<PAGE>   1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 0-24696

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

           FLORIDA                                             59-3248917
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)

                             755 WEST BRANDON BLVD.
                             BRANDON, FLORIDA 33511
               (Address of principal executive offices) (Zip Code)

                                 (813) 661-9501
                (Issuer's telephone number, including area code)

       SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: NONE


             SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT:

        UNITS CONSISTING OF ONE SHARE OF COMMON STOCK, WITHOUT PAR VALUE,
                      AND ONE COMMON STOCK PURCHASE WARRANT
                                (TITLE OF CLASS)

                         COMMON STOCK, WITHOUT PAR VALUE
                                (TITLE OF CLASS)

                         COMMON STOCK PURCHASE WARRANTS
                                (TITLE OF CLASS)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                             Yes [ ]           No [X]

         Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained herein, 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. 

         Issuer's revenues for the fiscal year ended December 31, 1997 were
$9,952,550.

         As of March 31, 1998, there were outstanding 8,880,000 shares of Common
Stock, no par value. The aggregate market value of the voting stock held by
non-affiliates of the registrant based on the closing bid price reported on the
OTC Bulletin Board as of March 31, 1998 was $2,718,573.

                      DOCUMENTS INCORPORATED BY REFERENCE:

DOCUMENTS                                                    FORM 10-K REFERENCE
---------                                                    -------------------



            TRADITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):

                             Yes [ ]           No [X]

                               Page 1 of 71 Pages




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                           NATIONAL DIAGNOSTICS, INC.

                            FORM 10-KSB ANNUAL REPORT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                           PAGE NO.
                                                                                           --------
<S>       <C>                                                                              <C>
PART I
  Item 1  Description of Business...........................................................   3
  Item 2  Description of Property...........................................................  16
  Item 3  Legal Proceedings.................................................................  17
  Item 4  Submission of Matters to a Vote of Security Holders...............................  18

PART II
  Item 5  Market for Common Equity and Related Stockholder Matters..........................  18
  Item 6  Management's Discussion and Analysis or Plan of Operation.........................  19
  Item 7  Financial Statements..............................................................  25
  Item 8  Changes In and Disagreements with Accountants on Accounting and Financial
                  Disclosure................................................................  48

PART III
  Item 9  Directors, Promoters and Control Persons; Compliance with
                  Section 16(a) of the Exchange Act.........................................  49
  Item 10 Executive Compensation............................................................  50
  Item 11 Security Ownership of Certain Beneficial Owners and Management....................  51
  Item 12 Certain Relationships and Related Transactions....................................  52
  Item 13 Exhibits and Reports on Form 8-K..................................................  54
</TABLE>


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<PAGE>   3



                                     PART I

ITEM 1 -- DESCRIPTION OF BUSINESS

GENERAL

         National Diagnostics, Inc., its wholly-owned subsidiaries, SunPoint
Diagnostic Center, Inc. ("SunPoint"), National Diagnostics/Orange Park, Inc.
("Orange Park"), National Diagnostics/Riverside, Inc. ("Riverside"), Alpha
Associates, Inc. ("Alpha Associates") and Alpha Acquisitions Corp. ("Alpha
Acquisitions"), and Brandon Diagnostic Center, Ltd., a limited partnership of
which Alpha Associates and Alpha Acquisitions are the general and limited
partner, respectively, provide diagnostic imaging services through several
outpatient centers located in the State of Florida. Sundance Partners (a wholly
owned general partnership) owns the land and building associated with the
outpatient center leased to Orange Park. (As used herein, the term "Company"
refers to National Diagnostics, Inc., including its subsidiaries.) The Company's
principal facility is located in Brandon, just east of Tampa. This facility
accounted for 46% of the Company's net revenues in 1997. The SunPoint facility
is located in Ruskin, Florida. The Company acquired, through its Orange Park
subsidiary, substantially all of the assets of an existing mobile diagnostic
imaging business in greater metropolitan Jacksonville in February, 1995. In
August, 1995 the company opened in the Jacksonville area a third fixed site
facility. In September, 1995 the Company expanded its mobile facilities by
adding both a mobile MRI unit and mobile cardiology unit in the Jacksonville
area. In July 1996, the Company opened its fourth fixed site facility with its
Riverside facility in Jacksonville. This expansion from one facility to four was
made financially possible by the Company's initial public offering in September,
1994 and other credit arrangements.

         The Company provides full service diagnostic imaging services to
patients and physicians in a comfortable, service-oriented environment located
outside of an institutional setting. Diagnostic imaging services provided
include magnetic resonance imaging ("MRI"), computer tomography ("CT"),
ultrasound, nuclear medicine, general radiology and fluoroscopy, neurodiagnostic
testing, and mammography. The Company's diagnostic imaging procedures are
performed by trained radiologic technologists and board certified radiologists.
Medical services are provided at each facility by interpreting physicians, who
are board certified radiologists and members of physician groups with whom the
Company has entered into long-term contracts. The Company provides management,
administrative, marketing and technical services, as well as equipment and
facilities, to its interpreting physicians. The Company accepts Medicare,
Medicaid, Worker's Compensation and most commercial insurance. The Company has
contracted with many health maintenance organizations and preferred provider
organizations. In 1996 and 1997, the Company's total net revenues were
$8,877,000 and $9,942,000, respectively, reflecting approximately 52,000 and
60,000 respective diagnostic imaging procedures.

         The Company was incorporated in Florida in June of 1994. The Company's
executive headquarters are located at 755 West Brandon Blvd., Brandon, Florida
33511, and its telephone number is (813) 661-9501.

         On February 23, 1998, the Company entered into a definitive "Merger
Agreement", amended March 17, 1998, with American Enterprise Solutions, Inc.
("AES"). The Company filed Form 8-K on March 10, 1998 describing the merger
transaction. Upon merger, the separate existence of AES will cease and National
Diagnostics, Inc. being the surviving corporation, will change its name to
American Enterprise Solutions, Inc.





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         AES was founded in September, 1997, for the purpose of acquiring
seasoned and profitable high growth firms with operations and facilities to
create Community Healthcare Delivery Systems. These systems are designed to
provide comprehensive delivery of all healthcare services while electronically
interactively linking with AES's proprietary Internet/Intranet and virtual
network gateways. The network can link all of the healthcare industry's trading
partners, from patient/consumer/employees to the providers, payors, employers
and government agencies.

         AES consists of businesses acquired in the first and second quarter of
1998 which complements AES' goal to create numerous Community Healthcare
Enterprises (an organization that owns and operates a complete community wide
healthcare delivery system). These businesses include: a multi specialty and
primary care physician group; a behavioral and mental healthcare facility; a
provider of referral management services for physician groups and insurance
companies ; and a nationally known healthcare consulting firm specializing in
corporate reengineering, business development and finance.

         On March 30, 1998, Mr. Charles Broes and Mr. Cardwell C. Nuckols,
Ph.D., were appointed to the Company's Board of Directors. Mr. Broes and Dr.
Nuckols are CEO and Executive Vice President of AES. On March 31, 1998, Mr.
Broes and Dr. Nuckols were appointed as Officers of the Company in the capacity
as CEO and Secretary, respectively.


DIAGNOSTIC IMAGING SERVICES INDUSTRY

  Overview

         During the past ten years, the diagnostic imaging industry has
experienced substantial growth as well as a major shift from inpatient to
outpatient delivery of services. Due to the contrast and detail of a high
quality MRI scan, the use of MRI equipment frequently facilitates the
identification of disease and disorders of a patient and often reduces the
amount and cost of care needed to treat the patient and the need for certain
invasive procedures, like exploratory surgery. The number of MRI units in
operation has increased from fewer than 100 in 1984 to more than 4,800 in 1994.
This rapid growth resulted from increasing acceptance by physicians and patients
of MRI as well as an increasing need for MRI usage in imaging different body
organ systems and disease conditions. New software programs and hardware
capabilities, coupled with new contrast agents (chemicals administered to the
patient that enhance the signal generated by body tissues), are anticipated to
expand further the usage of the technology by physicians.

         In addition, inpatient health care cost containment pressures have led
to the growth of outpatient delivery of services. Prior to 1983, most imaging
services were delivered to patients in a hospital radiology department. In 1983,
the federal government instituted the Prospective Payments System, which limited
the amount paid by Medicare to hospitals for inpatient care for most categories
of diseases. This restrictive reimbursement environment was a prime factor in
the shift from inpatient to freestanding, outpatient imaging centers, since
hospitals became less likely to purchase or lease expensive diagnostic imaging
equipment.

         Ownership of outpatient diagnostic imaging centers remains highly
fragmented, with no dominant national provider. Most of the equity in outpatient
centers is owned by hospitals, independent radiologists, management companies or
other groups. This fragmentation provides the Company with potential acquisition
opportunities.


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  Equipment and Modalities

         Diagnostic imaging systems are based on the ability of energy waves to
penetrate human tissue and generate images of the body which can be displayed
either on film or on a video monitor. Imaging systems have evolved from
conventional x-rays to the advanced technologies of MRI, computerized
tomography, ultrasound, nuclear medicine, neurology and mammography. The
principal diagnostic imaging modalities used by the Company include the
following:

                  Magnetic Resonance Imaging. MRI is a sophisticated diagnostic
         imaging system that utilizes a strong magnetic field in conjunction
         with low energy electromagnetic waves which are processed by a
         dedicated computer to produce high resolution multiple images of body
         tissue. A principal virtue of MRI imaging is that atoms in various
         kinds of body tissue behave differently in response to a magnetic
         field, enabling the differentiation of internal organs and normal and
         diseased tissue. During an MRI procedure, a patient is placed in a
         large, cylindrical magnet. Multiple images to various planes and
         cross-sections can be created without moving the patient. The images
         can be displayed on a computer screen, stored within the computer, or
         transferred to film for interpretation by a physician and retention in
         a patient's file. Unlike computerized tomography and general radiology
         and fluoroscopy, MRI does not utilize ionizing radiation which can
         cause tissue damage in high doses. As with many other diagnostic
         imaging technologies, MRI is generally non-invasive.

                  Computerized Tomography. CT is used to detect tumors and other
         conditions affecting the skeleton and internal organs. CT provides
         higher resolution images than conventional x-rays, but generally not as
         well defined as those produced by MRI. During a CT procedure, a patient
         is placed inside a ring on which a rotating x-ray tube is mounted. A
         dedicated computer directs the movement of the x-ray tube to produce
         multiple cross sectional images of a particular organ or area of the
         body.

                  Ultrasound. Ultrasound has widespread application,
         particularly for procedures in obstetrics, gynecology and cardiology.
         Ultrasound imaging relies on the computer-assisted processing of sound
         waves to develop images of internal organs and the vascular system. The
         sound waves are generated and recorded by probes that are either passed
         over or inserted into the body. A dedicated computer processes sound
         waves as they are reflected by body tissue, providing an image that may
         be viewed immediately on a computer screen or recorded continuously or
         in single images for further interpretation.

                  Nuclear Medicine. Nuclear medicine is used primarily to study
         anatomy and metabolic functions. During a nuclear medicine procedure,
         short-lived radioactive isotopes are administered to the patient by
         ingestion or injection. The isotopes break down rapidly, releasing
         small amounts of radioactivity that can be recorded by a gamma or
         scintigraphic camera and processed by a computer to produce a flat
         image of various anatomical structures.

                  General Radiology and Fluoroscopy. The most frequently used
         type of imaging equipment, radiology uses "x-rays" or ionizing
         radiation to penetrate the body and record its images on film.
         Fluoroscopy uses a video viewing system for real-time monitoring of the
         organs being visualized.

                  Neurology. Neurological diagnostic testing, consisting of
         nerve conduction studies, electromyography, evoked-potentials and
         electroencephalography (EEG), is used for the evaluation of patients
         with suspected radiculophy of the cervical and lumbar nerves and
         diseases of the nervous system, such as multiple sclerosis (MS).
         Neurological diagnostic testing equipment is designed to assess

                                        5

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         the integrity, conduction ability and functioning of the nervous system
         through electro-physiological stimulation.

                  Mammography. Mammography is a specialized form of radiology
         equipment using low dosage x-rays to visualize breast tissue. It is the
         primary screening tool for breast cancer.


THE COMPANY'S GROWTH STRATEGY

         Due to the recency of the pending merger between AES and the Company,
the Company is not able to elicit the growth strategies for the numerous
businesses that will be part of the merger with AES. The focus will be on the
Company's Diagnostic Division as it is prior to the merger.

         The Company's strategy for growth involves increasing the revenues and
profitability of its existing facilities, establishing and developing additional
diagnostic imaging centers and acquiring existing imaging facilities in certain
target markets, as well as expanding its existing operations to include mobile
diagnostic imaging capabilities.

  Expansion of Existing Facilities.

         The Brandon facility is currently a full service imaging facility. In
1997, Brandon took delivery of a new non-surgical mammography biopsy unit to
expand the services offered in its Center for Women.

         The SunPoint Diagnostic Center is a full-service imaging facility, with
the exception of MRI. The Company intends to add MRI capabilities to the
SunPoint facility at such time as the demand for such services warrants the
acquisition of MRI equipment. See "The SunPoint Facility."

         In July of 1996, a new full service center "Riverside" was opened in
the Riverside area of Jacksonville, Florida. The new facility utilizes the
mobile MRI unit form Orange Park to offer MRI services.


  Center Development and New Center Acquisitions.

         The Company had deferred its external expansion in 1997, focusing more
directly on the continuing effort to build efficiencies and profitability into
existing new start ups. With the resources that will be available to the Company
as a result of the merger with AES, the Company intends, subsequent to the
merger, to embark on its external growth strategies in 1998. Due to the
synergies which will be experienced with other businesses in the AES fold, new
growth strategies will be developed which will include all other business merged
into the Company.

         The Company's external growth strategy includes the development and/or
acquisition of diagnostic imaging facilities in target areas identified by
management initially in the State of Florida, with the potential for expansion
to other regions in the United States where AES already has a presence.  In
seeking suitable locations for the development of new centers or the acquisition
of existing centers, the Company will focus primarily on demographic studies and
its analysis of local competition, physician referral patterns and imaging
services supply and demand. Also, the Company will focus on its ability to
either utilize the professional services of its existing interpreting physicians
to interpret test results or affiliate with other qualified interpreting
physicians.

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         Installation and maintenance costs on equipment can be substantial,
particularly with respect to MRI units. Consequently, new facilities initially
will include most or all of the modalities offered by the existing Brandon
facility, with the exception of MRI. MRI has historically accounted for
approximately 20-30% of the Company's revenues. MRI procedures are expensive to
perform and have historically generated high margins for the Company. Due to the
significant capital expenditure required to install and maintain MRI equipment a
minimum average number of procedures must be performed daily at each facility
offering MRI to cover fixed costs associated with MRI equipment. As a result,
the Company currently intends to perform all MRI procedures required by its
facilities not offering MRI directly either at the Company's nearest full
service facility or via a mobile MRI unit acquired by Orange Park. The Company
expects to provide MRI services in this manner until such time as management
determines that the demand for MRI procedures at a particular facility is at a
level that will generate revenue sufficient to cover fixed costs associated with
MRI equipment.

         The Company also believes that it can successfully acquire existing
imaging centers. Acquisition opportunities that were tied to the enactment of
federal and state laws and regulations restricting physician referrals to health
care facilities in which such physicians have a financial interest and limiting
permissible affiliations between tax exempt hospitals and "for profit"
outpatient medical centers have diminished. See "Business-Government
Regulation." The required divestitures of physician-owned centers have already
occurred. Nevertheless, management believes that acquisition opportunities
continue to exist due to the fragmented nature of the imaging center business.

         The Company believes that it can successfully integrate the operations
of its new facilities and any facilities that it chooses to acquire by
leveraging its existing corporate infrastructure. No assurances can be given,
however, that adequate financing will be available to fund the development of
this or any other new facilities.


  Increased Mobile Diagnostic Imaging Capabilities.

         The Company's growth strategy also includes expanding its mobile
diagnostic imaging capabilities. The Company's Orange Park facility currently
provides mobile ultrasound, mobile nuclear cardiology imaging, mobile MRI
services, and mobile neurological diagnostic imaging services.

         THERE CAN BE NO ASSURANCES THAT THE COMPANY CAN OR WILL SUCCESSFULLY
IMPLEMENT ITS CENTER GROWTH OR EXTERNAL GROWTH STRATEGIES.

  Imaging Equipment.

         The Company obtains its imaging equipment from large, well-established
companies, including Siemens Medical Systems Inc., Toshiba, Inc., Lo-Red Co. and
Raytheon, Inc. The Company is not dependent on any one supplier and believes
that it has satisfactory relationships with its suppliers.

         Equipment acquisition costs can vary dramatically, depending upon the
model and peripheral equipment acquired. The Company reviews the technological
capabilities of new product offerings in order to improve and upgrade equipment
when necessary. Currently, equipment costs range as follows:

<TABLE>
<CAPTION>
         EQUIPMENT                       PRICE RANGE
         ---------                       -----------
         <S>                       <C>           <C>       
         MRI                       $900,000  to  $1,700,000
         CT                         300,000  to     900,000
         Ultrasound                 100,000  to     250,000
         Nuclear Medicine           250,000  to     400,000
         Radiology                   40,000  to      75,000
         Fluoroscopy                200,000  to     350,000
         Mammography                 50,000  to      80,000
         Neurology                   25,000  to      60,000
</TABLE>

                                        7


<PAGE>   8

         Installation and maintenance costs on the equipment can be substantial,
particularly with respect to MRI units. Installation costs can range from
$35,000 to $125,000 for an MRI unit, depending on the particular installation
circumstances.

         The Company generally obtains financing for its equipment from lenders
and lessors, with the equipment and other assets serving as security for the
loans. Leases for smaller medical equipment average three years and leases for
larger medical equipment are for seven years. Certain of such loans are
personally guaranteed by Mr. Alliston and Mr. Baugh.

  Operations

         The Company provides diagnostic imaging services to patients referred
by physicians who are either in private practice or affiliated with managed care
providers or other groups. Patients are scheduled for an appointment, informed
of any medications needed for the test, and pre-qualified with respect to their
medical requirements and insurance coverage by Company personnel. Procedures are
designed to avoid the admission and administrative complexities of in-hospital
diagnostic imaging services. All of the Company's imaging services are performed
on an outpatient basis by trained medical technologists under the direction of
the interpreting physician. Following the diagnostic procedures, the images are
reviewed by the interpreting physicians, who prepare a report of these tests and
their findings. These reports are transcribed by Company personnel and then
delivered to the referring physicians. The interpreting physicians are board
certified specialists in radiology, nuclear medicine, nuclear cardiology or
neuroradiology, as appropriate. Such interpreting physicians are members of an
independent health care provider group with which the Company has entered into a
long-term contract, and are not employees of the Company. The Company is not
engaged in the practice of medicine.

         Typically, patients are charged an all-inclusive fee for the imaging
studies. The administrative staff is responsible for billing and collecting the
fee.

         The Company contracts for interpreting physician services for which
typically the interpreting physician receives a fixed fee or a fixed percentage
of monthly collections. The Company believes that the structure of its
compensation arrangement with its interpreting physicians encourages high
quality service and fairly compensates these physicians for the interpretation
services they provide. The Company's agreement with its interpreting physicians
is typically for a three-year term and requires each physician to obtain medical
malpractice insurance.


THE BRANDON, FLORIDA FACILITY

         The Brandon, Florida facility was established in 1991 as a full-service
diagnostic facility specializing in outpatient radiology. The Brandon facility
generally provides medical diagnostic services to the general population living
within approximately ten miles of Brandon, Florida. The Brandon, Florida area
population, currently in excess of 250,000, consists primarily of an expanding
base of middle income families and retirees. In 1996 and 1997, the Brandon
facility generated net revenues of approximately $4,900,000 and $4,600,000,
respectively, reflecting approximately 21,000 and 32,000 respective diagnostic
imaging procedures.

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         The Brandon facility currently has one unit for each of MRI, CT and
nuclear medicine and two units for each of mammography, radiology, ultrasound
and fluoroscopy.

         Annual expenses for equipment maintenance and repairs at the Brandon
facility were approximately $114,000 and $280,000 for the fiscal years ended
December 31, 1996 and December 31, 1997, respectively. The Company typically
enters into agreements with equipment manufacturers or other third parties for
equipment maintenance. In 1997, Brandon obtained maintenance contracts on
certain of its older equipment.

         Patients at the Brandon facility are invoiced in the name of Brandon
Diagnostic Center. The interpreting physician's P.A. with which the Company has
currently contracted for interpreting physician services at the Brandon facility
receives a fixed percentage fee for services performed.

         Brandon facility's interpreting physician is certified by the American
Board of Radiology. The interpreting physician's P.A. is responsible for
subcontracting with additional physicians to assure adequate coverage during
peak times, absences, etc. The Brandon facility has forty employees.

         The Brandon facility is open from 7:30 a.m. to 6:00 p.m. Monday,
Wednesday and Friday, 7:30 a.m. to 8:00 p.m. on Tuesday and Thursday, 8:00 a.m.
to 2:00 p.m. on Saturdays and on an as-needed basis on Sundays.


