.001 par value; 50,000,000 shares authorized; 21,526,909 shares issued and outstanding                                                                                   |                            |            | 21,520     |           
|                                                                                                   | Paid-in capital                                                                                                                                                                          |                            |            | 10,658,282 |           
|                                                                                                   | Accumulated deficit                                                                                                                                                                      |                            |            | (5,193,306 | )         
|                                                                                                   |                                                                                                                                                                                          |                            |            |            |           
|                                                                                                   |                                                                                                                                                                                          |                            | 6,176,496  |            |           
|                                                                                                   | Less common stock in treasury at cost, 33,000 shares                                                                                                                                     |                            |            | 50,000     |           
|                                                                                                   |                                                                                                                                                                                          |                            |            |            |           
|                                                                                                   |                                                                                                                                                                                          | Total shareholders' equity |            |            | 6,126,496 
|                                                                                                   |                                                                                                                                                                                          |                            |            |            |           
|                                                                                                   |                                                                                                                                                                                          | $                          | 15,777,764 |            | $         
|                                                                                                   |                                                                                                                                                                                          |                            |            |            |           

The accompanying notes are an integral part of these consolidated balance sheets.

F3

---



REVCARE, INC. AND SUBSIDIARIES        Consolidated Statements of Operations  For the Years Ended September 30, 2001 and 2000

|                                                       |                                      | 2001 |            | 2000       |  
|------------------------------------------------------ | ------------------------------------ | ---- | ---------- | ---------- | -
|Revenues:                                              |                                      |      |            |            |  
|                                                       | Service fees                         |      | $          | 13,771,909 |  
|                                                       | Portfolio receivables revenue        |      |            | 386,835    |  
|                                                       |                                      |      |            |            |  
|                                                       |                                      |      | 14,158,744 |            |  
|                                                       |                                      |      |            |            |  
|Operating Expenses:                                    |                                      |      |            |            |  
|                                                       | Salaries, wages and related benefits |      |            | 11,259,949 |  
|                                                       | Selling, general and administrative  |      |            | 3,723,136  |  
|                                                       | Losses on portfolio receivables      |      |            | 241,381    |  
|                                                       | Depreciation and amortization        |      |            | 888,029    |  
|                                                       |                                      |      |            |            |  
|                                                       |                                      |      | 16,112,495 |            |  
|                                                       |                                      |      |            |            |  
|Loss from Operations                                   |                                      |      | (1,953,751 | )          |  
|                                                       |                                      |      |            |            |  
|Other Income (Expense):                                |                                      |      |            |            |  
|                                                       | Interest expense, net                |      |            | (566,739   | )
|                                                       | Rental operations, net               |      |            | 84,143     |  
|                                                       |                                      |      |            |            |  
|                                                       |                                      |      | (482,596   | )          |  
|                                                       |                                      |      |            |            |  
|Loss before Provision for Income Taxes                 |                                      |      | (2,436,347 | )          |  
|Provision for Income Taxes                             |                                      |      |           |            |  
|                                                       |                                      |      |            |            |  
|Net Loss                                               |                                      | $    | (2,436,347 | )          | $
|                                                       |                                      |      |            |            |  
|Loss per share:                                        |                                      |      |            |            |  
|                                                       | Basic                                |      | $          | (0.11      | )
|                                                       | Diluted                              |      | $          | (0.11      | )
|Number of shares used in computing earnings per share: |                                      |      |            |            |  
|                                                       | Basic                                |      |            | 21,526,909 |  
|                                                       | Diluted                              |      |            | 21,526,909 |  

The
accompanying notes are an integral part of these consolidated financial statements.

F4

---



REVCARE, INC. AND SUBSIDIARIES        Consolidated Statements of Shareholders' Equity  For the Years Ended September 30, 2001 and 2000

|                                |                              | Series A Convertible,
Redeemable
Preferred Stock |   |   |         |   |            |            |   |        |        |   |         |         |  
|------------------------------- | ---------------------------- | ------------------------------------------------ | - | - | ------- | - | ---------- | ---------- | - | ------ | ------ | - | ------- | ------- | -
|
|
|
|BALANCES, at September 30, 1999 |                              | 345,000                                          |   | $ | 690,000 |   | 6,527,571  |            | $ | 6,527  |        | $ | (2,272  | )       | $
|                                | Retirement of treasury stock |                                                  |  |   |         |  |            | (662       | ) |        | (7     | ) |         | 2,272   |  
|                                | Common stock issued, net     |                                                  |  |   |         |  |            | 15,000,000 |   |        | 15,000 |   |         |        |  
|                                | Common stock repurchased     |                                                  |  |   |         |  |            |           |   |        |       |   |         | (50,000 | )
|                                | Net loss                     |                                                  |  |   |         |  |            |           |   |        |       |   |         |        |  
|                                |                              |                                                  |   |   |         |   |            |            |   |        |        |   |         |         |  
|BALANCES, at September 30, 2000 |                              | 345,000                                          |   |   | 690,000 |   | 21,526,909 |            |   | 21,520 |        |   | (50,000 | )       |  
|                                | Net loss                     |                                                  |  |   |         |  |            |           |   |        |       |   |         |        |  
|                                |                              |                                                  |   |   |         |   |            |            |   |        |        |   |         |         |  
|BALANCES, at September 30, 2001 |                              | 345,000                                          |   | $ | 690,000 |   | 21,526,909 |            | $ | 21,520 |        | $ | (50,000 | )       | $
|                                |                              |                                                  |   |   |         |   |            |            |   |        |        |   |         |         |  

The accompanying notes are an integral part of these consolidated financial statements.

F5

---



REVCARE, INC. AND SUBSIDIARIES        Consolidated Statements of Cash Flows  For the Years Ended September 30, 2001 and 2000

|                                                                                  |                                                                             | 2001                                         |                                                         | 2000                                      |        
|--------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------- | ----------------------------------------- | -------
|Cash Flows from Operating Activities:                                             |                                                                             |                                              |                                                         |                                           |        
|                                                                                  | Net loss                                                                    |                                              | $                                                       | (2,436,347                                | )      
|                                                                                  | Adjustments to reconcile net loss to net cash used in operating activities: |                                              |                                                         |                                           |        
|                                                                                  |                                                                             | Depreciation and amortization                |                                                         |                                           | 888,029
|                                                                                  |                                                                             | Losses on portfolio receivables              |                                                         |                                           | 241,381
|                                                                                  |                                                                             | Changes in operating assets and liabilities: |                                                         |                                           |        
|                                                                                  |                                                                             |                                              | Increase in accounts receivable, net                    |                                           |        
|                                                                                  |                                                                             |                                              | Decrease in portfolio receivables                       |                                           |        
|                                                                                  |                                                                             |                                              | Decrease in prepaid expenses and other                  |                                           |        
|                                                                                  |                                                                             |                                              | Increase in accounts payable                            |                                           |        
|                                                                                  |                                                                             |                                              | Increase (decrease) in collection payables to customers |                                           |        
|                                                                                  |                                                                             |                                              | (Decrease) increase in accrued liabilities              |                                           |        
|                                                                                  |                                                                             |                                              |                                                         |                                           |        
|                                                                                  |                                                                             |                                              |                                                         | Net cash used in operating activities     |        
|                                                                                  |                                                                             |                                              |                                                         |                                           |        
|Cash Flows from Investing Activities:                                             |                                                                             |                                              |                                                         |                                           |        
|                                                                                  | Purchases of property                                                       |                                              |                                                         | (514,877                                  | )      
|                                                                                  | Acquisition of OCPS, net of cash acquired                                   |                                              |                                                         |                                          |        
|                                                                                  |                                                                             |                                              |                                                         |                                           |        
|                                                                                  |                                                                             |                                              |                                                         | Net cash used in investing activities     |        
|                                                                                  |                                                                             |                                              |                                                         |                                           |        
|Cash Flows from Financing Activities:                                             |                                                                             |                                              |                                                         |                                           |        
|                                                                                  | Issuance of common stock, net                                               |                                              |                                                         |                                          |        
|                                                                                  | Proceeds from issuance of mortgage note payable                             |                                              |                                                         | 2,990,000                                 |        
|                                                                                  | Principal payments on maturity of mortgage note payable                     |                                              |                                                         | (1,802,002                                | )      
|                                                                                  | Increase in bank overdraft                                                  |                                              |                                                         | 112,674                                   |        
|                                                                                  | Principal payments on notes payable                                         |                                              |                                                         | (481,499                                  | )      
|                                                                                  | Principal payments on capital lease obligations                             |                                              |                                                         | (121,608                                  | )      
|                                                                                  |                                                                             |                                              |                                                         |                                           |        
|                                                                                  |                                                                             |                                              |                                                         | Net cash provided by financing activities |        
|                                                                                  |                                                                             |                                              |                                                         |                                           |        
|Net (Decrease) Increase in Cash                                                   |                                                                             |                                              | (938,660                                                | )                                         |        
|Cash, at beginning of year                                                        |                                                                             |                                              | 938,660                                                 |                                           |        
|                                                                                  |                                                                             |                                              |                                                         |                                           |        
|Cash, at end of year                                                              |                                                                             | $                                            |                                                        |                                           | $      
|                                                                                  |                                                                             |                                              |                                                         |                                           |        
|Supplemental Disclosure of Cash Flow InformationCash paid during the period for: |                                                                             |                                              |                                                         |                                           |        
|                                                                                  | Interest                                                                    |                                              | $                                                       | 566,739                                   |        
|                                                                                  |                                                                             |                                              |                                                         |                                           |        