THE SUNPOINT FACILITY

         The Company, through its SunPoint subsidiary, opened its SunPoint
Diagnostic Center in Ruskin, Florida, approximately twenty miles south of
Brandon, in November, 1994. This facility is located near the Sun City Center
retirement community. The Ruskin area has a total population of approximately
45,000, including roughly 38,000 retirees. The SunPoint facility is a
full-service imaging facility, with the exception of MRI. It currently has one
unit for each of CT, ultrasound, nuclear medicine, mammography, radiology and
fluoroscopy. The equipment located at the SunPoint facility is obtained from the
same manufacturers as the Brandon facility equipment.

         Consistent with the Company's expansion strategy, the Company intends
to add MRI capabilities to the SunPoint Diagnostic Center only as the demand for
such services develops and warrants the acquisition of MRI equipment. Until such
time, all MRI procedures required by SunPoint facility patients will be
performed at the nearby Brandon facility. All SunPoint patients requiring MRI
procedures are offered a free shuttle service to and from the Brandon facility.

         The operational procedures at the SunPoint facility are virtually
identical to those described above under "Operations," the patients are invoiced
in the name of SunPoint Diagnostic Center. The SunPoint facility is staffed by
fifteen employees and one interpreting physician, who rotates with the other
interpreting physician serving the Brandon facility. The interpreting
physician's P.A. with which the Company has currently contracted for
interpreting physician services at the SunPoint Diagnostic Center receives a
fixed fee for services rendered.

         The SunPoint facility is currently open from 7:30 a.m. to 5:30 p.m.
Monday through Friday, and on an as needed basis on Saturdays.



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THE ORANGE PARK FACILITY

         In February, 1995, the Company, through its Orange Park subsidiary,
acquired substantially all of the assets of Medical Imaging Consultants, Inc.
and certain of its affiliates, providers of both mobile and fixed site
ultrasound and related diagnostic testing services in the cardiac, cerebral
vascular and neurophysiology areas.

         Orange Park currently provides mobile and fixed diagnostic services in
Clay, Duval, Nassau and St. Johns counties in northeastern Florida. Its
principal facility is located in Orange Park, Florida, where it has three mobile
units for neurology, two units for ultrasound, one each for nuclear cardiology
and MRI. All equipment at the Orange Park facility is either owned directly or
leased through an independent leasing company. The Orange Park facility became a
full service imaging facility, with its mobile facilities, by September, 1995.
The Company has one unit for each for CT, ultrasound, mammography, radiology,
and fluoroscopy at its Orange Park subsidiary. This mobile unit is used to
provide MRI services at Orange Park and any future facilities developed by the
Company in northeastern Florida. See "-The Company's Growth Strategy-Center
Development and New Center Acquisitions."

         Orange Park follows the same operational procedures as the Company's
other facilities, except that patients are invoiced directly in the name of
Orange Park. The Orange Park facility is currently staffed by twenty-eight
employees. All interpreting services are provided by eight interpreting
physicians who are members of an independent health care provider group with
which the Company has entered into a long-term contract. These physicians are
not employees of the Company and the Company is not engaged in the practice of
medicine. The interpreting physician group with which the Company has contracted
for interpreting physician services at the Orange Park facility receives a
monthly fee equal to 17% of the monthly collections.

         The Orange Park facility is currently open from 7:30 a.m. to 5:30 p.m.
Monday through Friday, and on an as-needed basis on Saturdays. In 1997, the
Orange Park facility was awarded the Certificate of Accreditation from the Joint
Commission of Accreditation of Healthcare Organizations.


THE RIVERSIDE FACILITY

         The Company, through its Riverside subsidiary, opened in July of 1996
the Riverside Diagnostic Center in the Riverside area of Jacksonville, Florida.
The facility is located in proximity of a thousand bed hospital in a residential
area of Jacksonville. The Riverside facility is a full-service imaging facility,
inclusive of mobile MRI services which it obtains from the Orange Park facility
(see Orange Park Facility). It currently has one unit each for CT, ultrasound,
nuclear cardiology, nuclear medicine and radiology and two units each for
mammography and fluoroscopy.

         Riverside follows the same operational procedures as the Company's
other facilities, except that patients are invoiced directly in the name of
Riverside. The Riverside facility is currently staffed by eleven employees. All
interpreting services are provided by a group of physicians who received a
percentage (15% of the first $200,000 and 20% thereafter) of monthly
collections.

         The Riverside facility is currently open from 7:30 a.m. to 5:30 p.m.
Monday through Friday. In 1997, the Riverside facility was awarded the
Certificate of Accreditation from the Joint Commission of Accreditation of
Healthcare Organizations.




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<PAGE>   11



CARDIOLOGY MOBILE SERVICES

         In January, 1995, the Company, through its cardiology subsidiary,
entered into an exclusive agreement with Diagnostic Cardiology Associates, an
established group of 18 cardiologists based in Jacksonville and other physician
groups in northeast Florida, to provide mobile nuclear cardiology imaging
services. The Company acquired a mobile unit and placed it into operation in
September, 1995. Since then the Company has expanded its operations to
Fernandina Beach, Lake City and Palatka, Florida. The Company will seek to enter
into similar arrangements with other groups of cardiologists, but no assurances
can be made that such opportunities exist or can be realized. In May 1996, the
wholly owned cardiology company was merged into Orange Park.

MARKETING

         The Company provides diagnostic imaging services to patients referred
by physicians who are either in private practice or affiliated with managed care
providers or groups. Consequently, the Company's marketing program focuses on
establishing and maintaining referring physician relationships by efficiently
providing needed medical services to patients of those physicians, and
maximizing reimbursement yields. The Company's marketing program targets
selected market segments consisting of local physicians who may have a need for
diagnostic imaging services. The Company utilizes a variety of marketing
techniques in its market areas to educate physicians in the availability and
capabilities of the various imaging technologies, including personal visits by
the Company's clinical coordinators to local physicians and their staffs, direct
mailings of marketing brochures and participation in seminars on recent
developments in diagnostic imaging and related technology.

         The Company's clinical coordinators seek to maintain the satisfaction
of referring physicians by frequent contact with them, both to ascertain the
physicians' needs and, when appropriate, to seek suggestions on how to improve
the Company's delivery of services. The Company continually seeks to improve the
quality of its services by encouraging interaction between referring physicians
and interpreting physicians. The Company has also developed a database
containing referring physician and patient information in order to more
effectively coordinate its marketing activities with respect to its referring
physicians. The Company has joined the Florida Imaging Network, Inc., an
association recently established to develop and operate a statewide diagnostic
imaging services network to interface with managed care providers in the State
of Florida. The Company believes that this will provide an additional method of
expanding its referral base.

REIMBURSEMENT, BILLING AND COLLECTION

         The Company charges patients a fee for each imaging study performed,
which is billed in the name of the applicable diagnostic center. The Company
generally accepts assignment by the patient of payment from insurers and is
reimbursed for services performed by payment, directly and indirectly, from
third-party commercial insurers, managed care organizations, government payors,
workmen's compensation and other sources. In many instances, the patient is
responsible for payment of a co-payment or deductible and, in some instances,
the patient remains responsible for payment of the entire fee. The extent to
which services provided by the Company are reimbursable depends upon a number of
factors, including the type of insurance coverage carried by the patient, the
type of imaging services provided to the patient, prevailing practices in the
relevant geographic area and the identity of the third-party payor.




                                       11

<PAGE>   12



         The following table sets forth the approximate percentages of
collections received during 1997 in each of the following categories:

<TABLE>
<CAPTION>
           PERCENT OF
             SOURCE                               COLLECTIONS
             ------                               -----------
         <S>                                      <C>
         Managed Care/HMO                             35%
         Private Insurance                            38
         Medicare/Medicaid                            16
         Private Pay                                   8
         Workmen's Compensation                        3
</TABLE>

         The Company maintains a competitive billing strategy based upon
evaluation of available pricing data. The Company maintains sufficient price
flexibility to enable it to compete with other MRI imaging services provided in
the local community.

         Obtaining the maximum amount of allowable reimbursement and collecting
receivables on a timely basis are critical to the Company's success and are a
priority of management. The Company has developed and is continuing to develop
systems to process claims. The Company endeavors to provide complete and
accurate claims data to the relevant payor sources to obtain the maximum amount
of allowable reimbursement and to accelerate the collection of accounts
receivable. Approximately eighteen of the Company's employees are involved in
reimbursement, billing and collection activities. There can be no assurance that
the Company will be successful with respect to the foregoing.

         Third-party payors, including Medicare, Medicaid and certain commercial
payors, have taken extensive steps to contain or reduce the costs of health
care. A significant change in coverage or a reduction in payment rates by
third-party payors could have a material adverse effect upon the Company's
business. In 1996 and 1997, approximately 0.8% and 0.3%, respectively, of the
Company's total revenues were derived from providing imaging services to
patients involved in personal injury claims. The Company sometimes experiences
significant collection delays in connection with these services due to the fact
that the Company may not be paid for its services until the underlying legal
action is resolved.

COMPETITION

         The outpatient diagnostic imaging industry is highly competitive. The
Company believes that its principal competitors are hospitals, independent or
management company-owned imaging centers, some of which are owned, in whole or
in part, by physician investors, and mobile diagnostic units. Some of these
competitors have greater financial and other resources than the Company. The
Company's competitors in the immediate Brandon area are a 120 bed hospital
providing full inpatient service and a new outpatient diagnostic center opened
in January of 1997. The Brandon facility has experienced a 7% decline in gross
revenues in 1997 compared to 1996 but is not able to determine if this is from
competitor pressures since its case load has continued to increase. The
Company's sole competitor in the Ruskin area is a 50 bed hospital also providing
full inpatient service. The Company has many competitors in the Jacksonville
area, including hospitals, independent or management company-owned imaging
centers and mobile diagnostic units, but, to the best of management's knowledge,
none of these competitors is a full modality center offering mobile and fixed
site diagnostic imaging services.



                                       12

<PAGE>   13



         The Company believes that as a result of its operating efficiencies, it
can provide outpatient diagnostic services more competitively than other local
providers. Principal competitive factors include quality and timeliness of test
results, type and quality of equipment, facility location, convenience of
scheduling and availability of patient appointment times. The Company may
benefit, or experience increased competition, to the extent proposed or future
regulations will reduce self referrals from physician investors and make their
referrals part of the market for which any center may compete. The Company
currently has no physician investors and, therefore, derives 100% of its
revenues from non-investor referrals.

GOVERNMENT REGULATION

         The health care industry is highly regulated at the federal, state and
local levels. Although the following is not an exhaustive discussion, it
summarizes the key regulatory factors that affect the Company's operations and
development activities:

         Certificates of Need and Licensing. Under Certificate of Need laws, a
health care provider is typically required to substantiate the need for, and
financial feasibility of, certain expenditures related to the construction of
new facilities, commencement of new services or purchases of medical equipment
in excess of statutory thresholds. The provision of outpatient health services,
including outpatient MRI, is exempt from Certificate of Need review in the State
of Florida. The operations of outpatient imaging centers are subject to federal
and state regulations relating to licensure, standards of testing, accreditation
of certain personnel and compliance with governmental reimbursement programs.
The Company is required to obtain and maintain general business licenses from
certain counties in which it operates centers, as well as licenses from the
State of Florida for the handling and disposal of radioactive materials used in
nuclear medicine procedures. Radioactive materials are currently delivered daily
to the Company's Brandon, SunPoint and Cardiology facilities. Medical waste
contaminated with radioactive material is placed in locked hazardous waste
containers and picked up daily for disposal by a licensed hazardous waste
vendor. The Company is subject to surprise inspection by nuclear inspectors.
Although the Company believes that it has obtained all necessary licenses, the
failure to obtain a required license could have a material adverse effect on the
Company's business. The Company believes that diagnostic testing will continue
to be subject to intense regulation at the federal and state levels and it
cannot predict the scope and effect thereof.

         Medicare/Medicaid Anti-Kickback Provisions. The Medicare/Medicaid
Anti-Kickback Statute (the "Anti-Kickback Statute") prohibits the offering,
payment, solicitation or receipt of any form of remuneration in return for the
referral of Medicare or Medicaid patients for any item or service that is
covered by Medicare or Medicaid. Violation of the Anti-Kickback Statute is
punishable by substantial fines, imprisonment for up to five years or both. In
addition, the Medicare and Medicaid Patient and Program Protection Act of 1987
(the "Protection Act") provides that persons guilty of violating the
Anti-Kickback Statute may be excluded from participating as providers or
suppliers in the Medicare or Medicaid programs. Investigations leading to
prosecutions and/or program exclusion may be conducted by the Office of the
Inspector General ("OIG") of the United States Department of Health and Human
Services ("HHS"), the United States Department of Justice and State of Florida
agencies.

         Under the Anti-Kickback Statute, law enforcement authorities, HHS and
the courts are increasingly scrutinizing arrangements between health care
providers and referral sources (such as physicians) in order to ensure that the
arrangements are not designed as a mechanism to exchange remuneration for
patient referrals. This scrutiny is not limited to financial arrangements that
involve a direct payment for patient referrals, but extends to payment
mechanisms that carry the potential for inducing Medicare or Medicaid referrals,
including situations where physicians hold investment interests in, or
compensation arrangements with, a health care entity to which such physicians
refer patients.

                                       13

<PAGE>   14



         Safe Harbor Regulations. The Protection Act directed the OIG to publish
regulations delineating health care payment practices that would not be subject
to criminal prosecution and would not provide a basis for program exclusion
under the Anti-Kickback Statute. In 1991, the OIG published final safe harbor
regulations that specify the conditions under which certain kinds of financial
arrangements, including (i) investment interests in public companies, (ii)
investment interests in small entities, (iii) management and personal services
contracts, and (iv) leases of space and equipment, will be protected from
criminal prosecution or civil sanctions under the Anti-Kickback Statute. The OIG
has stated that failure to satisfy the conditions of an applicable "safe harbor"
does not necessarily indicate that the arrangement in question violates the
Anti-Kickback Statute, but means that the arrangement is not among those that
the "safe harbor" regulations protect from criminal or civil sanctions under
that law.

         One provision of the Safe Harbor Regulations includes a public company
exception applicable to investment in the Company by referring physicians. The
Company currently does not qualify for this exception. A return on investment,
such as a dividend or interest, is not a prohibited payment if, within the
previous fiscal year or 12 month period, the public company possesses more than
$50 million in undepreciated net tangible assets which are related to the
furnishing of health care items and services and the Company meets all five of
the following standards:

         i)       Equity securities must be registered with the Commission under
                  15 U.S.C. 78l(b) or (g);

         ii)      The investment interest of an investor in a position to make
                  or influence referrals to, furnish items or services to, or
                  otherwise generate business for, the Company must be obtained
                  on terms equally available to the public through trading on a
                  registered national securities exchange or on Nasdaq;

         iii)     The Company or any investor must not market or furnish the
                  Company's items or services to passive investors
                  (non-management shareholders) differently than to
                  non-investors;

         iv)      The Company must not loan funds to or guarantee a loan for an
                  investor who is in a position to make or influence referrals
                  to furnish items or services to, or otherwise generate
                  business for the entity if the investor uses any part of the
                  loan to make the investment; and

         v)       The amount of payment to the investor in return for the
                  investment interest must be directly proportional to the
                  amount of the investor's capital investment.

         The Company does not meet the $50 million net tangible assets criterion
and, therefore, in order to avoid any issue as to fraud and abuse compliance, a
physician who owns any of the Company's securities might be prohibited from
making any patient referrals to the Company's diagnostic imaging facilities,
whether or not the remaining standards have been complied with.

         With respect to the arrangements between the Company and its
interpreting physicians, there is a safe harbor for personal service agreements
which requires that such arrangements be in writing and last for at least one
year, and that the compensation paid to the physicians be based on the fair
market value of the professional services they provide and not on any referrals
or business generated between the parties. To the extent that the compensation
arrangements with the interpreting physicians do not fit within all of the
requirements of the safe harbor, they are not per se illegal, but in order to
avoid all risk of fraud and abuse issues, the interpreting physicians would not
be permitted to make any referrals to the Company for imaging services.



                                       14

<PAGE>   15



         Florida Prohibition of Referrals. On March 13, 1992, the Florida
Legislature passed the "Patient Self-Referral Act of 1992" (the "1992 Act"),
which took effect April 9, 1992. The Act, as amended in 1993, prohibits
physicians' referrals of patients for designated health services, including
diagnostic imaging services, to facilities in which they own an investment
interest. Therefore, physicians who own Common Shares or Common Share Purchase
Warrants are prohibited from making any patient referrals to the Company's
diagnostic imaging facilities.

         Medicare Reimbursement. Diagnostic imaging services provided to
Medicare beneficiaries are reimbursed based on Medicare's Resource-Based
Relative Value Scale, which sets limits on reimbursement for both the technical
and physician components of these services. There is no guarantee that the
amount paid by Medicare, either now or in the future, will be adequate to meet
the Company's costs of providing the imaging services. There is also no
guarantee that the U.S. Government will not enact law or adopt regulations
restricting the ability of free-standing diagnostic imaging centers from
providing services to Medicare or Medicaid patients, although the Company is
currently unaware of any proposal to do so. In 1998, the Medicare allowable
increased approximately 7%.

         Omnibus Budget Reconciliation Act of 1993. As part of the Omnibus
Budget Reconciliation Act of 1993, Congress passed the "Stark II" law, which
prohibits a physician from referring Medicare and other federal program patients
for designated health services, including imaging services, to certain entities
with which the physician or a member of his or her immediate family has a
financial relationship. A "financial relationship" would include either an
ownership interest in, or compensation arrangement with, the entity. The Stark
II law has been incorporated into Section 1877 of Title XVIII of the Social
Security Act. The Company, as a provider of radiology and other diagnostic
services, would be such an entity, and therefore, a physician with such a
financial relationship with the Company could not make referrals of Medicare or
Medicaid business to the Company, unless the relationship falls within one of
the limited exceptions offered by Stark II. These limitations became effective
January 1, 1995.

         Stark II provides an exception for referrals by a physician who, or a
member of whose immediate family, owned investment securities in a public entity
which may be purchased on terms generally available to the public, but only if
the entity met the following criteria: (i) its securities are listed on a
recognized stock exchange or traded on Nasdaq; and (ii) the entity has at the
end of its most recent fiscal year or on average during the previous three
fiscal years, stockholder equity exceeding $75 million. The Company does not
meet these criteria and, therefore, a physician who owns Common Shares or Common
Share Purchase Warrants of the Company is prohibited from making Medicare and
other federal program patient referrals to any of the Company's diagnostic
imaging facilities. The Company also is prohibited from presenting a claim for
services rendered in connection with such a prohibited referral. It would not be
necessary for the Company to have knowledge that the referral was unlawful in
order for there to be a violation for which the penalty could be denial of
payment for the claim or a refund to the payer. Penalties of up to $15,000 for
each violation and exclusion from Medicare and other programs could be assessed
if a bill is presented and the entity knows or should have known that it is the
result of a prohibited referral.

         Physicians with compensation arrangements with the Company, such as its
interpreting physicians, also are subject to the foregoing referral prohibition,
unless the arrangement fits within a Stark II exception. Stark II permits
personal arrangements between such physicians and the Company if various
criteria are met, including that the arrangement is set out in writing, has a
duration of at least one year and the compensation paid to the physicians
represents the fair market value of the professional services provided and does
not take into account the volume or value of any referrals or other business
generated between the parties. Stark II also specifically states that a
prohibited referral does not include a request by a radiologist for diagnostic
radiology services if such services are furnished by or under the supervision of
that radiologist.

                                       15

<PAGE>   16



         To its knowledge the Company currently does not have any physicians who
are significant shareholders and, therefore, the Company's revenue growth has
been derived entirely from non-investor physician referrals. In the event the
Company has physician shareholders in the future federal and state law will
prohibit referrals by such investors to any of the Company's imaging centers.

         As a provider of diagnostic services, the Company is required to report
the names and unique identification number of physicians who, or whose immediate
family members, have an investment interest in or compensation arrangement with
the Company. The Company's current shareholders are not physicians and,
therefore, do not provide referrals in potential violation of the foregoing
provisions. In the future, however, many of the Company's Common Shares or
Warrants may be held by physicians or their immediate family members or in
"street name", and therefore, not readily subject to discovery. Management
believes that monitoring of such ownership would be extremely difficult.
However, management is investigating methods of minimizing its exposure to
inadvertently accepting a prohibited referral. Management will also assess and
monitor its compensation arrangements with physicians.

         Although the Company believes that it is in material compliance with
all applicable federal and state laws and regulations, there can be no assurance
that such laws or regulations will not be enacted, interpreted or applied in the
future in such a way as to have a material adverse impact on the Company, or
that federal or state governments will not impose additional restrictions upon
all or a portion of the Company's activities, which might adversely affect the
Company's business.

EMPLOYEES

         As of March 24, 1998, the Company had 118 employees (all full time),
including 2 executive officers, 73 administrative personnel, 2 sales and
marketing person and 41 technical personnel. The Company is not a party to any
collective bargaining agreement and considers its relationship with its
employees to be good.

INSURANCE

         The Company carries workmen's compensation insurance, comprehensive and
general liability coverage, fire and allied perils coverage in amounts deemed
adequate by management. The Company is not engaged in the practice of medicine
and, therefore, does not carry medical malpractice insurance. See "Risk
Factors." There is no assurance that potential claims will not exceed the
coverage amounts, that the cost of coverage will not substantially increase or
require the Company to insure itself or that certain coverages will not be
reduced or become unavailable. The Company also requires that physicians
practicing at the imaging centers carry medical malpractice insurance to cover
their individual practices. The interpreting physicians are responsible for the
costs of this insurance.


ITEM 2 -- DESCRIPTION OF PROPERTY

         The Company's executive office and its primary diagnostic facility are
located in Brandon, Florida and occupy approximately 11,325 square feet of
space. The Company entered into a lease with respect to such facilities on
September 1, 1994, expiring August 31, 1997, which is followed by a renewal
option of five years. The Company exercised its option to renew and incurred,
pursuant to the lease agreement, a one-time 10% escalation upon exercise of the
renewal option. The new lease consolidated prior leases pertaining to the
Brandon facility's then existing space and provided additional space to
accommodate the Company's Center for Women.



                                       16

<PAGE>   17



Under both prior leases and its existing lease, the Company paid an aggregate of
approximately $133,000 (including common area maintenance and real estate taxes)
in fiscal 1997 for space at such facility. Pursuant to the lease terms, the
annual rental for the Brandon facility is subject to an annual escalation of up
to four percent based upon the Consumer Price Index.

         The Company entered into a month to month lease for 1,500 square feet
of office space in Jacksonville to serve as the Company's northeast Florida
regional office. Annual rent approximates $18,000. The lease for this space is
with Ronald Baugh, the President and Chief Operating Officer of Orange Park. The
office was closed in March, 1998.

         The Company also has entered into a lease relating to its 6,390 square
foot SunPoint facility in Ruskin, Florida. The initial term of the Ruskin lease
is five years, beginning September 1, 1994, with one five year renewal option.
Base rental payments (excluding common area maintenance and real estate taxes)
under the lease was approximately $23,000 in 1995 and $48,000 annually
thereafter. Pursuant to the lease terms, the annual rental for the Ruskin
facility is subject to a four percent annual escalation after 1996. Rent expense
with common area maintenance approximated $62,000 in 1997.

         The Orange Park mobile operations and fixed site facility are based in
a 5,100 square foot medical building located in Orange Park, Florida. The
facility is owned by Sundance Partners, a Florida general partnership which is
owned 100% by the Company. A triple net lease was entered into with an initial
term of ten years, beginning April 1, 1995. Base rental payments under the lease
are approximately $ 44,000 annually. Rent expense for 1997 approximated $50,000
which is eliminated upon consolidation.

         The Company entered into a triple net lease for its Riverside facility
(which opened in July of 1996) with Sundance Partners II, a Florida general
partnership in which the general partners are officers/directors and majority
shareholders of the Company. The facility is a newly constructed 7,100 square
foot stand alone medical center constructed to Company specifications. The lease
has an initial term of five years with a one time renewal option for five more
years. Base rental payments are $110,050 annually. The base rent shall escalate
up each year by $.25 per square foot. Rent expense for 1997 approximated
$117,000.

         The Company believes its present and anticipated leased facilities to
be in excellent condition and suitable for their intended operations.


ITEM 3 -- LEGAL PROCEEDINGS

         In December, 1995 the physician group which contracted with Brandon and
SunPoint for radiology readings terminated the contract. On February 9, 1996 the
physician group filed a suit entitled East Pasco Radiology Associates, P.A. vs.
Brandon Diagnostic Center, Ltd., and SunPoint Diagnostic Center, Inc. in the
Hillsborough County Florida Circuit Court against the Company alleging the
centers materially breached the contract by failing to pay physician fees timely
and incorrectly billing certain procedures. The physician group sought payment
for services rendered (approximately $178,000) and lost profits (approximately
$850,000). In February of 1997, the court denied the claim for lost profits and
entered an award in favor of the physician group relating to services rendered.
The Company adequately reserved for the claim for services in 1995 and satisfied
the judgement in February of 1997. Subsequently, a motion by the physicians for
a rehearing was denied. The physicians filed a notice of appeal in the District
Court of Appeal, Second District of Florida, for the lost profits claim in
April, 1997. The appeal was denied in January, 1998.



                                       17

<PAGE>   18



         On March 10, 1995 legal action was instituted against A.T. Brod & Co.,
Inc. (a national stock brokerage firm) by a terminated employee of A. T. Brod &
Co., Inc ("A.T. Brod"). A. T. Brod was a major market maker for National
Diagnostic, Inc. stock. The Company was named in the suit entitled James I.
Blackey vs. A.T. Brod & Co., Inc., Arthur M. Stupay, Jugal Taneja, R.K. Khosla,
Bancapital Investment Corporation, and National Diagnostics, Inc. pending the
Supreme Court of the State of New York, County of Erie, Index Number I-1995-
2249. Mr. J. Taneja was Chairman, Chief Executive Officer and Director of A. T.
Brod and the Company. Mr. Taneja resigned as Chairman and all offices of the
Company on January 19, 1998. The action alleges wrongful discharge, breach of
contract, deformation of character, conspiracy and tortious interference with a
contract arising out of the alleged wrongful termination of the plaintiff by
A.T. Brod and seeks compensatory and punitive damages of $2,830,000. In April of
1997 the Company reached a settlement for $5,000 which has been fully paid by
the Company.


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

         No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1997.


                                     PART II

ITEM 5 -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         From October 12, 1994 through August 18, 1997, the Company's Common
Shares had been traded separately in the Nasdaq SmallCap Market under the symbol
NATD. Since August 18, 1997 the Company's Common Shares have been traded
separately on the Over The County Bulletin Board. The following table sets forth
the high and low bid prices for Common Shares as reported by Nasdaq for the
periods indicated. These prices are not necessarily indicative of prices at
which actual buy and sell transactions could occur.

<TABLE>
<CAPTION>
                                                       HIGH               LOW
                                                       ----               ---
<S>      <C>                                          <C>               <C>
1994

         Fourth Quarter (from October 12)             $4-3/4            $3
1995

         First Quarter                                $6-1/4            $1-7/8
         Second Quarter                               $4                $1-1/2
         Third Quarter                                $1-7/8            $1
         Fourth Quarter                               $3-1/2            $1-11/16
1996
         First Quarter                                $3-3/8            $2-5/16
         Second Quarter                               $4-1/2            $2-1/2
         Third Quarter                                $4                $2-1/2
         Fourth Quarter                               $2-3/4            $1-11/16
1997
         First Quarter                                $2-7/16           $1-1/4
         Second Quarter                               $1-41/64          $0-13/6
         Third Quarter                                $1-7/8            $0-5/8
         Fourth Quarter                               $0-30/32          $0-14/32
</TABLE>


                                       18

<PAGE>   19



         On March 24, 1998, the closing bid quote for the Common Shares was
$0.9375 per share, and there were 32 holders of record of Common Shares. The
majority of over 280 individual shareholders held their stock in a "street
name".

         The Company has not paid cash dividends on its Common Shares and does
not anticipate doing so in the foreseeable future. The Company intends to retain
earnings, if any, for future growth and expansion opportunities. Payment of cash
dividends in the future, as to which there can be no assurance, will be
dependent upon the Company's earnings, financial condition, capital requirements
and other factors determined to be relevant by the Board of Directors.


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

         The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
Company's audited consolidated financial statements included elsewhere herein.
Due to the Company's financial operating results and condition which has
resulted in the Company being in default of its major lease and loan agreements,
our independent certified public accountants have qualified their accountants'
report dated April 30, 1998, on the Company's 1997 financial statements as to a
going concern uncertainty. The following commentary within "Management
Discussion and Analysis" addresses the Company's operations for 1997 and its
plan to improve future results. The reader should also refer to Note 2l of the
audited financial statements.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996.

         The following table sets forth selected operating results as a
percentage of net revenues for 1997 as compared to 1996.

<TABLE>
<CAPTION>
                                    FISCAL 1997    FISCAL 1996
                                    -----------    -----------
<S>                                 <C>            <C>   
Net Revenue                             100.0%        100.0%
Direct Operating Expenses                53.6          54.6
General and Administrative Expense       44.3          40.3
Depreciation and Amortization            14.5          13.6
Operating loss                          (12.5)         (8.6)
Interest                                  7.0           6.3
Other Income                              0.2            .9
Income Taxes (benefit)                      0             0
Net Loss                                (19.2)        (14.0)
</TABLE>

         Net revenues for fiscal 1997 were $9,942,000 as compared to $8,877,000
for fiscal 1996, representing an approximately 12% increase. This increase was
primarily attributable to relatively new start up facilities and an increase in
the volume of procedures performed at these facilities. Orange Park mobile
operations started up in February 1995, opening a fixed site facility in August;
and in September a mobile MRI facility and a mobile cardiology unit were placed
in service. Riverside operations started up in July, 1996. The start up
facilities accounted for approximately $1,171,000 of the increase in revenues.
The Brandon facility decreased its revenues $334,000 or approximately 7% to
$4,593,000 in 1997. SunPoint increased its revenues $228,000 or approximately
18% to $1,505,000 in 1997.



                                       19

<PAGE>   20





         Direct operating expenses increased approximately 10% to $ 5,331,000
for 1997 from $4,850,000 for 1996. This increase is a direct result of the
increased number of diagnostic procedures performed in 1997 compared to the
preceding year. Direct costs as a percentage of net revenue decreased
approximately 1% from the preceding year. This is attributable to various costs
that do not vary proportionately with net revenue.

         General and administrative expenses increased approximately 23% to
$4,406,000 for 1997 as compared to $3,576,000 for 1996. This increase was
primarily attributable to the addition of the Riverside facility which completed
its first full year of operation and personnel and the related payroll and
related benefit costs associated with such personnel. Such personnel costs
increased approximately $462,000 to $2,448,000 inclusive of executive
compensation. The personnel were added in response to the increased volume of
procedures performed. General and administrative expenses also increased because
of current operating expenses for start-up operations relating to the addition
of Riverside (an increase of $180,000 exclusive of personnel related costs).

         Depreciation (depreciation expense approximating $1,319,000) and
amortization increased 19% to $1,445,000 in 1997 as compared to $1,210,000
during 1996. The dollar increase was principally attributable to the acquisition
of new equipment for the start-ups and amortization (approximately $60,000) of
previously capitalized start-up costs which are amortized over 12 months
commencing with the date of first patient services.

         Interest expense increased to $695,000 in 1997 from $564,000 in 1996 as
a result of additional financing for equipment acquisitions and working capital.

         The increase in net revenues was offset by a greater increase in
expenses resulting in a net loss of $1,910,000 for 1997 compared to a net loss
of $1,242,000 in 1996. This is primarily attributable to the start up operations
which bear the costs of a fully operational diagnostic facility while building
its patient and referring physician base from day one. Orange Park in its second
full year of operation has a loss of $ 660,000. Riverside in its first full year
of operation has a loss of $635,000. Revenues increased steadily; however, the
ramp up of revenues for the new starts did not meet the Company's expectations.
The Company has responded in the last quarter of 1997 and first quarter of 
1998 by realligning and terminating personnel. 

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995.

         Net revenues for fiscal 1996 were $8,877,000 as compared to $6,233,000
for fiscal 1995, representing an approximately 42% increase. This increase was
primarily attributable to new start up facilities and an increase in the volume
of procedures performed at pre-existing facilities. Orange Park mobile
operations started up in February 1995, opening a fixed site facility in August;
and in September a mobile MRI facility and a mobile cardiology unit were placed
in service. Riverside operations started up in July, 1996. The start up
facilities accounted for approximately $1,344,000 of the increase in revenues.
The Brandon facility increased its revenues $1,005,000 or approximately 26% to
$4,927,000 in 1996. SunPoint increased its revenues $314,000 or approximately
30% to $1,276,000 in 1996.

                                       20

<PAGE>   21



         The Company's net accounts receivable increased $630,000 to $2,131,000
from $1,501,000 at December 31, 1996 and 1995, respectively. Approximately 52%
of this increase is the direct result of the Company's start up operations
inclusive of the Orange Park Center opened in August, 1995. The cash position of
the Company decreased to $104,000 from $128,000 at December 31, 1996 and 1995,
respectively.


         The following table sets forth selected operating results as a
percentage of net revenues for 1996 as compared to 1995.

<TABLE>
<CAPTION>
                                       FISCAL 1996    FISCAL 1995
                                       -----------    -----------
<S>                                    <C>            <C>   
Net Revenue                               100.0%         100.0%
Direct Operating Expenses                  54.6           56.0
General and Administrative Expense         40.3           42.3
Depreciation and Amortization              13.6           14.2
Operating loss                             (8.6)         (12.6)
Interest                                    6.3            5.3
Other Income                                0.1            1.7
Income Taxes (benefit)                        0           (2.9)
Net Loss                                  (14.0)         (13.3)
</TABLE>

         Direct operating expenses increased approximately 38% to $ 4,850,000
for 1996 from $3,495,000 for 1995. This increase is a direct result of the
increased number of diagnostic procedures performed in 1996 compared to the
preceding year. Direct costs as a percentage of net revenue decreased
approximately 2% from the preceding year. This is attributable to various costs
that do not vary proportionately with net revenue. Rents increased approximately
2% as a percent of revenues primarily from the costs associated with the
operating lease for the Orange Park mobile MRI which completed its first full
year of operation. In addition, radiology reading fees as a percent of net
revenue decreased approximately 3% due to the more favorable contracts the
Company entered into for 1996; wages decreased approximately 1% as a percent of
net revenue due to increased efficiencies.

         General and administrative expenses increased approximately 35% to
$3,576,000 for 1996 as compared to $2,635,000 for 1995. This increase was
primarily attributable to the addition of personnel and the related payroll and
related benefit costs associated with such personnel. Such personnel costs
increased approximately $631,000 to $1,986,000 inclusive of executive
compensation. The personnel were added in response to the expansion of
facilities and increased volume of procedures performed. Executive compensation
increased from approximately $468,000 in 1995 to $555,000 in 1996 as a result of
the employment of two additional executives in 1995 receiving their first full
year of salary in 1996. General and administrative expenses also increased
because of current operating expenses for start-up operations relating to the
addition of Riverside (an increase of $137,000 exclusive of personnel related
costs).

         Depreciation (depreciation expense approximating $1,085,000) and
amortization increased 36% to $1,210,000 in 1996 as compared to $890,000 during
1995, while decreasing as a percentage of net revenue. The dollar increase was
principally attributable to the acquisition of new equipment for the start-ups
and amortization (approximately $50,000) of previously capitalized start-up
costs which are amortized over 12 months commencing with the date of first
patient services.

         Interest expense increased to $564,000 in 1996 from $334,000 in 1995 as
a result of additional financing for equipment acquisitions and working capital.

                                       21

<PAGE>   22



         The increase in net revenues was offset by a greater increase in
expenses resulting in a net loss of $1,242,000 for 1996 compared to a net loss
of $835,000 in 1995. This is primarily attributable to the start up operations
which bear the costs of a fully operational diagnostic facility while building
its patient and referring physician base from day one. Orange Park in its first
full year of operation has a loss of $ 898,000. Riverside in its six months of
operation has a loss of $511,000. Revenues increased steadily; however, the ramp
up of revenues for the new starts did not meet the Company's expectations. The
Company has responded in the first quarter of 1997 by terminating certain
management and executive personnel and placing additional emphasis on marketing
for the new start ups. The Company estimates this will save approximately
$150,000 in executive compensation. Additionally, the Board has acted effective
of January 1, 1997 to eliminate C.E.O. and C.O.O. bonuses (in the 1996 this
approximated $136,000) until the Company becomes profitable for two consecutive
quarters.

Liquidity and Capital Resources

         Medical equipment, capital improvements, acquisitions and new center
development historically have been funded through third-party capital lease and
debt obligations and internally generated cash flow. The leases are generally
secured by the equipment, and sometimes other assets, of particular facilities.
Interest rates in connection with the leases and borrowing range from fixed
rates of up to 14.5% to a variable rate equal to the bank prime rate, plus 1 to
2%. The Company at December 31, 1997 was, and is at March 31, 1998, in default
of its capital lease obligations due to late payments of approximately $124,000
and $418,000, respectively, as a result of its liquidity problems discussed more
fully below. Generally, while in default the lessor may accelerate the lease
obligation (at December 31, 1997 total long-term portion of all leases prior to
reclassification to current liabilities, approximated $2,446,000). The Company's
major lessor has been cooperating and working with the Company during the period
of delinquency and has refrained from exercising its rights under default.
Meetings and discussions are expected to be concluded in May of 1998 to arrive
at a solution to the delinquency under the lease agreements. The other remaining
lessors (approximately 17% of the total lease obligations outstanding at
December 31, 1997) have been cooperating with the Company, generally allowing
not more than 60 days past due on lease payments. There is no assurance the
Company will be successful in achieving these goals.

         Capital expenditures, including capital lease obligations, for the
years ended December 31, 1997 and 1996 totaled approximately $539,000 and
$2,930,000, respectively.

         In October 1997, the Company refinanced with HealthCare Financial
Partners, Inc. ("HCFP", a lender specializing in medical receivables), its
existing $2,000,000 line of credit previously financed with DVI Business Credit
Corporation ("DVI"). An additional term loan for $235,000 calling for monthly
installments of $9,792 with interest was also financed by HCFP. The lender has a
first security interest on all accounts receivable and the term loan is
personally guaranteed by the principals. Interest is at prime plus 2.0%. Initial
proceeds from the loans went to pay off $1,224,348 of the existing line of
credit with DVI and approximately $333,000 went toward arrearages of a work out
agreement with the Company's major lessor, which left approximately $136,000 to
fund current operations. At year end the Company had drawn approximately
$136,000 in excess of its borrowing base for the line with a loan balance
approximating $1,309,000. The Company was at December 31, 1997 in technical
default of a loan covenant due to the Company's stockholder deficit exceeding
$500,000. However, this has been cured with the infusion of captial (see below)
in March, 1998. At year end the term loan approximated $220,000. HCFP has
allowed the Company to make daily payments of approximately $4,000 toward
reducing the overdraw and will begin reducing the term loan upon satisfaction of
the overdraw. At May 7, 1998 the over draw had been paid and the line balance
approximated $1,256,000. The term loan balance at May 7, 1998 approximated 
$210,000. 

                                       22


<PAGE>   23



         In February of 1997 the Company settled its litigation with its prior
radiologists (see Item 3-Legal Proceedings). The settlement plus legal fees
approximated $205,000 which were paid by the Company. In March of 1997, the
Company borrowed $125,000 from a related party corporation (majority owned by
Messrs., Taneja and Alliston). The proceeds were used to pay property taxes. The
loan balance at year end is $62,500 and is due on demand. It is expected to be
paid out of receipts from overdue providers payments.

         Due to the rapid expansion of facilities and increases in additional
personnel and related costs the Company has continued to experience difficulty
in meeting timely its current obligations to its lessors (discussed above) and
trade creditors. At year end and as of March 25, 1998, the Company has past due
payables in the amount of $1,294,000 and $1,596,000, respectively. Most of the
vendors have accepted late payments. However, certain vendors will ship only on
a cash on delivery basis. The Company has been able to operate to date with no
known lost revenues.

         In 1997 the Company reduced its net cash by $104,000. Operations
contributed the total cash increases of $426,000. Investing for capital assets,
primarily equipment, utilized approximately $245,000, net financing activities
used approximately $285,000. More than $1,114,000 was used in debt retirement of
long-term debt and capital lease obligations. Equipment acquired through capital
leasing approximated $274,000.

         The Company's net accounts receivable decreased $72,000 to $2,059,000
from $2,131,000 at December 31, 1997 and 1996 respectively. This is the result
of additional collection efforts made to collect receivables and an adjustment 
to reserves for approximately $316,000 for older accounts receivable deemed
uncollectable. 

         In March of 1998 the Company entered into a private placement Stock
Purchase Agreement with AES.  The Company issued 500,000 shares of Series A
Preferred Stock in exchange for 8,000,000 common shares of Halis,  Inc.
(OTCBB:HLIS) held by AES and valued at $2,000,000.  This value was based upon
the market value at the date of exchange less a discount due to, among other
things, the exchange being a large block of Halis, Inc. common stock.  The
Company, at present, intends to utilize a major portion of the Halis, Inc.
securities as collateral for securing debt financing and obtaining extended
loan or lease terms for existing obligations.  The remaining Halis, Inc.
securities may be sold to provide cash if needed.  Currently, the Company has
not determined the time frame required to sell the securities nor the selling
price that would be realized upon sale of the Halis, Inc. securities.
Therefore, the amount available for potential future cash needs is not known at
this time.

          Five hundred thousand shares of Series A Preferred Stock of the
Company were issued with voting rights of eight votes per preferred share and
conversion rights at the rate of 44.11 shares of NDI common stock per preferred
share. In March of 1998, AES exercised its right to convert 131,185 shares of
the Company's Preferred Stock into 5,786,570 shares of Common Stock. This
effectively gave AES 65% of the voting rights for the Company's Common Stock.
Concurrent with the merger with AES the Board will call for all the preferred
shares issued to be converted into common stock. Upon completion of the merger
NDI "old" shareholders (those of record before the Preferred Stock Issue and
merger) will effectively hold a 12.3% interest in ("new") NDI common stock after
the merger. AES "old" shareholders effectively hold a 87.7% interest in the new
NDI common stock after the merger.

         The Company expects to implement additional financial and operational
strategies it believes will enhance stockholder value. Due to the recency of the
pending merger, details are not available. However, the Company believes debt
re-alignment, equipment refinancing, operational efficiencies, consolidation,
management re-alignment, capital infusion alternatives which may include selling
additional stock, acquisitions, and new start ups will all play a role in making
NDI a leader in the medical community. These is no assurance that these goals
will be met.