Supplemental Disclosure of Non Cash Investing, Financing and Operating Activities



The
accompanying notes are an integral part of these consolidated financial statements.

F6

---



REVCARE, INC. AND SUBSIDIARIES        Notes to Consolidated Financial Statements  September 30, 2001

1. Organization and Basis of Presentation

RevCare, Inc.
(formerly known as Cypress Financial Services, Inc.), a Nevada corporation, (together with its subsidiaries, the Company), provides accounts receivable
management, administration, and debt collection services primarily to health care providers and consumer credit issuers.

2. Summary of Significant Accounting Policies











F7

---





F8

---





Basic EPS

Diluted EPSNumeratornet loss

$
(2,436,347
)
$
(2,436,347
)Denominatorweighted average shares outstanding


21,526,909


21,526,909Loss per share

$
(0.11
)
$
(0.11
)




Basic EPS

Diluted EPSNumeratornet loss

$
(886,672
)
$
(886,672
)Denominatorweighted average shares outstanding


16,979,025


16,979,025Loss per share

$
(0.05
)
$
(0.05
)




F9

---



2001

2000Rental income

$
236,953

$
273,309Utilities and other


(152,810
)

(151,866
)$
84,143

$
121,443






F10

---





3. Acquisition and Goodwill

On
August 14, 2000, the Company completed the purchase of all of the outstanding stock of OCPS and its wholly owned subsidiary, Impact. Concurrent with this acquisition, OCPS
acquired substantially all of the assets of RBA Rem-Care, Inc., Insource Medical Solutions, LLC and Hospital Employee Labor Pool, affiliates of OCPS. This acquisition was accounted
for using the purchase method of accounting. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The operations of OCPS have been included in the
accompanying consolidated financial statements from the date of acquisition.