          The Company's determination whether to proceed with new facilities in
Florida or elsewhere in the United States will depend on management's
consideration of such factors as (i) the demographics of a particular area, (ii)
competition from other diagnostic service providers in such area, (iii)
physician referral patterns, (iv) the mix of managed care providers,
Medicare/Medicaid patients and patients insured by commercial insurance
carriers, (v) estimates of potential sales in relation to the capital investment
required to establish a facility, (vi) the availability of commercial lease
property for a start-up facility, and (vii) financial analysis of potential
acquisition targets.

                                       23


<PAGE>   24




         The Company has over the last few years experienced increased pressures
on reimbursement from third parties. The Company expects such pressures to cause
reduced pricing in the aggregate for diagnostic procedures in the future. Due
primarily from the Company's revenue mix the effects of reduced pricing have
been minimized. Approximately 49% of the company's revenue has been derived from
private insurance carriers, individuals, worker's compensation and other sources
that have not experienced reimbursement pressures characteristic of managed care
providers, Medicare and Medicaid.

Seasonality

         The Company, in prior years, has experienced an 8 to 12% decrease in
revenues during the third quarter of the fiscal year due to reduced activity
during the summer months. This trend was not evident in 1996 or 1997 due to the
upward trend for services experienced in the new start ups.

Effects of Inflation

         The impact of inflation and changing prices on the Company has been
primarily limited to salary, medical and film supplies and rent increases and
has not been material to the Company's operations to date. Management is aware
of increased inflationary expectations and realizes that the Company may not be
able to raise the prices for its diagnostic imaging procedures in an amount
sufficient to offset inflation. The Company, however, does believe that this can
be offset by increased volume.

New Accounting Pronouncements

SFAS No. 130, Reporting Comprehensive Income, is effective for fiscal years
beginning after December 15, 1997. This Statement establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. The new rule requires that the Company
(a) classify items of other comprehensive income by their nature in a financial
statement, and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet. The Company plans to adopt SFAS No. 130 in 1998
and expects no material impact to the Company's financial statement
presentation.

SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, is effective for fiscal years beginning after December 15, 1997.
This Statement supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise, and amends SFAS No. 94, Consolidation of All Majority-Owned
Subsidiaries. This Statement requires annual financial statements to disclose
information about products and services, geographic areas and major customers
based on a management approach, along with interim reports. The management
approach requires disclosing financial and descriptive information about an
enterprise's reportable operating segments based on reporting information the
way management organizes the segments for making business decisions and
assessing performance. It also eliminates the requirement to disclose additional
information about subsidiaries that were not consolidated. The Company plans to
adopt SFAS No. 131 in 1998 with impact only to the company's disclosure
information and not its results of operations.

The AICPA's Accounting Standards Executive Committee has issued SOP 98-5,
Reporting on the Costs of Start-Up Activities. The SOP requires that costs of
start-up activities, including organization costs, be expensed as incurred. It
applies to all nongovernmental entities. Start-up activities are broadly
defined and include one-time activities related to opening a new facility,
introducing a new product or service, conducting business in a new territory,
conducting business with a new class of customer or beneficiary, initiating a
new process in an existing facility, commencing some new operation, and
organizing a new entity.

SOP 98-5 is generally effective for financial statements for fiscal years
beginning after December 15, 1998, with initial application reported as the
cumulative effect of a change in accounting principle. The Company has had the
policy of capitalizing pre opening costs. At December 31, 1997 there exist $0
unamortized cost. Therefore, the Company does not believe that the adoption of
SOP 98-5 will have a significant effect on the Company's financial statements.



                                       24


<PAGE>   25



Item 7 -- Financial Statements

<TABLE>
<CAPTION>
                                    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<S>                                                                                                              <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...............................................................26

CONSOLIDATED BALANCE SHEETS
         As of December 31, 1997 and 1996........................................................................27

CONSOLIDATED STATEMENTS OF OPERATIONS
         Years ended December 31, 1997 and 1996..................................................................29

CONSOLIDATED STATEMENTS OF CASH FLOWS
         Years ended December 31, 1997 and 1996..................................................................30

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
         Years ended December 31, 1997 and 1996..................................................................32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................................................................33
</TABLE>


                                       25


<PAGE>   26





               Report of Independent Certified Public Accountants





Board of Directors
National Diagnostics, Inc.

We have audited the accompanying consolidated balance sheets of National
Diagnostics, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of National
Diagnostics, Inc. and Subsidiaries as of December 31, 1997 and 1996 and the
consolidated results of their operations and their consolidated cash flows for
the years then ended in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared, assuming that the
Company will continue as a going concern.  As shown in the financial
statements, the Company incurred a net loss of $1,910,131 during the year ended
December 31, 1997, and as of that date, the Company has a retained earnings
(accumulated deficit) of $3,958,296 and current liabilities exceed current
assets by $6,190,476.  The Company's present financial condition has resulted
in the Company being in default of its major lease and loan agreements.  The
Company's ability to fund its operations and meet its obligations in 1998 will
be dependent upon the Company improving its overall level of profitability and
its ability to successfully cure its lease and loan defaults.  In addition, the
success of the Company could, among other things, require obtaining additional
financing or an infusion of capital.  These factors, among other, addressed in
Note 21 raise substantial doubt about the Company's ability to continue as a
going concern.  Management's plans in regard to these matters are described in
Note 21.  The financial statements do not included any adjustments that might
result from the outcome of this uncertainty.


                               GRANT THORNTON LLP

Tampa, Florida
April 30, 1998

                                       26


<PAGE>   27



                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                                     ASSETS
                                     ------

<TABLE>
<CAPTION>
                                                                             December 31,            December 31,
                                                                                1997                     1996
                                                                            ------------             -----------
<S>                                                                         <C>                      <C>        
Current assets:
  Cash                                                                      $        --              $   104,335
  Accounts receivable, net of allowances of $1,011,942 and
     $664,402 in 1997 and 1996, respectively                                  2,058,647                2,131,284
  Prepaid expenses and other current assets                                     148,903                  220,864
                                                                            -----------              -----------

             Total current assets                                             2,207,550                2,456,483
                                                                            -----------              -----------

Property and equipment                                                        9,974,924                9,481,198
  Less:  accumulated depreciation and
     amortization                                                            (4,574,173)              (3,264,655)
                                                                            -----------              -----------

              Net property and equipment                                      5,400,751                6,216,543
                                                                            -----------              -----------

Other assets:
  Excess of purchase price over net assets acquired,
     net of accumulated amortization of $85,751 and
     $61,274 in 1997 and 1996, respectively                                     403,711                  428,187
  Deposits                                                                       54,941                   47,444
  Other                                                                          41,894                   51,020
                                                                            -----------              -----------


              Total other assets                                                500,546                  526,651
                                                                            -----------              -----------



                                                                            $ 8,108,847              $ 9,199,677
                                                                            ===========              ===========
</TABLE>




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

                                       27


<PAGE>   28



                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

<TABLE>
<CAPTION>
                                                                             December 31,            December 31,
                                                                                1997                    1996
                                                                            ------------             -----------
<S>                                                                         <C>                      <C>        
Current liabilities:
  Lines of credit                                                           $ 1,309,612              $   993,818
  Note due to related party                                                      62,500                   99,882
  Note payable, other                                                                --                    4,294
  Current installments of long-term debt                                        413,243                  105,410
  Current installments of obligations under
     capital leases                                                           3,820,933                1,103,952
  Accounts payable                                                            1,655,858                1,080,236
  Accrued radiologist fees                                                      439,066                  489,785
  Accrued expenses, other                                                       696,814                  738,687
                                                                            -----------              -----------

             Total current liabilities                                        8,398,026                4,616,064


Long-term liabilities:
  Long-term debt, excluding current installments                                594,064                  619,227
  Obligations under capital leases,
     excluding current installments                                                  --                3,454,456
  Deferred lease payments                                                       175,136                  236,912
                                                                            -----------              -----------

             Total liabilities                                                9,167,226                8,926,659
                                                                            -----------              -----------

Commitments and contingencies                                                        --                       --

Stockholders' equity (deficit):
  Preferred stock, no par value, 1,000,000
     shares authorized, no shares issued
     and outstanding                                                                 --                       --
  Common stock, no par value, 9,000,000
     shares authorized, 3,093,430 and 2,628,577 shares
     issued and outstanding in 1997 and 1996                                        779                      686
  Additional paid-in capital                                                  2,899,138                2,320,497
  Retained earnings, (accumulated deficit)                                   (3,958,296)              (2,048,165)
                                                                            -----------              -----------

             Net stockholders' equity (deficit)                              (1,058,379)                 273,018
                                                                            -----------              -----------

                                                                            $ 8,108,847              $ 9,199,677
                                                                            ===========              ===========
</TABLE>


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

                                       28


<PAGE>   29



                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                             Year Ended               Year Ended
                                                                            December 31,             December 31,
                                                                               1997                     1996
                                                                            -----------              -----------
<S>                                                                         <C>                      <C>        
Net revenue                                                                 $ 9,942,050              $ 8,876,652
                                                                            -----------              -----------

Operating expenses:
  Direct operating expenses                                                   5,331,362                4,850,088
  General and administrative                                                  4,405,975                3,576,087
  Depreciation and amortization                                               1,445,492                1,210,245
                                                                            -----------              -----------

             Total operating expenses                                        11,182,829                9,636,420
                                                                            -----------              -----------

             Operating loss                                                  (1,240,779)                (759,768)

Interest expense                                                                694,575                  563,951
Other income                                                                     25,223                   82,058
                                                                            -----------              -----------

Loss before income taxes                                                     (1,910,131)              (1,241,661)

Income taxes                                                                         --                       --
                                                                            -----------              -----------

Net loss                                                                    $(1,910,131)             $(1,241,661)
                                                                            ===========              ===========

Loss per common share                                                       $      (.60)             $      (.48)
                                                                            ===========              ===========

Weighted average number of common
  shares outstanding                                                          3,159,884                2,579,380
                                                                            ===========              ===========
</TABLE>




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

                                       29


<PAGE>   30



                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                            Year Ended               Year Ended
                                                                            December 31,             December 31,
                                                                                1997                     1996
                                                                            ------------             -------------
<S>                                                                         <C>                      <C>         
Cash flows from operating activities:
  Net loss                                                                  $(1,910,131)             $(1,241,661)
  Adjustments to reconcile net loss to
     net cash provided by operating activities:
        Depreciation and amortization                                         1,445,492                1,210,245
        Common stock issued for services                                         48,397                       --
        Warrants issued for services                                                 --                    8,000        
        Increase in accounts receivable allowances                              347,540                  321,502
        Gain (loss) on disposition of equipment                                  (5,086)                  23,551
        Increase in accounts receivable                                        (274,903)                (951,945)
        Increase (decrease) in prepaid expenses and
          other assets                                                           13,325                   (9,026)
        Increase in accounts payable and
          accrued expenses                                                      799,465                1,067,152
        Increase due to related party                                            23,819                   10,067
        Increase (decrease) in deferred lease payments                          (61,776)                  26,577
                                                                            -----------              -----------

        Net cash provided by operating activities                               426,142                  464,462
                                                                            -----------              -----------

Cash flows used in investing activities:
        Increase in intangible assets                                           (38,963)                      --
        Purchases of property and equipment                                    (207,732)                (793,870)
        Deposits                                                                  1,563                    5,671
                                                                            -----------              -----------

        Net cash used in investing activities                                  (245,132)                (788,199)
                                                                            -----------              -----------

Cash flows provided by (used in) financing activities:
        Proceeds from issuance of common stock, net                              77,990                  165,950
        Proceeds from borrowings on line of credit                              315,794                  584,318
        Proceeds from note payable                                              205,000                    4,294
        Repayment of notes payable                                             (209,294)                  (8,000)
        Proceeds from borrowings on long-term debt                              385,000                  164,358
        Repayment of long-term borrowings                                      (102,330)                 (81,332)
        Proceeds of borrowing from related parties                              125,000                   67,306
        Repayment of related parties borrowings                                 (70,742)                 (16,667)
        Principal payments under capital lease obligations                   (1,011,763)                (580,249)
                                                                            -----------              -----------

        Net cash provided (used) by financing activities                       (285,345)                 299,978
                                                                            -----------              -----------
</TABLE>





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

                                                                     (continued)

                                       30


<PAGE>   31




                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                Year Ended           Year Ended
                                                                                December 31,         December 31,
                                                                                   1997                  1996
                                                                               -------------         -------------
<S>                                                                            <C>                   <C>     
Net increase (decrease) in cash                                                   (104,335)              (23,759)

Cash at beginning of period                                                        104,335               128,094
                                                                               -----------           -----------

Cash at end of period                                                          $        --           $   104,335
                                                                               ===========           ===========


Supplemental disclosure of cash flow information:

     Interest paid                                                             $   747,113           $   453,712
                                                                               ===========           ===========

     Income tax paid                                                           $        --           $        --
                                                                               ===========           ===========

     Non-cash investing financing activities:

          Capital lease obligations incurred                                   $   274,288           $ 2,136,163
                                                                               ===========           ===========

          Capital lease obligations canceled and return of equipment
               (net book value of equipment approximating $120,000)            $        --           $   135,859
                                                                               ===========           ===========

          Stock issued as satisfaction of related party debt (See Note 13)     $   275,604           $    67,292
                                                                               ===========           ===========

          Stock issued as satisfaction for trade creditor debt                 $   205,140           $        --
                                                                               ===========           ===========

          Stock issued for equipment acquisition                               $    20,000           $        --
                                                                               ===========           ===========

          Stock issued in exchange for marketable securities                   $ 1,800,000           $        --
                                                                               ===========           ===========

          Stock exchange for marketable securites rescinded                    $(1,800,000)          $        --
                                                                               ===========           ===========

          Note received on disposal of equipment                               $        --           $     9,770
                                                                               ===========           ===========
</TABLE>


In September of 1996 the Company refinanced its bank lines of credit
approximating $517,000 with a new line from DVI Business Credit (see note 4).
Additionally, in 1996 the Company refinanced a $208,000 equipment loan and a
$50,000 related party note.

In October of 1997 the Company refinanced its line of credit approximating
$1,200,000 with a new line from HealthCare Financial Partners, Inc., including a
term loan of $235,000 personally guaranteed by principals.

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

                                       31


<PAGE>   32



                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

            Consolidated Statements of Stockholders' Equity (Deficit)

                     Years Ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                                         Retained
                                                          Additional     Earnings
                                         Common            Paid-In     (accumulated          Stockholders'
                                         Stock             Capital       deficit)           Equity (Deficit)
                                       --------         ------------   -------------     -------------------
<S>                                    <C>              <C>            <C>               <C>
Balances at December 31, 1995            $ 668          $ 2,079,267    $  (806,504)          $ 1,273,431

Issuance of common stock
  (33,448 shares)                            7               67,291             --                67,298

Issuance of warrants
  (100,000 warrants)                        --                8,000             --                 8,000

Exercise of warrants
  (55,500 shares)                           11              165,939             --               165,950


Net Loss                                    --                   --     (1,241,661)           (1,241,661)
                                         -----          -----------    -----------           -----------

Balances at December 31, 1996            $ 686          $ 2,320,497    $(2,048,165)          $   273,018


Issuance of common stock                   375            2,300,369             --             2,300,744
  (1,872,041 shares)

Common stock issue rescinded              (292)          (1,799,708)            --            (1,800,000)
  (1,459,188 shares)

Exercise of warrants                        10               77,980             --                77,990
  (52,000) shares

Net Loss                                    --                   --     (1,910,131)           (1,910,131)
                                         -----          -----------    -----------           -----------

Balance at December 31, 1997             $ 779          $ 2,899,138    $(3,958,296)          $(1,058,379)
                                         =====          ===========    ===========           ===========
</TABLE>




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

                                       32


<PAGE>   33



                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1997 and 1996

1)       Organization and Basis of Presentation

         The consolidated financial statements include the accounts of National
         Diagnostics, Inc. and its subsidiaries (Company): Alpha Associates,
         Inc. (Associates); Alpha Acquisitions Corp. (Acquisitions); SunPoint
         Diagnostic Center, Inc. (SunPoint); National Diagnostics/Orange Park,
         Inc. (Orange Park); and National Diagnostics/Riverside, Inc.
         (Riverside). Associates and Acquisitions hold 100% of the partnership
         interests in Brandon Diagnostic Center, Ltd. (Brandon). The Company and
         Orange Park hold 100% of the partnership interests in Sundance Partners
         (a real estate holding partnership.) National Diagnostics, Inc., is a
         holding company which was formed in June 1994.

         The Company provides medical imaging services to patients at its
         centers or mobile facilities in Brandon (Brandon), Ruskin (SunPoint),
         and greater Jacksonville area (Orange Park and Riverside), Florida.

         The Company intends to merge with American Enterprise Solutions, Inc.
         ("AES"). The Company will be the surviving corporation; however, it
         will change its name to American Enterprise Solutions, Inc. AES was
         founded in 1997 for the purpose of acquiring seasoned and profitable
         high growth firms with operations and facilities which complement AES's
         goal to create Community Healthcare Enterprises (an organization that
         owns and operates a complete community wide healthcare delivery
         system). These businesses include: a multi-speciality and primary care
         physician group; a behavioral and mental healthcare facility; and
         TMRCorp, a nationally known healthcare consulting firm specializing in
         corporate reengineering, business, business development and finance.
         The financial information presented represents the Company as it was
         before merger.

         In preparing financial statements in conformity with generally accepted
         accounting principles, management makes estimates and assumptions that
         affect the reported amounts of assets and liabilities and disclosures
         of contingent assets and liabilities at the date of the financial
         statements, as well as the reported amounts of revenues and expenses
         during the reporting period. As an example of such an estimate is the
         Company's determination of its contractual adjustments and doubtful
         accounts provision. Actual results could differ from those estimates.

         The consolidated financial statements include the accounts of the
         Company and its wholly owned subsidiaries and their affiliates. All
         significant intercompany balances and transactions have been
         eliminated.

2)       Summary of Significant Accounting Policies

         a)       Property Equipment

                  Property and equipment is stated at cost. Depreciation expense
                  is charged to operations over the estimated useful service
                  period of the assets using the straight-line method. Property
                  and equipment held under capital leases are generally
                  amortized straight-line over the shorter of the lease term or
                  estimated useful life of the asset. The Company uses
                  accelerated depreciation for tax purposes.

                                       33


<PAGE>   34


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         b)       Income Taxes

                  Income taxes are provided based upon provisions of Statement
                  of Financial Accounting Standards No. 109, "Accounting for
                  Income Taxes". Under the asset and liability method of
                  Statement 109, deferred tax assets and liabilities are
                  recognized for the future tax consequences attributable to
                  differences between the financial statement carrying amounts
                  of existing assets and liabilities and their respective tax
                  bases. Deferred tax assets and liabilities are measured using
                  enacted tax rates expected to apply to taxable income in the
                  years in which those temporary differences are expected to be
                  recovered or settled. Under Statement 109, the effect on
                  deferred tax assets and liabilities of a change in tax rates
                  is recognized in income in the period that includes the
                  enactment date.

         c)       Pre-Opening Costs

                  Pre-opening costs consisting of outside consulting, other
                  directly related professional fees, equipment testing and
                  calibration and office set up which are incurred prior to
                  opening are deferred and amortized over 12 months commencing
                  with a Center opening. Such costs which are included net of
                  amortization in other current assets totaled approximately
                  $-0- and $59,089 at December 31, 1997 and 1996, respectively.
                  Amortization expense for pre-opening costs for 1997 and 1996
                  was $59,089 and $73,665, respectively.  (See Note 2-K)

         d)       Excess of Purchase Price Over Net Assets Acquired

                  Excess of purchase price over net assets acquired are
                  amortized over 20 years. Management reviews the performance of
                  the related assets on a quarterly basis to determine if
                  impairment has taken place. No impairment costs have been
                  realized in the current years. Amortization expense for the
                  excess of purchase price over net assets acquired for 1997 and
                  1996 was $24,187 and $24,477, respectively.  (See Note 2-K)

         e)       Cash and Cash Equivalents

                  For financial statement purposes cash equivalents include
                  short-term investments with an original maturity of ninety
                  days or less. At December 31, 1997 and 1996, respectively, the
                  Company had no cash equivalents.

         f)       Accounting for the Impairment of Long-Lived Assets and for 
                  Long-Lived Assets to Be Disposed Of

                  On a quarterly basis, the Company evaluates the projected
                  undiscounted cash flows of each business unit to determine,
                  when indicators of impairment are present, whether or not
                  there has been permanent impairment of its long-lived assets,
                  and accrues expenses for the amount, if any, determined to be
                  permanently impaired. No impairment exists as of December 31,
                  1997.

         g)       Revenue Recognition and Accounts Receivable

                  Revenues are recognized on the date services and related
                  products are provided to patients and are recorded at amounts
                  estimated to be received under reimbursement arrangements with
                  third party payors, including private insurers, prepaid health
                  plans, Medicare and Medicaid. Net revenue represents gross
                  revenue less contractual adjustments and provision for bad
                  debts 
                                       34


<PAGE>   35


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                  (see note 10). The Company's management at least quarterly
                  determines the adequacy of the accounts receivable valuation
                  allowances by, among other procedures, reviewing historical
                  experience for changes in factors affecting billing and
                  collections (e.g. third party reimbursement arrangements). For
                  all years presented, approximately 15% to 18% of the Company's
                  revenues are reimbursed under arrangements with
                  Medicare/Medicaid. No other third party payor group represents
                  10% or more of the Company's revenues. Therefore,
                  concentration of credit risk with respect to the remaining
                  accounts receivable is limited due to the large number of
                  payors representing the patient base.

                  The Brandon facility contributed approximately 46% and 55% of
                  total revenues for 1997 and 1996, respectively.

         h)       Accounting for Stock Based Compensation

                  The Company has adopted only the disclosure provisions of
                  Financial Accounting Standard No. 123, "Accounting for
                  Stock-Based Compensation," as it relates to employment awards.
                  It applies APB Opinion No. 25, "Accounting for Stock Issued to
                  Employees," and related interpretations in accounting for its
                  plans and does not recognize compensation expense for its
                  stock-based compensation plans other than for restricted
                  stock.

         i)       Loss Per Common Share

                  The Company has adopted Standard of Financial Accounting
                  Standards No. 128 (SFAS No. 128), "Earnings Per Share" as this
                  standard became effective for financial statements issued
                  after December 15, 1997. SFAS No. 128 eliminates primary and
                  fully dilutive net income per common share and replaces them
                  with basic and diluted net income per common share. Basic loss
                  per share is the same as the diluted loss per share since the
                  Company had a net loss for the year ended December 31, 1997
                  and 1996. Outstanding stock options and warrants have not been
                  considered in these computations since the effect of their
                  inclusion would be antidilutive. Accordingly, all loss per
                  common share data for the previous periods did not require
                  reinstatement to conform to the new standard.

                  The following table reconciles the numerator and denominator
                  of the basic and dilutive EPS computation:

<TABLE>
<CAPTION>
                  Numerator:                                      1997           1996
                                                               -----------    -----------
<S>                                                            <C>            <C>      
                     Net Loss
                                                               $(1,910,131)   $(1,241,661)
                                                               ===========    ===========
Denominator:
  Weighted average number of common shares used in basic EPS     3,159,884      2,579,380
  Effect of dilutive stock options and warrants                         --             --
                                                               -----------    -----------
  Weighted number of common shares and dilutive potential
     common stock used in diluted EPS                            3,159,884      2,579,380
                                                               ===========    ===========
</TABLE>




                                       35


<PAGE>   36

                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         j)       Fair Value of Financial Instruments

                  At December 31, 1997 and 1996, the carrying amount of cash,
                  accounts receivable, accounts payable and accrued expenses
                  approximate fair value because of the short-term maturities of
                  these assets.

                  The carrying amounts of current obligations approximate the
                  fair market value due to either the short-term maturity of the
                  obligation or the interest rate changes with market interest
                  rates. Carrying amounts of long-term obligations approximate
                  the fair market value due to either the fact that the
                  obligation was recently financed or refinanced, or in the case
                  of other obligations, the interest rates approximate that
                  which the Company is able to obtain currently.

         k)       New Accounting Pronouncements

                  SFAS No. 130, Reporting Comprehensive Income, is effective for
                  fiscal years beginning after December 15, 1997. This Statement
                  establishes standards for the reporting and display of
                  comprehensive income and its components in a full set of
                  general-purpose financial statements. The new rule requires
                  that the Company (a) classify items of other comprehensive
                  income by their nature in a financial statement, and (b)
                  display the accumulated balance of other comprehensive income
                  separately from retained earnings and additional paid-in
                  capital in the equity section of the balance sheet. The
                  Company plans to adopt SFAS No. 130 in 1998 and expects no
                  material impact to the Company's financial statement
                  presentation.

                  SFAS No. 131, Disclosures about Segments of an Enterprise and
                  Related Information, is effective for fiscal years beginning
                  after December 15, 1997. This Statement supersedes SFAS No.
                  14, Financial Reporting for Segments of a Business Enterprise,
                  and amends SFAS No. 94, Consolidation of All Majority-Owned
                  Subsidiaries. This Statement requires annual financial
                  statements to disclose information about products and
                  services, geographic areas and major customers based on a
                  management approach, along with interim reports. The
                  management approach requires disclosing financial and
                  descriptive information about an enterprise's reportable
                  operating segments based on reporting information the way
                  management organizes the segments for making business
                  decisions and assessing performance. It also eliminates the
                  requirement to disclose additional information about
                  subsidiaries that were not consolidated. The Company plans to
                  adopt SFAS No. 131 in 1998 with impact only to the company's
                  disclosure information and not its results of operations.

                  The AICPA's Accounting Standards Executive Committee has
                  issued SOP 98-5, Reporting on the Costs of Start-Up
                  Activities. The SOP requires that costs of start-up
                  activities, including organization costs, be expensed as
                  incurred. It applies to all nongovernmental entities. Start-up
                  activities are broadly defined and include one-time activities
                  related to opening a new facility, introducing a new product
                  or service, conducting business in a new territory, conducting
                  business with a new class of customer or beneficiary,
                  initiating a new process in an existing facility, commencing
                  some new operation, and organizing a new entity.

                  SOP 98-5 is generally effective for financial statements for
                  fiscal years beginning after December 15, 1998, with initial
                  application reported as the cumulative effect of a change in
                  accounting principle. The Company has had the policy of
                  capitalizing pre opening costs. At December 31, 1997 there
                  exist $0 unamortized cost. Therefore, the Company does not
                  believe that the adoption of SOP 98-5 will have a significant
                  effect on the Company's financial statements.

         l)       Operational matters and liquidity

                  The Company has a net loss for 1997 of $1,910,131 and at
                  December 31, 1997 has a retained earnings accumulated deficit
                  of $3,958,296 and a working capital deficiency of $6,190,476.
                  The Company's present financial condition has resulted in the
                  Company being in default of the major lessors lease
                  agreements. In view of these matters, recoverability of a
                  major portion of the recorded asset amounts shown in the
                  accompanying balance sheet is dependent upon continued
                  operation of the Company, which in turn is dependent upon the
                  Company's improving its overall level of profitability and
                  its ability to successfully cure its lease and loan defaults.
                  In addition, the success of the Company could also, among
                  other things, require obtaining additional financing or
                  capital infusions. The financial statements do not include any
                  adjustments relating to the recoverability and classification
                  of recorded asset amounts or amounts and classification of
                  liabilities that might be necessary should the Company be
                  unable to continue in existence.

                                       36


<PAGE>   37


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          The following commentary addresses the Company's operations for 1997
and its plan to improve future results.

         The Company attributes the loss in 1997 primarily to the effect the
         losses from its relatively new start up facilities had on the Company:
         Orange Park (opened in July of 1995) had a loss of $661,000 and
         Riverside (opened July of 1996) had a loss of $635,000. Due to the
         expansion and growth, the Company's working capital has decreased to
         the extent that the Company has fallen behind in meeting its lease and
         vendor obligations. Most of the vendors have been cooperative by
         allowing extended terms. The Company expects in May of 1998 to conclude
         negotiating a favorable resolve to the delinquency with its major
         lessor. In March of 1998 the Company entered into a private placement
         Stock Purchase Agreement with AES. The Company issued 500,000 shares
         of Series A Preferred Stock in exchange for 8,000,000 common shares of
         Halis, Inc. (OTCBB:HLIS) held by AES and valued at $2,000,000. This
         value was based upon the market value at the date of exchange less a
         discount due to, among other things, the exchange being a large block
         of Halis, Inc. common stock. The Company, at present, intends to
         utilize a major portion of the Halis, Inc. securities as collateral
         for securing debt financing and obtaining extended loan or lease terms
         for existing obligations. The remaining Halis, Inc. securities may be
         sold to provide cash if needed. Currently, the Company has not
         determined the time frame required to sell the securities nor the
         selling price that would be realized upon sale of the Halis, Inc.
         securities. Therefore, the amount available for potential future cash
         needs is not known at this time.

         The Company believes as the increase in revenues for start ups
         continues, certain cost cutting measures take effect, and an acceptable
         resolution with the Company's major lessor is achieved, the Company
         will return to a profitable position though no absolute assurances can
         be given.

3)       Property and Equipment

         Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                                                                        Estimated
                                                                                     December 31,       December 31,     service
                                                                                        1997               1996        life (years)
                                                                                    -------------     --------------   ------------
           <S>                                                                    <C>                 <C>              <C>    
           Land                                                                   $        85,000     $     85,000       --
           Buildings                                                                      253,041          253,041       39
           Medical Equipment                                                            7,846,004        7,414,946        7
           Office furniture and equipment                                                 728,930          665,295        7
           Leasehold improvements                                                         836,732          837,699      3-5
           Vehicles                                                                       225,217          225,217      5-7
                                                                                  ---------------     ------------

                                                                                  $     9,974,924     $  9,481,198
                                                                                  ---------------     ------------
</TABLE>

           Depreciation and amortization expense totaled $1,445,492 and
           $1,210,245 for the year ended December 31, 1997 and 1996,
           respectively.

4)         Lines of Credit

           In 1997 the Company refinanced its line of credit with a lender that
           specializes in medical receivable financing. The lender has a first
           security interest on all accounts receivable. The borrowing base on
           the line fluctuates proportionately with accounts receivable balance
           and is adjusted on a daily basis. The line has an interest rate of
           prime plus 2% (at December 31, 1997, 10.5%) paid monthly, the line
           matures September, 1999.

<TABLE>
<CAPTION>
                                                                                        1997
                                                                                 --------------
                     <S>                                                         <C>           
                     Line of credit limit                                        $    2,000,000
                     Qualifying borrowing base                                   $    1,173,102
                     Outstanding loan balance at December 31, 1997               $    1,309,160
</TABLE>

           At December 31, 1997 the Company borrowed approximately $136,000 in
           excess of its borrowing base and was in technical default of a loan
           covenant due to the stockholder deficit exceeding certain limits
           (approximately $500,000). This was cured with the infusion of
           capital in March of 1998, (see subsequent events footnote).


                                       37


<PAGE>   38
 

                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


5)         Long-Term Debt

<TABLE>
<CAPTION>
           Long-term debt is summarized as follows:                                   December 31,        December 31,
                                                                                         1997                1996
                                                                                      -----------       -------------

           <S>                                                                        <C>               <C>
           Installment loans payable which consist of a number of separate
           installment loan contracts collateralized by equipment and vehicles.
           The loans require monthly installments of principal and interest over
           terms that vary from two to five years. At December 31, 1997, the
           loans bear interest at rates ranging from 9.0% to 12.25%.                  $ 348,259          $  432,681

           Mortgage notes payable in monthly installments of $3,821 including
           interest at 8.75% and 11%; maturing through April, 2020;
           collateralized by mortgaged real estate property.                            438,262             291,956

           Installment loan payable collateralized by accounts receivable and
           personal guarantees. The loan requires monthly installments of
           approximately $11,000 including interest at prime plus 2%;
           maturing October, 1999.                                                      220,786                  --
                                                                                      ---------          ----------

           Total long-term debt                                                       1,007,307             724,637

           Less current installments of long-term debt                                  413,243             105,410
                                                                                      ---------          ----------

           Long-term debt, excluding current installments                             $ 594,064          $  619,227
                                                                                      =========          ==========
</TABLE>



           The aggregate principal payments of long-term debt required annually
           are:

<TABLE>
           <S>                                    <C>            <C>  
           Year ending December 31:               1998           $   413,243
                                                  1999               200,525
                                                  2000                81,220
                                                  2001                44,719
                                                  2002                 6,180
                                                  Thereafter         261,420
                                                                 -----------
                                                                 $ 1,007,307
                                                                 ===========
</TABLE>

                                       38


<PAGE>   39


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

6)         Leases

           The Company has entered into capital leases for medical equipment
           which expire in 2001. The gross amount of equipment and related
           accumulated depreciations recorded under capital leases are as
           follows:

<TABLE>
<CAPTION>
                                                                December 31,  December 31,
                                                                   1997           1996
                                                               -----------    ------------
              <S>                                              <C>            <C>        
              Medical equipment                                $ 6,274,000    $ 6,000,000

              Less accumulated depreciation                      3,004,000      2,410,000
                                                               -----------    -----------

                                                               $ 3,270,000    $ 3,590,000
                                                               ===========    ===========
</TABLE>


           The present value of future minimum capital lease payments based on
           interest rates ranging from 9% to 14.5% is as follows:

<TABLE>
           <S>                                                                     <C>            
           Year ending December 31:                1998                            $  1,375,352
                                                   1999                                 911,315
                                                   2000                                 680,086
                                                   2001                                 596,775
                                                   2002                                 257,405
                                                                                   ------------

                Present value of minimum capital lease payments                       3,820,933

                Less current installments of obligations under capital leases         1,375,352
                                                                                   ------------
                Less long-term portion reclassified due to default                    2,445,581
                                                                                   ------------

                                                                                      3,820,933

                Obligations under capital leases, excluding
                   current installments                                            $         --
                                                                                   ============
</TABLE>


           The Company was at December 31, 1997 and currently (March, 1998) is
           in default of its capital lease obligations due to late payments of
           approximately $124,000 and $418,000, respectively. Generally, while
           in default the lessor may accelerate the lease obligation. The
           Company's major lessor, considering the Company's merger transaction,
           has been cooperating and working with the Company during the period
           of delinquency and has refrained from exercising its rights under
           default. Discussions are to be concluded in May of 1998 to arrive at
           a solution to the delinquency under the lease agreements. The other
           remaining lessors (approximately 17% of the total leases obligations
           outstanding at December 31, 1997) have also been cooperating with the
           Company; generally allowing not more than 60 days past due on lease
           payments. The long-term portion of the these lease approximates
           $2,445,581. Since waivers of default have not been received from the
           lessors by the Company, the long-term portion has been reclassified
           from long-term to current liabilities. 

           The Company is obligated under noncancellable operating leases that
           expire through 2002.

                                       39


<PAGE>   40


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>

           Future minimum lease payments under these leases are as follows:
           <S>                                    <C>            <C>        
           Year ending December 31:               1998           $ 1,014,458
                                                  1999               974,392
                                                  2000               903,778
                                                  2001               292,376
                                                  2002               189,277
                                                  Thereafter          55,386
                                                                 -----------
                                                                 $ 3,429,667
                                                                 ===========
</TABLE>

           Rental expense related to these non-cancelable leases was
           approximately $1,161,000 and $1,066,000 for the years ended December
           31, 1997 and 1996, respectively.

7)         Notes Payable to Related Parties

           Note payable to related parties are as follows:

<TABLE>
<CAPTION>
                                                                           December 31,   December 31,
                                                                              1997            1996
                                                                           -----------    ------------
           <S>                                                             <C>            <C>       
           Note payable with interest at 9%,
           payable on demand                                                 $62,500        $    -- 
                                                                                                    
           Installment note payable with interest at 10%                                            
           payable in monthly payments of $4,167;                                                   
           Paid in full in 1997                                              $    --        $33,333 
                                                                                                    
           Notes payable with interest at 8% payable                                                
           on demand; Paid in full in 1997                                   $    --        $66,549 
                                                                             -------        ------- 
                                                                                                    
                                                                             $62,500        $99,882 
                                                                             =======        ======= 
</TABLE>

           Interest expense to related parties totaled $8,527 and $3,469 for the
           years ended December 31, 1997 and 1996, respectively.

8)         Note Payable, Other

           Other note payable is summarized as follows:

<TABLE>
<CAPTION>
                                                                           December 31,   December 31,
                                                                               1997          1996
                                                                           -----------    ------------
           <S>                                                             <C>            <C>
           Installment note payable with interest at 10.25%
           due December 1997; unsecured.                                     $    --       $  4,294
                                                                             =======       ========
</TABLE>




                                       40


<PAGE>   41


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

9)         Income Taxes

           The provision for income tax expense (benefit) at December 31,
consists of the following:

<TABLE>
<CAPTION>
                                                                                   1997         1996
                                                                              -----------    -----------
                 <S>                                                          <C>            <C>        
                 Current                                                      $        --    $        --
                 Deferred                                                              --             --
                                                                              -----------    -----------

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

           The income tax provision for 1997 and 1996 reconciled to the 
           tax computed at the statutory rate of 34% is as follows:

<TABLE>
<CAPTION>
                                                                                  1997           1996
                                                                              -----------    -----------
           <S>                                                                <C>            <C>
           Income taxes at statutory rate                                     $  (649,400)   $  (422,100)
           State income taxes                                                     (95,800)       (48,000)
           Current year net operating loss not utilized                           730,900        453,700
           Non deductible expenses                                                 14,300         16,400
                                                                              -----------    -----------


                                                                              $        --    $        --
                                                                              ===========    ===========
</TABLE>
           The deferred tax asset and liability consist of the following
           December 31:

<TABLE>
<CAPTION>
                                                                                  1997           1996
                                                                             -----------    -----------
          <S>                                                                <C>            <C>  
          Assets
                Net operating loss carry forward                              $ 1,196,300    $   477,400
                Allowance for doubtful accounts                                   394,700        259,100
                Deferred rents                                                     65,300         87,800
                 Other                                                                600             --
                Nondeductible accrued compensation                                  2,000         47,300
                Pre-opening costs                                                  54,000         44,800
                Acquisition basis difference                                      118,200        121,500
                                                                              -----------    -----------
                                                                                1,831,100      1,037,900
                Less:  valuation allowance                                     (1,493,800)      (763,800)
                                                                              -----------    -----------
                                                                                  337,300        274,100
                                                                              -----------    -----------

           Liabilities
                Fixed assets                                                      335,700        273,200
                Goodwill                                                            1,600            900
                                                                              -----------    -----------
                                                                                  337,300        274,100
                                                                              -----------    -----------
           Net deferred taxes                                                 $        --    $        --
                                                                              ===========    ===========
</TABLE>



                                       41


<PAGE>   42


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

           Management, using SFAS 109 criteria and placing greater weight on the
           1996/1997 taxable losses along with expectations for 1998, concluded
           that the above valuation allowance at December 31, 1997, was
           reasonable. The net increase in the valuation allowance in 1997
           approximated $730,000.

           At December 31, 1997 approximately $3,067,000 in net operating carry
           forwards remain which will expire if not utilized by 2011.

10)        Concentration of Accounts Receivable

           The Company's accounts receivable are due from the following:

<TABLE>
<CAPTION>
                                                        December 31,       December 31,
                                                           1997               1996
                                                        -----------        ------------
           <S>                                          <C>                <C>       
           Commercial insurance carriers                $1,410,200         $1,077,500
           Managed care providers                          710,900            753,100
           Private patients                                475,189            431,300
           Worker's compensation                           105,500            140,700
           Medicare/Medicaid                               358,300            393,086
                                                        ----------         ----------

                                                         3,060,089          2,795,686
           Less allowances:
                 Contractual adjustments                   626,842            625,402
                 Doubtful accounts                         374,600             39,000
                                                        ----------         ----------

                                                        $2,058,647         $2,131,284
                                                        ==========         ==========
</TABLE>


11)        Commitments and Contingencies

           a)     Guarantees

           A term loan and certain equipment loans of the Company are fully
           guaranteed by an officer/stockholder.

           b)     Employment Contracts

           The President and Chief Executive Officer operate under three year
           employment contracts that became effective July 1, 1995. The
           President and Chief Executive Officer receive salaries of $150,000
           and $75,000, respectively, plus certain benefits. Under the contracts
           each executive is to receive a 5% bonus of the annual net income of
           the Company in excess of the prior fiscal year's income.
           Additionally, a bonus equal to 2.5% of net revenue in excess of the
           prior year's net revenue is to be paid to each executive. In 1997 the
           bonus arrangement was eliminated until the Company experiences two
           consecutive profitable quarters. The Chief Executive Officer resigned
           and the employment contract terminated effective January 19, 1998.

           Total compensation earned by the Chief Executive Officer and
           President under the existing contracts for the years ended December
           31, 1997 and 1996 was approximately $240,900 and $401,742
           respectively.

                                       42


<PAGE>   43
                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The Company entered into an employment agreement with the President of
         Orange Park for a three year period commencing February 1, 1995. The
         executive is to receive as compensation an annual salary of $100,000
         (adjusted from $85,000 in July, 1996) plus certain benefits. In
         addition, the executive will earn a 10% bonus based on the increase in
         adjusted profits of the Orange Park center. No bonus was awarded in
         1996 or 1997. The employment agreement was extended through June, 1998.

         In November, 1995 the Company entered into a three year employment
         agreement with the Vice President of Development. The executive was to
         receive a salary of $85,000 plus certain benefits. This executive was
         terminated effective February 1997.

         C) PROFESSIONAL SERVICES AGREEMENT

         The Company enters into agreements with physician groups to provide
         radiological services. The physicians are paid with a percentage of the
         net receipts or fixed fee amount. The contracts are generally three
         years or less.

         The Company entered into radiological service contracts that were
         effective for the period February 1 through June 30, 1997, for its
         Brandon, SunPoint and Orange Park facilities. The contracts were
         terminated by the Company effective June 30, 1997 due to
         non-performance of all representations made by the contracted
         radiologist group. A settlement of $238,000 was reached wherein the
         Company agreed to pay for services rendered. The agreement calls for
         the assumption of a $48,000 liabilitity due to tenant locums used by
         the Centers; a $50,000 payment due March 15, 1998, and the balance of
         $140,000 to be paid evenly in 12 monthly installments thereafter. The
         Company adequately reserved for these amounts in 1997, assumed the
         liability and made the May 15, 1998 payment.