Below
is a summary of the OCPS acquisition:

Fair value of tangible assets acquired

$
1,317,668Goodwill acquired


10,865,614Liabilities assumed


(1,216,216
)Acquisition price


10,967,066Less cash acquired


(33,396
)Less notes payable issued for acquisition


(4,200,000
)Net cash paid for acquisition

$
6,733,670


Due
to a post closing adjustment goodwill was reduced to $10,773,940 during fiscal 2001.

Had
the acquisition occurred at the beginning of the prior fiscal year, the pro forma results would be as follows:

2000(unaudited)Revenues

$
14,375,441Net loss

$
(1,252,971
)Diluted earnings per share

$
(0.07
)Diluted weighted average shares outstanding


16,979,025


4. Portfolio Receivables

F11

---

The cost basis of portfolio receivables (Receivables) activity consists of the following as of September 30, 2001 and 2000 and for the years then ended:

Portfolio receivables at September 30, 1999

$
905,220Increase in allowance for losses on portfolio receivables


(341,645
)Collections applied to cost basis


(48,690
)Portfolio receivables at September 30, 2000


514,885Increase in allowance for losses on portfolio receivables


(241,381
)Collections applied to cost basis


(28,749
)Portfolio receivables at September 30, 2001

$
244,755


For
the years ended September 30, 2001 and 2000, the Company had gross collections from the Receivables of $415,585 and $602,840, respectively. After applying $28,749 and $48,690
to the cost basis for the years ended September 30, 2001 and 2000, respectively, $386,835 and $554,151 was recognized as portfolio receivables revenue in the accompanying consolidated
statements of operations.

On
August 14, 1998, the Company sold Receivables with a book value of $224,634 to a wholly owned subsidiary for $2,750,000, which issued interest-bearing asset-backed securities
to Pacific Life Insurance Company (Pacific Life) for the same amount. The Company considers the transfer of Receivables where the Company surrenders control over the Receivables a sale and does not
include the wholly-owned subsidiary in its consolidated financial statements. For the years ended September 30, 2001 and 2000, the Company had gross collections from these Receivables of
$635,825 and $848,761, respectively, of which $130,592 and $179,128 was recognized as service fee revenue in the accompanying consolidated statements of operations. Subsequent to year end these
receivables were sold to a third party.

F12

---

5. Related Party Transactions

On
July 2, 1998, Pacific Life purchased 2,000,000 shares of common stock from the Company, representing 28 percent of the outstanding common stock of the Company on a fully
diluted basis for $3,000,000.

On
August 14, 1998 the Company sold Receivables with a book value of $224,634 to a wholly owned subsidiary for $2,750,000, which issued interest-bearing asset-backed securities to
Pacific Life for the same amount. The Company considers a transfer of Receivables where the Company surrenders control over the Receivables a sale to the extent that consideration other than
beneficial interests in the transferred Receivables is received in exchange for the Receivables. The Company continues to service the asset backed securities and receives a 20 percent servicing
fee (see also Note 14).

In
conjunction with the acquisition of OCPS on August 14, 2000 the Company entered into $3,675,000 of Secured Convertible Promissory Notes to shareholders and officers of OCPS,
currently employees or officers of RevCare. All of these notes bear interest at the rate of 8 percent per annum with $171,500 maturing in August 2002 with the remaining balance maturing
in January 2003, at which time the unpaid principal balances and all accrued and unpaid interest are due. At the option of the holder, the notes are convertible at $0.735 of any unpaid
principal balance into $.001 par value common stock.

On
September 28, 2001, the Company entered into a revolving line of credit agreement with two officers of the Company. The agreement permits borrowings up to $350,000 at the bank
reference rate plus one percent. The line of credit is unsecured and expires on January 2, 2003. At September 30, 2001 this line of credit had not been used.

6. Property

Property
consists of the following:

2001

2000Land

$
866,575

$
866,575Building


1,540,577


1,540,577Equipment and furnishings


2,234,875


1,613,5484,642,027


4,020,700LessAccumulated depreciation


1,179,686


832,898$
3,462,341

$
3,187,802


Depreciation
expense for the years ended September 30, 2001 and 2000 totaled $346,788 and $235,354, respectively. At September 30, 2001 and 2000, the net
book value of equipment under capital leases was $280,950 and $251,044, respectively. During the year ended September 30, 2000, the Company removed $1,055,483 of fully depreciated assets from
its books.