         Physician service expense under the current and previously existing
         contracts for the years ended December 31, 1997 and 1996 was
         approximately $1,284,000 and $1,228,000, respectively.

         (D) LEGAL ACTIONS

         In December of 1995, the physician group terminated its contract for
         reading services with the Brandon and SunPoint centers and in February
         of 1996, filed suit against the centers alleging the centers materially
         breached the contract by failing to pay physician fees timely and
         incorrectly billed certain procedures. The physician group sought
         payment for services rendered (approximately $178,000) and lost profits
         (approximately $850,000). In February of 1997, the court denied the
         claim for lost profits and entered an award in favor of the physician
         group relating to services rendered. The Company substantially reserved
         for the claim for services and satisfied the judgement in February of
         1997 by obtaining financing for approximately $205,000 from its
         accounts receivable lender. Subsequently, a motion by the physicians
         for a rehearing was denied. The physicians filed a notice of appeal for
         the lost profits claim in April, 1997. Also, a motion for costs
         relating to the lawsuit (approximating $10,000) was filed by the
         physician group. The appeal was denied by the District Court of Appeal,
         Second District of Florida on January 30, 1998 and became final after
         30 days. Attorney fees were awarded to Brandon Diagnostic Center, Ltd.

         The Company is a defendent in a suit filed on January 5, 1998 by Lake
         City Medical Group, P.A. ("P.A.") for past due rents approximating
         $16,500. The Company has reached an out of court settlement in which
         the Company has agreed to pay $12,000.



                                       43

<PAGE>   44


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         The Company filed suit against TeleQuest, Inc. due to its
         non-performance under the radiologist contract. However, an out of
         court settlement had been reached. (See c - Professional Services
         Agreements, above.)


12)      SHAREHOLDERS' EQUITY

         COMMON STOCK

         In 1997, the Company issued 104,815 shares of common stock in
         satisfaction of $156,742 of trade creditor debt.

         In June of 1997, the Company entered into an agreement for consulting
         and funding services which called for compensation payable in nine
         installments of 14,583 shares of common stock each, four quarterly
         installments of $43,750 each in value of common stock at the prevailing
         market price, plus options. The Company subsequently, in 1997,
         terminated the contract and in January of 1998, entered into a release
         and settlement agreement. The Company issued in 1997 29,166 shares of
         Common Stock valued at $48,397 under the contract and settled with an
         additional payment of $15,000 in 1998.

         The Company on June 27, 1997 acquired 127,773 shares of common stock
         (net of 14,197 shares given in payment of commission) of Equisure, Inc.
         (American Stock Exchange: EQE) valued at the providing market rate
         totalling $1,800,000 from an investment trust in exchange for 1,459,188
         shares of its own common stock. There was an agreement in place with
         the trust that in the event the market value of the shares would
         decline additional shares would be issued to effectively eliminate the
         market risk. On August 4, 1997 the AMEX called a halt to trading EQE
         shares on the AMEX. On September 9, 1997 the Company and the trust
         agreed to rescind the transaction in its entirety.


         STOCK OPTIONS

         On April 21, 1995 the Board of Directors approved an Employee Stock
         Option Plan ("employee plan") and a Non-employee Director Stock Option
         plan ("director plan") for the purpose of competing successfully in
         attracting, motivating, and retaining employees and non-employee
         directors with outstanding abilities. Options granted under the
         employee plan are intended to be incentive stock options. The total
         number of shares to which options may be granted under the employee and
         director plans are 200,000 shares. Generally, the exercise price shall
         be fixed at no less than 100% of the average fair market value of the
         shares at date of option.

         During 1996 options for 10,000 shares were granted under the employee
         plan. No options were granted in 1997 under the employee or director
         plans; however, in 1997 option for 15,000 shares were gratned for
         services rendered. 


                                       44

<PAGE>   45


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         A summary of the status of the Company's outstanding stock options as
         of December 31, 1997, and 1996, and changes during the years ending on
         those dates is presented below.

<TABLE>
<CAPTION>
                                                                  Weighted Average
                                                         Shares    Exercise Price
                                                         ------    --------------
         <S>                                             <C>         <C>     
         Options outstanding, December 31, 1995          50,000      $   7.20
         Options granted                                 10,000      $     -- 
         Options exercised                                   --            --
         Options outstanding, December 31, 1996          60,000      $   6.69
         Options granted                                 15,000            --
         Options exercised                                   --            --
         Options outstanding, December 31, 1997          75,000      $   5.95
</TABLE>


         The following table summarizes information concerning currently
         outstanding and exercisable stock options.

<TABLE>
<CAPTION>
                                                                  Weighted       Weighted
                                   Range of        Number     Remaining Contract  Average
                                Exercise Prices  Outstanding     Life (Years)    Exercise
                                ---------------  -----------  ------------------ --------
         <S>                      <C>              <C>               <C>           <C>  
         Outstanding Options:     $1.50-7.20       75,000            9             $5.95

         Exercisable Options:     $1.50-7.20       75,000            9             $5.95
</TABLE>

         The Company has adopted only the disclosure provisions of Financial
         Accounting Standard No. 123 "Accounting of Stock-Based Compensation,"
         as it relates to employment awards. It applies APB Option No. 25,
         "Accounting for Stock Issued to Employees," and related interpretations
         in accounting for its plans. If the Company had elected to recognize
         compensation expense based upon the fair value at the grant date
         forwards under these plans consistent with the methodology prescribed
         by SFAS 123, the Company's net loss per common share would be increased
         to the pro forma amounts indicated below for the years ended December
         31:

<TABLE>
<CAPTION>
                                                            1997              1996
                                                            ----              ----
         <S>                         <C>                <C>               <C>        
         Net loss                    As reported        $ 1,910,131       $ 1,241,661
                                     Pro forma            1,920,181         1,261,661


         Loss per common share       As reported        $       .60       $       .48
                                     Pro forma                  .61               .49
</TABLE>

         The fair value of each option grant is estimated on the date of grant
         using the Binomial options-pricing model with the following
         weighted-average assumptions used for grants in 1997 and 1996, no
         dividend yield for all years, expected volatility of approximately 80%
         and 124%; risk-free interest rates of approximately 5.5% and 6% and
         expected lives of approximately 1 and 2.5 years, respectively.

                                       45

<PAGE>   46


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         WARRANTS

         Pursuant to consulting agreement dated March 29, 1996 between the
         Company and an outside computer consultant the Board authorized 100,000
         warrants exercisable at $3.00 to be issued for services rendered. The
         warrants were issued on July 25, 1996 and valued at the fair value of
         the contracted services performed ($8,000.) 55,500 of these warrants
         were exercised during 1996; the remaining warrants were exercised in
         1997.

         In March on 1996, the Company entered into an agreement for financial,
         consulting and investment banking services. The Company agreed to pay a
         compensation for these services $16,000 which it recognized in 1996.
         The Company was going to issue up to 80,000 warrants for these
         services, however, the contract was subsequently terminated before the
         services were rendered.

         A summary of the status of the Company's outstanding warrants as of
         December 31, 1997 and 1996, and changes during the years ending on
         those dates is presented below.

<TABLE>
<CAPTION>
                                                                           Weighted Average
                                                           Warrants         Exercise Price
                                                           --------         --------------
         <S>                                               <C>             <C>            
         Warrants outstanding, December 31, 1995            92,705             $7.20
         Warrants granted                                  100,000                --
         Warrants exercised                                 55,500              7.20
         Warrants outstanding, December 31, 1996           137,205              7.20(1)
         Warrants granted                                       --              3.00
         Warrants exercised                                 52,000              1.50(2)
         Warrants expired                                   85,205              3.00
         Warrants outstanding, December 31, 1997                --                      
</TABLE>


         (1)      Effective May 24, 1996 the Company lowered the strike price to
                  $3.00 a share (the fair market value of the common share at
                  that date) for all outstanding warrants at that date.
         (2)      Effective June 17, 1997, the Company lowered the strike price
                  to $1.50 a share for all outstanding warrants at that date.



                                       46


<PAGE>   47


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(13)     RELATED PARTIES

         At December 31, 1996 the Company was indebted to the President of
         Orange Park for $33,000 which is reflected in the December 31, 1996
         balance sheet in a "Notes due to related parties." During 1996 the
         Company reimbursed this executive approximately $10,000 for expenses
         that he paid on behalf of the Company. In 1997, the Company issued its
         common stock valued at $51,804 as satisfaction of the remaining balance
         of this debt; purchase of certain medical equipment valued at $20,000
         and reimbursement of expenses paid by this executive on behalf of the
         Company.

         The Company through its Orange Park facility utilizes various
         diagnostic and office equipment leased by Neurophysiology Associates,
         Inc. ("NPA"). NPA is 100% owned by the President and Chief Operating
         Officer of Orange Park. The Company has agreed to compensate NPA in no
         more or less favorable terms than the original lease calls for. Monthly
         payments approximate $1,920; annual rent expense approximated $23,000
         in 1996 and 1997. Certain payments by the Company are made directly to
         the third party lessor.

         In July of 1996, the Company entered into a month to month rental
         arrangement for its regional office (approximately 2,200 square feet)
         in northeast Florida with Medical Consultants Inc. President and Chief
         Operating Officer of Orange Park is 100% owner of Medical Consultants,
         Inc. The agreement calls for rental payments of $1,500 per month. Rent
         expense for these spaces in 1997 and 1996 totaled $18,000 and $9,000,
         respectively. The office was closed in March, 1998.

         In July of 1996, a triple net lease became effective between the
         Company and Sundance Partners II (a Florida general partnership) for a
         free standing 7,100 medical facility used for Riverside's Diagnostic
         Center. The facility is located in the Riverside area of Jacksonville,
         Florida. The lease term is for an initial five years with a one time
         option to extend for a five year period. Rent expense for 1997 and 1996
         approximated $117,000 and $58,000, respectively. Sundance Partners II
         is 100% owned by the Company's Chief Executive Officer and President.

         In November 1996, the past CEO and the COO loaned the Company
         approximately $33,000 each. The loans were due on demand and bear an 8%
         interest rate. In 1997, the officers each accepted stock valued at
         $121,900 as payment of this indebtedness and unpaid bonuses from 1996.

         One of the Company's directors (currently resigned), a partner of Foley
         and Lardner, a law firm that is one of the Company's legal counselors.
         Total expense to the firm amounted to approximately $36,000 in 1996. In
         1997, the firm accepted stock value at $150,000 in settlement for the
         Company's indebtedness which, at the time, approximated that amount.

         In March 1997, the Company borrowed $125,000 from a related party
         corporation (majority owned by the Company's past CEO and the COO. The
         proceeds were used to pay property taxes. The loan was due April 29,
         1997 and was expected to be paid out of receipts from overdue provider
         payments. The loan was paid down and a remaining $62,500 remains to be
         paid and appears in the balance sheet as "Note Due Related Party".

         The Company has contracted with Healthy Services, Inc. which performs
         bone density diagnostic services. Mr. Curtis Alliston (President and
         COO) owns 50% interest in Healthy Services. The Company bills and
         collects for the services rendered and retains a percentage of
         collection varying from 25% to 50%. Total net fees earned by Healthy
         Services for 1997 approximate $68,000.


                                       47

<PAGE>   48


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The Company engages Alan Serna (D.B.A.: Clearway Cleaning) to perform
         janitorial services and laundry services for the corporate office,
         Brandon and SunPoint facilities. Mr. Serna is the step son-in-law of
         Mr. Alliston.

         During 1995 the Company incurred approximately $88,000 in costs related
         to a potential opening of a new site. Under an agreement with Sundance
         III (a Florida general partnership), owned jointly by Mr. Taneja and
         Mr. Alliston, Sundance III was to rent the Company its building for the
         above mentioned site. However, in the event the Company was to abandon
         the opening, Sundance III was to sell off the building and reimburse
         the Company from the proceeds of such sale. In 1996, the project was
         abandoned, sold and the reimbursement made.

(14)     SUBSEQUENT EVENTS

         On February 23, 1998 the Company entered into a definitive agreement to
         merge with American Enterprise Solutions, Inc. ("AES"). The transaction
         is expected to close in the second quarter of 1998. Upon merger the
         separate existence of AES will cease and the Company, being the
         surviving corporation, will change its name to American Enterprise
         Solutions, Inc. It is intended that the merger transaction be, for tax
         purposes, a tax free reorganization.

         In March of 1998 the Company entered into a private placement Stock
         Purchase Agreement with AES. The Company issued 500,000 shares of
         Series A Preferred Stock in exchange for 8,000,000 common shares of
         Halis, Inc. (OTCBB:HLIS) held by AES and valued at $2,000,000. This
         value was based upon the market value at the date of exchange less a
         discount due to, among other things, the exchange being a large block
         of Halis, Inc. common stock. The Company, at present, intends to
         utilize a major portion of the Halis, Inc. securities as collateral for
         securing debt financing and obtaining extended loan or lease terms for
         existing obligations. The remaining Halis, Inc. securities may be sold
         to provide cash if needed. Currently, the Company has not determined
         the time frame required to sell the securities nor the selling price
         that would be realized upon sale of the Halis, Inc. securities.
         Therefore, the amount available for potential future cash needs is not
         known at this time.

         The Preferred Stock has conversion rights at the rate of 44.11 shares
         of Common Stock to one share of Preferred Stock. A portion of the
         Preferred Shares were converted giving AES 65% of the total 8,880,000
         shares of Common Stock outstanding on March 27, 1998. As part of the
         merger, the remaining Preferred Shares will also be converted to Common
         Stock. After a total of 22,057,407 of Common Stock are issued and in
         accord with appropriate amendments to the Articles of Incorporation,
         NDI's "old" shareholders will own an aggregate of 12.3% of the post
         merger Common Stock and AES "new" shareholders will own 87.7%.
         Subsequently, a reverse stock split will take place.


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

         None.


                                       48
<PAGE>   49


                                    PART III

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

Prior to January 19, 1998, the Board of Directors consisted of Curtis L.
Alliston, Jugal K. Taneja, Martin A. Traber, Donald Ward and Susan Carmichael.
Mr. Ward resigned as a director effective January 1, 1997. Mr. Traber resigned
as director effective March 27, 1997. Susan Carmichael resigned as director
effective April 7, 1997. Mr. Taneja resigned as director effective January 19,
1998.

CURTIS L. ALLISTON, Age 52, currently is a director, the President and Chief
Operating Officer of the Company. He also serves as a director and the President
and Chief Executive Officer of Brandon Clinical Associates, Inc., a home health
care group, and President and Chief Executive Officer of Alliston Enterprises,
an investment and construction Company. From 1988 to 1992, he served as
President and Chief Executive Officer of Tampa Medical Group Management, a
medical practice management firm, and President and Chief Executive Officer of
Bay Cardiac Imaging, a mobile cardiac ultrasound service provider. Mr. Alliston
was the founder of Positron Partners, Inc., a joint venture specializing in
positron emission tomography, and served as its President and Chief Executive
Officer from 1990 to 1992. Also, from 1990 to 1993, Mr. Alliston served as the
President and Chief Executive officer of Cleveland Avenue Real Estate Partners,
a medical real estate investment group.

JUGAL K. TANEJA, Age 51, was a director, the Chief Executive officer and
Secretary of the Company. Mr. Taneja also serves as the Chairman, Chief
Executive Officer and director of NuMED Home Health Care, Inc. and Chief
Executive Officer and director of NuMED Surgical, Inc., publicly-held entities
involved in the home health care and medical equipment industries. He also
serves as the President and director of Bancequity Petroleum, Inc. Before his
association with Bancapital and NuMED, Mr. Taneja served as Senior Vice
President of Union Commerce Bank and Huntington National Bank.

MARTIN A. TRABER, Age 48, is a partner in the law firm of Foley & Lardner, a
national general practice law firm. He has also served as an Adjunct Professor
of Law at Cleveland Marshall Law School where he structured a course on and
lectured in the area of real estate finance. Prior to joining Foley & Lardner in
August, 1994, he practiced with Arter & Hadden since 1970 and was a partner in
the Cleveland office.

DONALD G. WARD, Age 53, has served as Administrative Director of Clay Cardiology
Associates, P.A., a group of cardiology specialists associated with several
major hospitals in northeastern Florida and northeastern Georgia, since 1992.
From 1990 to 1992, Mr. Ward was the Director of Special Projects/Mobile Imaging
Services for St. Vincent's Health Care Systems in Jacksonville, Florida. Prior
thereto, he has served in various position in the health care industry.

SUSAN J. CARMICHAEL, Age 48, is currently President and Chief Operating Officer
of NuMED Home Health Care, Inc. and Board Director since 1991. Ms. Carmichael
was the past President of Whole Person Home Health Care and Pennsylvania Medical
Concepts prior to being purchased by NuMED to serve as its entrance into the
home health industry. NuMED employs an average of 500+ employees and caring for
700+ clients in Florida, Pennsylvania, and Ohio. Previously Co-owner, President,
and Chairperson of the Board for Health Consulting Associates (1981-1985),
served as Chairperson for the Erie Pennsylvania Mental Health/Mental Retardation
Board for two, six-year terms, and has received the "Outstanding Service to the
Community" citation from Erie County.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and holders of more than 10% of the Common Stock to file
with the Securities Exchange commission initial reports of beneficial ownership
and reports of changes in beneficial ownership of Common Stock and any other
equity securities of the Company. To the Company's knowledge, based solely upon
a review of the forms filed with the Company by such person, all such Section
16(a) filing requirements were complied with by such persons in 1997.


                                       49

<PAGE>   50


ITEM 10 - EXECUTIVE COMPENSATION


                             EXECUTIVE COMPENSATION


The following table sets forth certain information concerning compensation paid
to or earned by the Company's Chief Executive Officer and President and
President of Orange Park. No other executive officer earned more than $100,000
for the fiscal years ended December 31, 1996 and 1997. The directors of the
Company receive no compensation.


<TABLE>
<CAPTION>
                                                                                    LONG-TERM
                                        ANNUAL COMPENSATION                     COMPENSATION AWARDS
                                        -------------------                    ---------------------

                              FISCAL                            ALL OTHER      SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION    YEAR     SALARY      BONUS      COMPENSATION          OPTIONS
---------------------------   ------    ------      -----      ------------    ----------------------
<S>                           <C>      <C>         <C>         <C>             <C>  
Jugal K. Taneja,               1997     75,000         --         7,950                   --
  Chief Executive Officer      1996     75,000     68,015(2)     20,356(1)                --
                               1995     76,250     75,614        18,958(1)            25,000
                               1994     10,000     10,000        16,400(1)                --
                               1993         --         --            --                   --

Curtis L. Alliston,            1997    150,000         --         7,950
  President and Chief          1996    150,000     68,015(2)     20,356(1)                --
  Operating Officer            1995    150,000     69,125        19,708(1)            25,000
                               1994     83,600     54,000         8,700(1)                --
                               1993     75,000         --         6,700(1)                --
 
Ron Baugh,                     1997    100,000         --        10,200(1)                --
  President of Orange Park
</TABLE>

(1)      Represents club dues and automobiles expense allowance.
(2)      Received stock in lieu of payment.



The following tables set forth information with respect to grants of options to
purchase shares of Common Stock during 1997 to the executive officers named in
the Summary Compensation Table. The amounts shown as potential realizable values
on the options are based on assumed annualized rates of appreciation in the
price of the Common Stock of 0%, 5% and 10% over the term of the options, as set
forth in rules of the Securities and Exchange Commission. Actual gains, if any,
on stock option exercises are dependent on future performance of the Common
Stock. There can be no assurance that the potential realizable values reflected
in this table will be achieved.


                                       50

<PAGE>   51



                           STOCK OPTION GRANTS IN 1997

<TABLE>
<CAPTION>
                                                                      MARKET         POTENTIAL REALIZABLE VALUE AT ASSUMED
                                     % OF TOTAL                     PRICE PER             ANNUAL RATES OF STOCK PRICE
                                       OPTIONS                       SHARE OF           APPRECIATION FOR OPTION TERM(2)
                       NUMBERS OF     GRANTED TO                    UNDERLYING       -------------------------------------
                       SECURITIES     EMPLOYEES                    SECURITY ON
                       UNDERLYING     IN FISCAL      EXERCISE        DATE OF     EXPIRATION
     NAME           OPTIONS GRANTED     1997      PRICE PER SHARE   GRANT (1)       DATE          0%        5%         10%
------------------  ---------------  -----------  ---------------  ------------  -----------  ---------  ---------  --------
<S>                 <C>              <C>          <C>              <C>           <C>          <C>        <C>        <C>

No options were granted to executive officers in 1997.
</TABLE>
---------------

The following table sets forth information concerning each exercise of options
during 1997 by the executive officers named in the Summary Compensation Table.
No options were outstanding as of December 31, 1997.


                            OPTION EXERCISES IN 1997

<TABLE>
<CAPTION>
                               SHARES ACQUIRED ON
       NAME                         EXERCISE               VALUE REALIZED ($)
-------------------            ------------------          ------------------
<S>                            <C>                         <C>


No options were exercised by executives in 1997. VALUE REALIZED ($)

</TABLE>



ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                             PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the Record Date, March 31, 1998, with respect
to: (i) each of the Company's directors; (ii) each of the Company's executive
officers named in the Summary Compensation Table; (iii) all directors and
executive officers of the Company as a group; and (iv) each person known by the
Company to own beneficially more than 5% of the Common Stock. Except as
otherwise indicated, each of the shareholders listed below has sole voting and
investment power over the shares beneficially owned.

<TABLE>
<CAPTION>
                                                                                             BENEFICIALLY OWNED
                                                                                            --------------------

NAME                                                                                          SHARES     PERCENT
----                                                                                          ------     -------
<S>                                                                                         <C>          <C> 
Curtis L. Alliston (3)(4) ...............................................................     622,000      7.0%
Directors and executive officers as a group (1 persons)(5) ..............................     622,000      7.0%
Jugal K. Taneja (1)(2) ..................................................................   1,020,000     11.5%
American Enterprise Solutions, Inc. .....................................................   5,786,570     65.2%
</TABLE>


(1)      The address of Mr. Taneja is 7270 Sawgrass Point Drive, Pinellas Park,
         Florida 33782.
(2)      Includes 100,000 shares of Common Stock held by First Delhi Trust
         established in 1987 which was established for the benefit of Mr.
         Taneja's children, over which Mr. Taneja will exercise voting rights;
         720,000 shares are held by Twenty First Century Health Care Fund, LLC
         ("CHCF") over which Mr. Taneja has no economic interest but shares
         voting rights with other members of CHCF. The 1,020,000 shares shown
         does not include 115,000 shares held by Mr. Taneja's children, who are
         over the age of 21 years.



                                       51

<PAGE>   52



(3)      Includes 100,000 shares of Common Stock held by Alliston Family Limited
         Partnership, which was established for the benefit of Mr. Alliston's
         children, over which Mr. Alliston will exercise voting rights.
(4)      The business address of Mr. Alliston is 755 West Brandon Boulevard,
         Brandon, Florida 33511.
(5)      Includes notes (1) through (3) above.



ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


                              CERTAIN TRANSACTIONS


The Company has an Employee Stock Option Plan ("employee plan") and a
Non-employee Director Stock Option plan ("director plan"). Options granted under
the employee plan are intended to be incentive stock options. The total number
of shares to which options may be granted under the employee and director plans
are 200,000 shares. Generally, the exercise price shall be fixed at no less than
100% of the average fair market value of the shares at date of option. During
1996 the Company granted options for 10,000 shares exercisable at $3 per share
under the Employee Plan. At December 31, 1997 there are no outstanding options
under the Director Plan and there are 10,000 outstanding options under the
Employee Plan.

The Company through its Orange Park facility utilizes various diagnostic and
office equipment leased by Neurophysiology Associates, Inc ("NPA"). NPA is 100%
owned by Ron Baugh, President and Chief Operating Officer of Orange Park. The
Company has agreed to compensate NPA in no more or less favorable terms than the
original lease calls for. Monthly payments approximate $1,920; annual rent
expense approximated $23,000 in 1996 and 1997. Certain payments by the Company
are made directly to the third party lessor.

In July of 1996, the Company entered into a month to month rental arrangement
for its regional office (approximately 2,200 square feet) in northeast Florida
with Medical Consultants Inc. The President and Chief Operating Officer of
Orange Park is 100% owner of Medical Consultants, Inc. The agreement calls for
rental payments of $1,500 per month. Rent expense for these spaces in 1997 and
1996 totaled $18,000, and $9,000, respectively.

In July of 1996, a triple net lease became effective between the Company and
Sundance Partners II (a Florida general partnership) for a free standing 7,100
medical facility used for Riverside's Diagnostic Center. The facility is located
in the Riverside area (an old "upscale" residential area) of Jacksonville,
Florida. The lease term is for an initial five years with a one time option to
extend for a five year period. Rent expense for 1997 and 1996 approximated
$117,000, and $58,000, respectively. Sundance Partners II is 100% owned by
Messrs. J. Taneja and C. Alliston.

One of the Company's directors (currently resigned) Mr. Traber is a partner of
Foley and Lardner, a law firm that is one of the Company's legal counselors.
Total expense to the firm amounted to approximately $36,000 in 1996. In 1997,
the firm accepted Company stock valued at $150,000 in settlement for the
Company's indebtedness which, at the time, approximated that amount.

In November , 1996 J. Taneja and C. Alliston loaned the Company approximately
$33,000 each. The loans are due on demand and bear an 8% interest rate. In 1997,
the officers each accepted stock valued at $121,900 as payment of this
indebtedness and unpaid bonuses from 1996.


                                       52

<PAGE>   53



At December 31, 1996 the Company is indebted to the President of Orange Park for
$33,000 which is reflected in the December 31, 1996 balance sheet in a "Notes
due to related parties." During the year the Company reimbursed this executive
approximately $10,000 for expenses that he paid on behalf of the Company. In
1997, the Company issued its common stock valued at $51,804 as satisfaction of
the balance of this debt, purchase of certain medical equipment valued at
$20,000 and reimbursement of expenses paid by this executive on behalf of the
Company.

In March of 1997 the Company borrowed $125,000 from a related party corporation
(majority owned by Messrs. Taneja and Alliston). The proceeds were used to pay
property taxes. The loan was due April 29, 1997 and is expected to be paid out
of receipts from overdue provider payments. The loan was paid down and a
remaining $62,500 remains to be paid.

The Company has contracted with Healthy Services, Inc. which performs bone
density diagnostic services. Mr. Curtis Alliston (President and COO) owns 50%
interest in Healthy Services. The Company bills and collects for the services
rendered and retains a percentage of collection varying from 25% to 50%. Total
net fees earned by Healthy Services for 1997 approximate $68,000.

During 1995 the Company incurred approximately $88,000 in costs related to a
potential opening of a new site. Under an agreement with Sundance III (a Florida
general partnership), owned jointly by Mr. Taneja and Mr. Alliston, Sundance III
was to rent the Company its building for the above mentioned site. However, in
the event the Company was to abandon the opening, Sundance III was to sell off
the building and reimburse the Company from the proceeds of such sale. In 1996,
the project was abandoned, sold and the reimbursement made.


                                       53

<PAGE>   54



Item 13 - Exhibits and Reports on Form 8-K

  (a) List of exhibits filed as part of this report:


<TABLE>
<CAPTION>
Exhibit
Number                              Description
-------                             -----------
<S>      <C>                 
3.1      Articles of Incorporation of the Company (Exhibit 3.1 to the Company's
         Form SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
         reference herein).

3.2      By-laws of the Company (Exhibit 3.2 to the Company's Form SB-1
         Registration Statement (Reg. No. 33-80612) is incorporated by reference
         herein).

3.3      Articles of Amendment to Articles of Incorporation (Exhibit 10.50,
         pages 11-15 of Exhibit B to the Company's Form 8-K dated April 10, 1998
         is incorporated by reference herein).

4.1      1995 Employee Stock Option Plan. (Exhibit 4.1 of Company's Form S-8
         Registration No.33-80293 is incorporated by reference herein).

4.2      1995 Non-Employee Director Stock Option Plan. (Exhibit 4.2 of Company's
         Form S-8 Registration No. 80293 is incorporated by reference herein).

4.3      Warrants Agreement (Exhibit 4.4 to Amendment No. 3 to the Company's
         Form SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
         reference herein).

10.3     Lease Agreement dated April 1, 1995 by and between National
         Diagnostics/Orange Park, Inc. and Sundance Partners. (Exhibit 10.3 of
         Company's Form 10-QSB for the period ended March 31, 1995 is
         incorporated by reference herein).

10.4     Brandon Diagnostic Center, Ltd.'s Revolving Note dated May 30, 1995.
         (Exhibit 10.1 of Company's Form 10-QSB for the period ended June 30,
         1995 is incorporated by reference herein.)

10.5     Employment Agreement by and between the Company and Curtis L. Alliston
         dated November 10, 1995. (Exhibit 10.1 of Company's Form 10-QSB for the
         period ended September 30, 1995 is incorporated by reference herein).

10.6     Employment Agreement by and between the Company and Jugal K. Taneja
         dated November 10, 1995. (Exhibit 10.2 of Company's Form 10-QSB for the
         period ended September 30, 1995 is incorporated by reference herein).

10.7     Lease Agreement dated July 12, 1995 between National Diagnostics/Orange
         Park, Inc. and Siemens Medical Systems, Inc. effective September 14,
         1995. (Exhibit 10.3 of Company's Form 10-QSB for the period ended
         September 30, 1995 is incorporated by reference herein).

10.8     Professional Services Agreement dated December 21, 1995 between Brandon
         Diagnostic Center, Ltd., SunPoint Diagnostic Center, Inc. and Robert D.
         Marshall, M.D., P.A. (Exhibit 10.8 of Company's Form 10-KSB for the
         period ended December 31, 1995 filed on April 1, 1996 is incorporated
         by reference herein).

10.9     Purchase Agreement dated February 19, 1996 between National
         Diagnostics, Inc., National Diagnostics/Orange Park, Sundance Partners,
         and partners (Exhibit 10.9 of the Company's Form 10-KSB for the period
         ended December 31, 1995 filed on April 1, 1996 is incorporated by
         reference herein).
</TABLE>


                                       54

<PAGE>   55



<TABLE>
<CAPTION>
Exhibit
Number                              Description
-------                             -----------
<S>      <C>                 
10.10    Agreement of Partnership of Sundance Partners (a Florida partnership)
         dated March 1, 1995. (Exhibit 10.10 of the Company's Form 10-KSB for
         the period ended December 31, 1995 filed on April 1, 1996 is
         incorporated by reference herein).

10.11    Lease Agreement dated September 3, 1991 and modification thereto dated
         August 8, 1992 by and between Brandon Diagnostic Center, Ltd. and Bay
         Land Investment, Inc. relating to a portion of the Company's Brandon,
         Florida facility. (Exhibit 10.2 to the Company's Form SB-1 Registration
         Statement (Reg. No. 33-80612) is incorporated by reference herein).

10.12    Lease Agreement dated February 1, 1992 and modification thereto dated
         August 8, 1992 by and between Brandon Diagnostic Center, Ltd. and Bay
         Land Investment, Inc. relating to a portion of the Company's Brandon,
         Florida facility. (Exhibit 10.3 to the Company's Form SB-1 Registration
         Statement Reg. No. 33-80612) is incorporated by reference herein).

10.13    Lease Agreement dated January 15, 1993 by and between Brandon
         Diagnostic Center, Ltd. and Bay Land Investment, Inc. relating to a
         portion of the Company's Brandon, Florida facility. (Exhibit 10.4 to
         the Company's Form SB-1 Registration Statement (Reg. no. 33-80612) is
         incorporated by reference herein).

10.14    Lease Agreement dated May 4, 1994 by and between Alpha Associates, Inc.
         and Sun Point Associates, Inc. and Sun Point Associates relating to the
         Company's Ruskin, Florida facility. (Exhibit 10.5 to the Company's for
         SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
         reference herein).

10.15    Equipment Lease Agreement dated September 11, 1991 by and between
         Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
         supplements thereto relating to the Company's magnetic resonance
         imaging equipment. (Exhibit 10.6 to the Company's Form SB-1
         Registration Statement (Reg. No. 33-80612) is incorporated by reference
         herein).

10.16    Equipment Lease Agreement dated September 11, 1991 by and between
         Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
         supplement thereto relating to the Company's computer tomography
         equipment. (Exhibit 10.7 to the Company's Form SB-1 Registration
         Statement (Reg. No. 33-80612) is incorporated by reference herein).

10.17    Equipment Lease Agreement dated November 18, 1991 by and between
         Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
         supplements thereto relating to the Company's nuclear medicine
         equipment. (Exhibit 10.9 to the Company's Form SB-1 Registration
         Statement (Reg. No. 33-80612) is incorporated by reference herein).

10.19    Lease Agreement dated September 1, 1994 by and between Highland
         Properties of Gulf Coast, Ltd. and Brandon Diagnostic Center, Ltd.
         relating to the Company's Brandon, Florida facility. (Exhibit 10.21 to
         Amendment No. 3 to the Company's Form SB-1 Registration Statement (Reg.
         No. 33-80612 is incorporated by reference herein).

10.20    Asset Purchase Agreement effective November 1, 1993 by and between
         Alpha Acquisitions Corp. and Equipment Company of Brandon, Inc.
         pertaining to the acquisition by Alpha Acquisitions Corp. of the 40%
         limited partnership interest in Brandon Diagnostic Center, Ltd.
         (Exhibit 10.22 to Amendment No. 3 to the Company's Form SB-1
         Registration Statement (Reg. No. 33-80612) is incorporated by reference
         herein).

10.21    Unit Purchase Option dated September 27, 1994 relating to 50,000 Units
         (Exhibit 4.5 to Amendment No. 2 to the Company's Form SB-1 Registration
         Statement (Reg. No. 33-80612) is incorporated by reference herein).

10.22    Equipment Lease Agreement dated July 19, 1994 by and between Medical
         Consultants of Middleburg, Inc. and Copelco Capital Corporation
         relating to Orange Park's ultrasound equipment. (Exhibit 10.17 to the
         Company's Form 10-KSB for December 31, 1994 is incorporated by
         reference herein).
</TABLE>



                                       55

<PAGE>   56



<TABLE>
<CAPTION>
Exhibit
Number                              Description
-------                             -----------
<S>      <C>                 
10.23    Master Lease Agreement dated June 27, 1994 by and between Alpha
         Associates, Inc. d/b/a Brandon Diagnostic Center and Copelco Leasing
         Corporation and schedules thereto relating to SunPoint's diagnostic
         imaging equipment. (Exhibit 10.18 to the Company's Form 10-KSB for
         December 31, 1994 is incorporated by reference herein).

10.24    Equipment Lease Agreement dated August 1, 1994 by and between Brandon
         Diagnostic Center, Ltd. and Siemens Credit Corporation relating to
         SunPoint's diagnostic imaging equipment. (Exhibit 10.19 to the
         Company's Form 10- KSB for December 31, 1994 is incorporated by
         reference herein).

10.25    Asset Purchase Agreement, dated February 6, 1995 and effective as of
         January 31, 1995, as amended, by and among Middleburg Medical Imaging
         Consultants, Inc. (renamed National Diagnostics/Orange Park, Inc.),
         Medical Consultants of Middleburg, Inc. and Medical Imaging
         Consultants, Inc. (Exhibit 10.20 to the Company's Form 10- KSB for
         December 31, 1994 is incorporated by reference herein).

10.26    Employment Contract, dated February 6, 1995 and effective as of January
         31, 1995, by and between Ronald D. Baugh and Middleburg Medical Imaging
         Consultants, Inc. (Exhibit 10.21 to the Company's Form 10-KSB for
         December 31, 1994 is incorporated by reference herein).

10.28    Professional Services Agreement, dated November 30, 1994, by and
         between the Company and Drs. Hurt, Isaacs, Johnston and Cranford, P.A.
         (Exhibit 10.23 to the Company's Form 10-KSB for December 31, 1994 is
         incorporated by reference herein).

10.29    Services Agreement, dated November 17, 1994, by and between Diagnostic
         Cardiology Associates, P.A. and the Company. (Exhibit 10.24 to the
         Company's Form 10-KSB for December 31, 1994 is incorporated by
         reference herein).

10.30    Term Loan Agreement and Revolving Loan Agreement, both dated March 6,
         1994, by and between Brandon Diagnostic Center, Ltd. and SouthTrust
         Bank of West Florida, and related Notes and Security Agreements
         (Exhibit 10.25 to the Company's Form 10-KSB for December 31, 1994 is
         incorporated by reference herein).

10.31    Lease Agreement dated August 15, 1995 between National
         Diagnostics/Riverside, Inc. ("Riverside") and Sundance Partners II
         relating to the Company's Riverside fixed site facility. (Exhibit 10.33
         to the Company's 10-QSB for June 30, 1996 is incorporated by reference
         herein).

10.32    Equipment Lease Agreement dated July 15, 1996 between National
         Diagnostics/Riverside, Inc. and Siemens Credit Corporation relating to
         Riverside's computer tomography equipment. (Exhibit 10.34 to the
         Company's 10-QSB for September 30, 1996 is incorporated by reference
         herein).

10.33    Equipment Lease Agreement dated August 12, 1996 between National
         Diagnostics/Riverside, Inc. and Siemens Credit Corporation relating to
         the Riverside's ultrasound equipment. (Exhibit 10.35 to the Company's
         10-QSB for September 30, 1996 is incorporated by reference herein).

10.34    Promissory Note and Business Loan Agreement dated September 9, 1996
         between Brandon Diagnositc Center, Ltd. and South Hillsborough
         Community Bank related to equipment refinancing. (Exhibit 10.36 to the
         Company's 10-QSB for September 30, 1996 is incorporated by reference
         herein).

10.35    Equipment Lease Agreement dated September 11, 1996 between National
         Diagnostics/Riverside, Inc. ("Riverside") and Siemens Credit
         Corporation relating to Riverside's Sireskop C. (Exhibit 10.37 to the
         Company's 10-QSB for September 30, 1996 is incorporated by reference
         herein).

10.36    Loan and Security Agreement dated September 13,1996 between National
         Diagnostics, Inc. and DVI Business Credit Corporation relating to the
         Company's line of credit. (Exhibit 10.38 to the Company's 10-QSB for
         September 30, 1996 is incorporated by reference herein).
</TABLE>


                                       56

<PAGE>   57



<TABLE>
<CAPTION>
Exhibit
Number                              Description
-------                             -----------
<S>      <C>                 
10.37    Promissory Note and Business Loan Agreement dated December 23, 1996
         between Brandon Diagnostic Center, Ltd. and South Hillsborough
         Community Bank related to the purchase of Stereotactic Mammography
         equipment. (Exhibit 10.37 to the Company's Form 10-KSB for December 31,
         1996 is incorporated by reference herein).

10.38    Equipment Lease Agreement dated January 22, 1997 between Brandon
         Diagnostic Center, Ltd. ("Brandon") and Siemens Credit Corporation
         relating to Brandon's Sireskop CX. (Exhibit 10.38 to the Company's Form
         10-KSB for December 31, 1996 is incorporated by reference herein).

10.39    Professional Service Agreement, effective February 1, 1997, by and
         between SunPoint Diagnostic Center, Inc. and TeleQuest, Inc. (Exhibit
         10.39 to the Company's Form 10-KSB for December 31, 1996 is
         incorporated by reference herein).

10.40    Professional Service Agreement, effective February 1, 1997, by and
         between National Diagnostics/Orange Park, Inc. and TeleQuest, Inc.
         (Exhibit 10.40 to the Company's Form 10-KSB for December 31, 1996 is
         incorporated by reference herein).

10.41    Professional Service Agreement, effective February 1, 1997, by and
         between Brandon Diagnostic Center, Ltd. and TeleQuest, Inc. (Exhibit
         10.41 to the Company's Form 10-KSB for December 31, 1996 is
         incorporated by reference herein).

10.42    Promissory Note and Security Agreement dated February 18, 1997 between
         National Diagnostics, Inc. and DVI Business Credit Corporation relating
         to the Company's installment loan. (Exhibit 10.42 to the Company's Form
         10- KSB for December 31, 1996 is incorporated by reference herein).

10.43    Exchange Agreement, dated June 27, 1997 by and between National
         Diagnostics, Inc. and Sudafric Suisse Trustees. (Exhibit 10.43 to the
         Company's Form 8-K dated July 22, 1997 is incorporated by reference
         herein).

10.44    Professional Services Agreement, dated May 15, 1997 by and between
         National Diagnostics, Inc. and University of Florida, for and on behalf
         of the Board of Regents of the State of Florida, for the Benefit of the
         Department of Radiology/UFHSCJ, College of Medicine, University of
         Florida. (Exhibit 10.44 to the Company's Form 10-QSB for June 30, 1997
         is incorporated by reference herein.)

10.45    Consulting Agreement, dated May 27, 1997 by and between National
         Diagnostics, Inc. and Capital Access Bureau, Inc. (Exhibit 10.45 to the
         Company's Form 10-QSB for June 30, 1997 is incorporated by reference
         herein).

10.46    Funding Agreement, dated May 27, 1997 by and between National
         Diagnostics, Inc. and Capital Access Bureau, Inc. (Exhibit 10.46 to the
         Company's Form 10-QSB for June 30, 1997 is incorporated by reference
         herein).

10.47    Professional Services Agreement dated August 1, 1997 by and between
         National Diagnostics, Inc. and Nancy C. Lawhon, M.D., P.C. (Exhibit
         10.47 to the Company's Form 10-QSB for June 30, 1997 is incorporated by
         reference herein).

10.48    Loan and Security Agreement, dated October 3, 1997 by and between
         National Diagnostics, Inc., SunPoint Diagnostic Center, Inc., National
         Diagnostics/Orange Park, Inc., National Diagnostics/Riverside, Inc.,
         Alpha Associates, Inc., Alpha Acquisitions, Inc., Brandon Diagnostic
         Center, Ltd., and HealthCare Financial Partners Funding, Inc. (Exhibit
         10.48 to the Company's Form 10-QSB for September 30, 1997 is
         incorporated by reference herein).