7. Intangible Assets

Intangible
assets consists of the following:

2001

2000Goodwill

$
10,773,940

$
10,865,614LessAccumulated amortization


608,729


67,488$
10,165,211

$
10,798,126


F13

---

8. Lines of Credit

The
Company has a line of credit, which permits borrowings up to a maximum of $300,000 at the bank's reference rate plus two percent (8 percent at September 30, 2001). The
line of credit expires on May 1, 2003. At September 30, 2001 and 2000, borrowings on the line totaled $125,221 and $182,512, respectively. Borrowings are secured by substantially all the
assets of OCPS, including accounts receivable and equipment, as well as guaranteed by principal owner of OCPS.

On
September 28, 2001, the Company entered into a revolving line of credit agreement with two officers of the Company. The agreement permits borrowings up to $350,000 at the bank
reference rate plus one percent. The line of credit is unsecured and expires on January 2, 2003. At September 30, 2001 this line of credit had not been used.

The
Company had a line of credit which permitted borrowings up to a maximum of $100,000, subject to an 8 percent interest rate. The line of credit expired on February 10,
2001. At September 30, 2000, borrowings on the line totaled $99,682. The line of credit was paid off during fiscal 2001.

See
Note 14 for additional information arising subsequent to year end.

9. Notes Payable

As
of September 30, 2001 and 2000, notes payable consists of the following:

|                                                                                                                                                                                                                                                                                                                           |  | 2001 |           | 2000
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ----
|Note payable to a bank, collateralized by land and a building, due in monthly payments of $25,984, including interest at a variable rate of 2.5 percent plus the standard LIBOR, through January 2021, at which time the
entire principal balance become due and payable.                                                  |  | $    | 2,946,966 |     
|Note payable to a bank, collateralized by land and a building, due in monthly payments of $14,089, including interest at 8 percent per annum, through December 2000, at which time the entire principal balance became due and payable.                                                                                    |  |      |          |     
|Note payable to a bank, interest at the bank's reference rate plus 2 percent (11.5 percent at September 30, 2000), payments of $4,048 are due in monthly installments through May 2001. The loan is secured by substantially all the assets of the
Insource division of OCPS, including accounts receivable and equipment. |  |      |          |     
|Convertible note payable to an individual, interest at 8 percent per annum, payments of $23,744 are due in monthly installments through August 2002. At the option of the holder, the note is convertible at $0.735 of any unpaid principal balance into
$.001 par value common stock.                                     |  |      | 251,037   |     
|                                                                                                                                                                                                                                                                                                                           |  |      |           |     
|                                                                                                                                                                                                                                                                                                                           |  | $    | 3,198,003 |     
|                                                                                                                                                                                                                                                                                                                           |  |      |           |     

Annual
maturities of notes payable at September 30, 2001 are as follows:

Years Ending September 30,2002

$
307,2192003


61,3002004


66,8842005


72,9772006


79,625Thereafter


2,609,998$
3,198,003


F14

---

10. Capital Transactions







F15

---



|                                               |           | September 30, 2001 |         | September 30, 2000
|---------------------------------------------- | --------- | ------------------ | ------- | ------------------
|
|Outstanding at beginning of year               |           | 1,484,608          |         | $                 
|                                               | Granted   |                    | 455,000 |                   
|                                               | Exercised |                    |        |                   
|                                               | Forfeited |                    | (7,700  | )                 
|                                               |           |                    |         |                   
|Outstanding at end of year                     |           | 1,931,808          |         | $                 
|                                               |           |                    |         |                   
|Exercisable at end of year                     |           | 1,226,110          |         | $                 
|                                               |           |                    |         |                   
|Weighted average remaining contractual life    |           |                    |         |                   
|                                               |           |                    |         |                   
|Weighted average fair value of options granted |           |                    |         | $                 
|                                               |           |                    |         |                   