10.49    Merger Agreement dated February 23, 1998 by and between National
         Diagnostics, Inc., a Florida Corporation, and American Enterprise
         Solutions, Inc., a Florida Corporation. (Exhibit 10.49 to the Company's
         Form 8-K dated March 10, 1998 is incorporated by reference herein).
</TABLE>



                                       57

<PAGE>   58



<TABLE>
<CAPTION>
Exhibit
Number                              Description
-------                             -----------
<S>      <C>                 
10.50    Stock Purchase Agreement dated March 17, 1998 by and between National
         Diagnostics, Inc., a Florida Corporation and American Enterprise
         Solutions, Inc., a Florida Corporation. (Exhibit 10.50 to the Company's
         Form 8-K dated April 10, 1998 is incorporated by reference herein).

10.51    Professional Services Agreement dated October 13, 1997 by and between
         National Diagnostics, Inc. and Lisa Porter- Grenn, M.D.

10.52    Second Amendment to Merger Agreement by and between National
         Diagnostics, Inc. and American Enterprise Solutions, Inc. effective
         April 29, 1998.

20.1     National Diagnostics, Inc. Offer to Exchange dated July 6, 1995.
         (Exhibit 20.1 to the Company's Form 10-QSB for the period ended June
         30, 1995 is incorporated by reference herein).

21       Subsidiaries of Registrant

23.1     Consent of Independent Certified Public Accountants-Grant Thornton LLP

24       Powers of Attorney (included on signature page) (Exhibit 24 of the
         Company's Form 10-KSB for the period ended December 31, 1995 filed on
         April 1, 1996 is incorporated by reference herein).

27.1     Financial Data Schedule
</TABLE>


 (b)     Reports on Form 8-K.

         No Form 8-K was filed by the Company in the fourth quarter of 1997.

         The Company filed on March 10, 1998, a Form 8-K indicating a Merger
         Agreement dated February 23, 1998 by and between National Diagnostics,
         Inc., a Florida Corporation, and American Enterprise Solutions, Inc., a
         Florida Corporation.

         The Company filed on April 10, 1998, a Form 8-K indicating a private
         placement valued at $2,000,000 wherein National Diagnostics, Inc.
         issued 500,000 shares of Series A Preferred Stock of NATD to American
         Enterprise Solutions, Inc. ("AES") in exchange for 8,000,000 shares of
         Common Stock of Halis, Inc. (OTCBB:HALIS). On March 27, 1998, AES
         exercised its right to convert 131,185 shares of Series A Preferred
         Stock for 5,786,570 shares of Common Stock of the Company. After
         conversion, AES holds 65% of the total 8,880,000shares of Common Stock
         outstanding.


                                       58

<PAGE>   59



                                   SIGNATURES

         IN ACCORDANCE WITH SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.



Date:  May 18, 1998                    NATIONAL DIAGNOSTICS, INC.



                                       By:  /s/ Curtis Alliston
                                            -------------------------------
                                            Curtis L. Alliston
                                            President and Chief Operating
                                            Officer




                                       By:  /s/ Dennis Hult
                                            -------------------------------
                                            Dennis C. Hult
                                            Comptroller


                                       59

<PAGE>   60



                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                  Pagination by
                                                                                   Sequential
Exhibit                                                                             Numbering
Number                         Description of Document                               System
-------                        -----------------------                            -------------
<S>      <C>                                                                      <C>
3.1      Articles of Incorporation of the Company (Exhibit 3.1 to the Company's
         Form SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
         reference herein).

3.2      By-laws of the Company (Exhibit 3.2 to the Company's Form SB-1
         Registration Statement (Reg. No. 33-80612) is incorporated by reference
         herein).

3.3      Articles of Amendment to Articles of Incorporation (Exhibit 10.50,
         pages 11-15 of Exhibit B to the Company's Form 8-K dated April 10, 1998
         is incorporated by reference herein).

4.1      1995 Employee Stock Option Plan. (Exhibit 4.1 of Company's Form S-8
         Registration No.33-80293 is incorporated by reference herein).

4.2      1995 Non-Employee Director Stock Option Plan. (Exhibit 4.2 of Company's
         Form S-8 Registration No. 80293 is incorporated by reference herein).

4.3      Warrants Agreement (Exhibit 4.4 to Amendment No. 3 to the Company's
         Form SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
         reference herein).

10.3     Lease Agreement dated April 1, 1995 by and between National
         Diagnostics/ Orange Park, Inc. and Sundance Partners. (Exhibit 10.3 of
         Company's Form 10-QSB for the period ended March 31, 1995 is
         incorporated by reference herein).

10.4     Brandon Diagnostic Center, Ltd.'s Revolving Note dated May 30, 1995.
         (Exhibit 10.1 of Company's Form 10-QSB for the period ended June 30,
         1995 is incorporated by reference herein.)

10.5     Employment Agreement by and between the Company and Curtis L. Alliston
         dated November 10, 1995. (Exhibit 10.1 of Company's Form 10-QSB for the
         period ended September 30, 1995 is incorporated by reference herein).

10.6     Employment Agreement by and between the Company and Jugal K. Taneja
         dated November 10, 1995. (Exhibit 10.2 of Company's Form 10-QSB for the
         period ended September 30, 1995 is incorporated by reference herein).

10.7     Lease Agreement dated July 12, 1995 between National Diagnostics/Orange
         Park, Inc. and Siemens Medical Systems, Inc. effective September 14,
         1995. (Exhibit 10.3 of Company's Form 10-QSB for the period ended
         September 30, 1995 is incorporated by reference herein).
</TABLE>


                                       60

<PAGE>   61


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                                  Pagination by
                                                                                   Sequential
Exhibit                                                                             Numbering
Number                         Description of Document                               System
-------                        -----------------------                            -------------
<S>      <C>                                                                      <C>
10.8     Professional Services Agreement dated December 21, 1995 between Brandon
         Diagnostic Center, Ltd., SunPoint Diagnostic Center, Inc. and Robert D.
         Marshall, M.D., P.A. (Exhibit 10.8 of Company's Form 10-KSB for the
         period ended December 31, 1995 filed on April 1, 1996 is incorporated
         by reference herein).

10.9     Purchase Agreement dated February 19, 1996 between National
         Diagnostics, Inc., National Diagnostics/Orange Park, Sundance Partners,
         and partners. (Exhibit 10.9 of the Company's Form 10-KSB for the period
         ended December 31, 1995 filed on April 1, 1996 is incorporated by
         reference herein).

10.10    Agreement of Partnership of Sundance Partners (a Florida partnership)
         dated March 1, 1995. (Exhibit 10.10 of the Company's Form 10-KSB for
         the period ended December 31, 1995 filed on April 1, 1996 is
         incorporated by reference herein).

10.11    Lease Agreement dated September 3, 1991 and modification thereto dated
         August 8, 1992 by and between Brandon Diagnostic Center, Ltd. and Bay
         Land Investment, Inc. relating to a portion of the Company's Brandon,
         Florida facility. (Exhibit 10.2 to the Company's Form SB-1 Registration
         Statement (Reg. No. 33-80612) is incorporated by reference herein).

10.12    Lease Agreement dated February 1, 1992 and modification thereto dated
         August 8, 1992 by and between Brandon Diagnostic Center, ltd. and Bay
         Land Investment, Inc. relating to a portion of the Company's Brandon,
         Florida facility. (Exhibit 10.3 to the Company's Form SB-1 Registration
         Statement Reg. No. 33-80612) is incorporated by reference herein).

10.13    Lease Agreement dated January 15, 1993 by and between Brandon
         Diagnostic Center, Ltd. and Bay Land Investment, Inc. relating to a
         portion of the Company's Brandon, Florida facility. (Exhibit 10.4 to
         the Company's Form SB-1 Registration Statement (Reg. no. 33-80612) is
         incorporated by reference herein).

10.14    Lease Agreement dated May 4, 1994 by and between Alpha Associates, Inc.
         and Sun Point Associates, Inc. and Sun Point Associates relating to the
         Company's Ruskin, Florida facility. (Exhibit 10.5 to the Company's for
         SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
         reference herein).

10.15    Equipment Lease Agreement dated September 11, 1991 by and between
         Brandon Diagnostic Center, ltd. and Siemens Credit Corporation and
         supplements thereto relating to the Company's magnetic resonance
         imaging equipment. (Exhibit 10.6 to the Company's Form SB-1
         Registration Statement (Reg. No. 33-80612) is incorporated by reference
         herein).
</TABLE>


                                       61

<PAGE>   62



                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                                  Pagination by
                                                                                   Sequential
Exhibit                                                                             Numbering
Number                         Description of Document                               System
-------                        -----------------------                            -------------
<S>      <C>                                                                      <C>
10.16    Equipment Lease Agreement dated September 11, 1991 by and between
         Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
         supplement thereto relating to the Company's computer tomography
         equipment. (Exhibit 10.7 to the Company's Form SB-1 Registration
         Statement (Reg. No. 33-80612) is incorporated by reference herein).

10.17    Equipment Lease Agreement dated November 18, 1991 by and between
         Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
         supplements thereto relating to the Company's nuclear medicine
         equipment. (Exhibit 10.9 to the Company's Form SB-1 Registration
         Statement (Reg. No. 33-80612) is incorporated by reference herein).

10.19    Lease Agreement dated September 1, 1994 by and between Highland
         Properties of Gulf Coast, Ltd. and Brandon Diagnostic Center, Ltd.
         relating to the Company's Brandon, Florida facility. (Exhibit 10.21 to
         Amendment No. 3 to the Company's Form SB-1 Registration Statement (Reg.
         No. 33-80612 is incorporated by reference herein).

10.20    Asset Purchase Agreement effective November 1, 1993 by and between
         Alpha Acquisitions Corp. and Equipment Company of Brandon, Inc.
         pertaining to the acquisition by Alpha Acquisitions Corp. of the 40%
         limited partnership interest in Brandon Diagnostic Center, Ltd.
         (Exhibit 10.22 to Amendment No. 3 to the Company's Form SB-1
         Registration Statement (Reg. No. 33-80612) is incorporated by reference
         herein).

10.21    Unit Purchase Option dated September 27, 1994 relating to 50,000 Units
         (Exhibit 4.5 to Amendment No. 2 to the Company's Form SB-1 Registration
         Statement (Reg. No. 33-80612) is incorporated by reference herein).

10.22    Equipment Lease Agreement dated July 19, 1994 by and between Medical
         Consultants of Middleburg, Inc. and Copelco Capital Corporation
         relating to Orange Park's ultrasound equipment. (Exhibit 10.17 to the
         Company's Form 10-KSB for December 31, 1994 is incorporated by
         reference herein).

10.23    Master Lease Agreement dated June 27, 1994 by and between Alpha
         Associates, Inc. d/b/a Brandon Diagnostic Center and Copelco Leasing
         Corporation and schedules thereto relating to SunPoint's diagnostic
         imaging equipment. (Exhibit 10.18 to the Company's form 10-KSB for
         December 31, 1994 is incorporated by reference herein).

10.24    Equipment Lease Agreement dated August 1, 1994 by and between Brandon
         Diagnostic Center, ltd. and Siemens Credit Corporation relating to
         SunPoint's diagnostic imaging equipment. (Exhibit 10.19 to the
         Company's Form 10-KSB for December 31, 1994 is incorporated by
         reference herein).
</TABLE>


                                       62

<PAGE>   63


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                                  Pagination by
                                                                                   Sequential
Exhibit                                                                             Numbering
Number                         Description of Document                               System
-------                        -----------------------                            -------------
<S>      <C>                                                                      <C>
10.25    Asset Purchase Agreement, dated February 6, 1995 and effective as of
         January 31, 1995, as amended, by and among Middleburg Medical Imaging
         Consultants, Inc. (renamed National Diagnostics/Orange Park, Inc.),
         Medical Consultants of Middleburg, Inc. and Medical Imaging
         Consultants, Inc. (Exhibit 10.20 to the Company's form 10-KSB for
         December 31, 1994 is incorporated by reference herein).

10.26    Employment Contract, dated February 6, 1995 and effective as of January
         31, 1995, by and between Ronald D. Baugh and Middleburg Medical Imaging
         Consultants, Inc. (Exhibit 10.21 to the Company's Form 10-KSB for
         December 31, 1994 is incorporated by reference herein).

10.28    Professional Services Agreement, dated November 30, 1994, by and
         between the Company and Drs. Hurt, Isaacs, Johnston and Cranford, P.A.
         (Exhibit 10.23 to the Company's Form 10-KSB for December 31, 1994 is
         incorporated by reference herein).

10.29    Services Agreement, dated November 17, 1994, by and between Diagnostic
         Cardiology Associates, P.A. and the Company. (Exhibit 10.24 to the
         Company's Form 10-KSB for December 31, 1994 is incorporated by
         reference herein).

10.30    Term Loan Agreement and Revolving Loan Agreement, both dated March 6,
         1994, by and between Brandon Diagnostic Center, Ltd. and SouthTrust
         Bank of West Florida, and related Notes and Security Agreements.
         (Exhibit 10.25 to the Company's Form 10-KSB for December 31, 1994 is
         incorporated by reference herein).

10.31    Lease Agreement dated August 15, 1995 between National
         Diagnostics/Riverside, Inc. ("Riverside") and Sundance Partners II
         relating to the Company's Riverside fixed site facility. (Exhibit 10.33
         to the Company's 10-QSB for June 30, 1996 is incorporated by reference
         herein).

10.32    Equipment Lease Agreement dated July 15, 1996 between National
         Diagnostics/ Riverside, Inc. and Siemens Credit Corporation relating to
         Riverside's computer tomography equipment. (Exhibit 10.34 to the
         Company's 10-QSB for September 30, 1996 is incorporated by reference
         herein).

10.33    Equipment Lease Agreement dated August 12, 1996 between National
         Diagnostics/Riverside, Inc. and Siemens Credit Corporation relating to
         the Riverside's ultrasound equipment. (Exhibit 10.35 to the Company's
         10-QSB for September 30, 1996 is incorporated by reference herein).
</TABLE>


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<PAGE>   64

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                                               Pagination by       
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Exhibit                                                                                          Numbering         
Number                            Description of Document                                         System           
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<S>      <C>                                                                                  <C>                  
10.34    Promissory Note and Business Loan Agreement dated September 9, 1996                  
         between Brandon Diagnositc Center, Ltd. and South Hillsborough
         Community Bank related to equipment refinancing. (Exhibit 10.36 to the
         Company's 10-QSB for September 30, 1996 is incorporated by reference
         herein).

10.35    Equipment Lease Agreement dated September 11, 1996 between National
         Diagnostics/Riverside, Inc. ("Riverside") and Siemens Credit
         Corporation relating to Riverside's Sireskop CX. (Exhibit 10.37 to the
         Company's 10-QSB for September 30, 1996 is incorporated by reference
         herein).

10.36    Loan and Security Agreement dated September 13,1996 between National
         Diagnostics, Inc. and DVI Business Credit Corporation relating to the
         Company's line of credit. (Exhibit 10.38 to the Company's 10-QSB for
         September 30, 1996 is incorporated by reference herein).

10.37    Promissory Note and Business Loan Agreement dated December 23, 1996
         between Brandon Diagnostic Center, Ltd. and South Hillsborough
         Community Bank related to the purchase of Stereotactic Mammography
         equipment. (Exhibit 10.37 to the Company's Form 10-KSB for December 31,
         1996 is incorporated by reference herein.)

10.38    Equipment Lease Agreement dated January 22, 1997 between Brandon
         Diagnostic Center, Ltd. ("Brandon") and Siemens Credit Corporation
         relating to Brandon's Sireskop CX. (Exhibit 10.38 to the Company's Form
         10-KSB for December 31, 1996 is incorporated by reference herein).

10.39    Professional Service Agreement, effective February 1, 1997, by and
         between SunPoint Diagnostic Center, Inc. and TeleQuest, Inc. (Exhibit
         10.39 to the Company's Form 10-KSB for December 31, 1996 is
         incorporated by reference herein).

10.40    Professional Service Agreement, effective February 1, 1997, by and
         between National Diagnostics/Orange Park, Inc. and TeleQuest, Inc.
         (Exhibit 10.40 to the Company's Form 10-KSB for December 31, 1996 is
         incorporated by reference herein).

10.41    Professional Service Agreement, effective February 1, 1997, by and
         between Brandon Diagnostic Center, Ltd. and TeleQuest, Inc. (Exhibit
         10.41 to the Company's Form 10-KSB for December 31, 1996 is
         incorporated by reference herein).

10.42    Promissory Note and Security Agreement dated February 18, 1997 between
         National Diagnostics, Inc. and DVI Business Credit Corporation relating
         to the Company's installment loan. (Exhibit 10.39 to the Company's Form
         10-KSB for December 31, 1996 is incorporated by reference herein).
</TABLE>




                                       64

<PAGE>   65



                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                                               Pagination by       
                                                                                                Sequential         
Exhibit                                                                                          Numbering         
Number                            Description of Document                                         System           
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<S>      <C>                                                                                   <C>                  
10.43    Exchange Agreement, dated June 27, 1997 by and between National                        
         Diagnostics, nc. and Sudafric Suisse Trustees. (Exhibit 10.43 to the
         Company's Form 8-K dated July 22, 1997 is incorporated by reference
         herein).

10.44    Professional Services Agreement, dated May 15, 1997 by and between
         National Diagnostics, Inc. and University of Florida, for and on behalf
         of the Board of Regents of the State of Florida, for the Benefit of the
         Department of Radiology/ UFHSCJ, College of Medicine, University of
         Florida. (Exhibit 10.44 to the Company's Form 10-QSB for June 30, 1997
         is incorporated by reference herein.)

10.45    Consulting Agreement, dated May 27, 1997 by and between National
         Diagnostics, Inc. and Capital Access Bureau, Inc. (Exhibit 10.45 to the
         Company's Form 10-QSB for June 30, 1997 is incorporated by reference
         herein).

10.46    Funding Agreement, dated May 27, 1997 by and between National
         Diagnostics, Inc. and Capital Access Bureau, Inc. (Exhibit 10.46 to the
         Company's Form 10-QSB for June 30, 1997 is incorporated by reference
         herein).

10.47    Professional Services Agreement dated August 1, 1997 by and between
         National Diagnostics, Inc. and Nancy C. Lawhon, M.D., P.C. (Exhibit
         10.47 to the Company's Form 10-QSB for June 30, 1997 is incorporated by
         reference herein).

10.48    Loan and Security Agreement, dated October 3, 1997 by and between
         National Diagnostics, Inc., SunPoint Diagnostic Center, Inc., National
         Diagnostics/Orange Park, Inc., National Diagnostics/Riverside, Inc.,
         Alpha Associates, Inc., Alpha Acquisitions, Inc., Brandon Diagnostic
         Center, Ltd., and HealthCare Financial Partners Funding, Inc. (Exhibit
         10.48 to the Company's Form 10-QSB for September 30, 1997 is
         incorporated by reference herein).

10.49    Merger Agreement dated February 23, 1998 by and between National
         Diagnostics, Inc., a Florida Corporation, and American Enterprise
         Solutions, Inc., a Florida Corporation. (Exhibit 10.49 to the Company's
         Form 8-K dated March 10, 1998 is incorporated by reference herein).

10.50    Stock Purchase Agreement dated March 17, 1998 by and between National
         Diagnostics, Inc., a Florida Corporation and American Enterprise
         Solutions, Inc., a Florida Corporation. (Exhibit 10.50 to the Company's
         Form 8-K dated April 10, 1998 is incorporated by reference herein).

10.51    Professional Services Agreement dated October 13, 1997 by and between National              67
         Diagnostics, Inc. and Lisa Porter-Grenn, M.D.

10.52    Second Amendment to Merger Agreement by and between National Diagnostics, Inc.              68
         and American Enterprise Solutions, Inc. effective April 29, 1998.
</TABLE>



                                       65

<PAGE>   66




<TABLE>
<CAPTION>
                                                                                               Pagination by       
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Exhibit                                                                                          Numbering         
Number                            Description of Document                                         System           
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<S>      <C>                                                                                   <C>                  
20.1     National Diagnostics, Inc. Offer to Exchange dated July 6, 1995.
         (Exhibit 20.1 to the Company's Form 10-QSB for the period ended June
         30, 1995 is incorporated by reference herein).

21       Subsidiaries of Registrant                                                                 72

23.1     Consent of Independent Certified Public Accountants-Grant Thornton LLP                     74

24       Powers of Attorney (included on signature page) (Exhibit 24 of the
         Company's Form 10-KSB for the period ended December 31, 1995 filed on
         April 1, 1996 is incorporated by reference herein).

27.1     Financial Data Schedule                                                                    76
</TABLE>



  (b)    Reports on Form 8-K.

         No Form 8-K was filed by the Company in the fourth quarter of 1997.

         The Company filed on March 10, 1998, a Form 8-K indicating a Merger
         Agreement dated February 23, 1998 by and between National Diagnostics,
         Inc., a Florida Corporation, and American Enterprise Solutions, Inc., a
         Florida Corporation.

         The Company filed on April 10, 1998, a Form 8-K indicating a private
         placement valued at $2,000,000 wherein National Diagnostics, Inc.
         issued 500,000 shares of Series A Preferred Stock of NATD to American
         Enterprise Solutions, Inc. ("AES") in exchange for 8,000,000 shares of
         Common Stock of Halis, Inc. (OTCBB:HALIS). On March 27, 1998, AES
         exercised its right to convert 131,185 shares of Series A Preferred
         Stock for 5,786,570 shares of Common Stock of the Company. After
         conversion, AES holds 65% of the total 8,880,000shares of Common Stock
         outstanding.



                                       66