F16

---



2001

2000Net Loss:

As Reported

$
(2,436,347
)
$
(886,672
)Pro Forma

$
(2,539,484
)
$
(891,766
)Basic EPS:

As Reported

$
(0.11
)
$
(0.05
)Pro Forma

$
(0.12
)
$
(0.05
)Diluted EPS:

As Reported

$
(0.11
)
$
(0.05
)Pro Forma

$
(0.12
)
$
(0.05
)


Years Ending September 30,

Operating

Capital2002

$
36,003

$
118,0632003


17,060


107,8662004





94,9622005





31,5422006





7,885Total minimum lease payments

$
53,063


360,318LessAmounts representing interest





79,368Present value of capital lease obligations




$
280,950




Years Ending September 30,2002

$
160,9432003


130,7692004


26,7482005


9,020$
327,480






F17

---







The
benefits for income taxes for the years ended September 30, 2001 and 2000 are shown in the table below:

2001

2000Federal:Current

$


$
Deferred





State:Current





Deferred





Total tax benefit

$


$



Although
not affecting the total provision, actual income tax payments may differ from the amounts shown as current as a result of the final determination as to the timing of certain
deductions and credits.

The
total tax benefit differs from the Federal statutory rate of 34 percent for the reasons shown in the table below:

2001

2000Federal statutory tax rate

(34.0
)%
(34.0
)%State income taxes, net of Federal income tax benefit

(8.6
)
(8.6
)Other

6.0

1.2Valuation Allowance

36.6

41.4Actual tax benefit


%

%


Because
certain items of income and expense are not recognized in the same year in the financial statements of the Company as in its Federal and California tax returns, deferred assets
and liabilities are created. As of September 30, 2001 and 2000, the accompanying consolidated balance sheets reflect

F18

---

no deferred tax assets. The net deferred tax assets as of September 30, 2001 and 2000 are disclosed in the table below:

2001

2000Deferred tax assets:Allowance for doubtful accounts

$
107,920


127,516Vacation accrual


60,469


17,101Net operating loss


1,671,602


858,209Warrants


42,840


42,840Other


31,772


21,965Total deferred tax assets


1,914,063


1,067,631Deferred tax liabilities:Securitization


(673,420
)

(456,290
)Other


(39,716
)

Total deferred tax liabilities


(713,136
)

(456,290
)Valuation allowance


(1,201,467
)

(611,341
)Net deferred tax asset

$


$



As
of September 30, 2001, the Company had approximately $4.4 million and $2.0 million of federal and state net operating carryforwards, respectively, available to
offset future taxable income which expire in various years through 2020.

The
following disclosures are intended to present reportable segments consistent with how the chief operating decision maker organizes segments within a company for making operating
decisions and assessing performance. Presently, the Company is segregated into healthcare, banking, and retail.

The
healthcare segment consists of pre-collect services, billing services, delinquent debt recovery, and insurance claims management and is managed as a single strategic
unit. The banking and retail segments focus primarily on delinquent debt recovery and are therefore managed collectively while their performance is assessed independent of one another.

Below
is a summary statement of operations for the years ended September 30, 2001 and 2000. The accounting policies used in the disclosure of business segments are the same as
those described in the summary of significant accounting policies. Certain assumptions are made concerning the allocations of costs between segments which may influence relative results, most notably,
allocations of various types of technology, legal, recruiting and training costs. Management believes that the allocations utilized below are reasonable and consistent with the way it manages the
business.

The
current year's segment information is presented on both the old and new basis of segmentation for comparison purposes only.

F19

---

For the year ended September 30, 2001:

|                                   |  | Recovery |           | Billing |   | Consulting |   | Staffing |           | Total |  
|---------------------------------- |  | -------- | --------- | ------- | - | ---------- | - | -------- | --------- | ----- | -
|Revenue                            |  | $        | 6,536,699 |         | $ | 2,672,615  |   | $        | 1,245,921 |       | $
|Operating expenses                 |  |          | 4,898,328 |         |   | 3,031,983  |   |          | 940,757   |       |  
|                                   |  |          |           |         |   |            |   |          |           |       |  
|Operating income (loss)            |  | $        | 1,638,371 |         | $ | (359,368   | ) | $        | 305,164   |       | $
|                                   |  |          |           |         |   |            |   |          |           |       |  
|Overhead & administrative expenses |  |          |           |         |   |            |   |          |           |       |  
|Depreciation & amortization        |  |          |           |         |   |            |   |          |           |       |  
|Losses on portfolio receivables    |  |          |           |         |   |            |   |          |           |       |  
|                                   |  |          |           |         |   |            |   |          |           |       |  
|Loss from operations               |  |          |           |         |   |            |   |          |           |       |  
|                                   |  |          |           |         |   |            |   |          |           |       |  

For
the year ended September 30, 2001:

|                                   |  | Healthcare |            | Banking |   | Retail  |   | Total |        
|---------------------------------- |  | ---------- | ---------- | ------- | - | ------- | - | ----- | -------
|Revenues                           |  | $          | 12,875,785 |         | $ | 386,835 |   | $     | 896,124
|Operating expense                  |  |            | 10,544,631 |         |   | 204,962 |   |       | 510,356
|Losses on portfolio receivables    |  |            |           |         |   | 241,381 |   |       |       
|                                   |  |            |            |         |   |         |   |       |        
|Operating income (loss)            |  | $          | 2,331,154  |         | $ | (59,508 | ) | $     | 385,768
|                                   |  |            |            |         |   |         |   |       |        
|Overhead & administrative expenses |  |            |            |         |   |         |   |       |        
|Depreciation & amortization        |  |            |            |         |   |         |   |       |        
|                                   |  |            |            |         |   |         |   |       |        
|Loss from operations               |  |            |            |         |   |         |   |       |        
|                                   |  |            |            |         |   |         |   |       |        

For
the year ended September 30, 2000:

|                                   |  | Healthcare |           | Banking |   | Retail   |   | Total |          
|---------------------------------- |  | ---------- | --------- | ------- | - | -------- | - | ----- | ---------
|Revenues                           |  | $          | 3,811,774 |         | $ | 731,736  |   | $     | 1,242,970
|Operating expenses                 |  |            | 2,706,443 |         |   | 660,225  |   |       | 886,317  
|Losses on portfolio receivables    |  |            |           |         |   | 341,645  |   |       |          
|                                   |  |            |           |         |   |          |   |       |          
|Operating income (loss)            |  | $          | 1,105,331 |         | $ | (270,134 | ) | $     | 356,653  
|                                   |  |            |           |         |   |          |   |       |          
|Overhead & administrative expenses |  |            |           |         |   |          |   |       |          
|Depreciation & amortization        |  |            |           |         |   |          |   |       |          
|                                   |  |            |           |         |   |          |   |       |          
|Loss from operations               |  |            |           |         |   |          |   |       |          
|                                   |  |            |           |         |   |          |   |       |          

Subsequent
to September 30, 2001, the Company sold its remaining portfolios and assets included in the Company's 1998 securitization. The terms of the sale included an immediate
payment of $100,000 and a contingency payment of up to $350,000. The contingent payment is dependent upon the success of the buyer in collecting the portfolio and therefore, we are unable at this time
to predict the timing of all or any of this payment. Collectively, the sales are not expected to have a material impact on our results of operations.

On
November 19, 2001, the Company entered into a secured line of credit, which permits borrowing up to one million dollars at the bank reference rate plus five percent. The line
expires on November 18, 2002.

F20

---

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