PHYMATRIX CORP, S-4/A, 1996-09-20

PHYMATRIX CORP
S-4/A, 1996-09-20
MISC HEALTH & ALLIED SERVICES, NEC

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As filed with the Securities and Exchange Commission on September 20, 1996
Registration No. 333-09187

===============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
To
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PHYMATRIX CORP.
(Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 8099 65-0617076
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

777 South Flagler Drive
West Palm Beach, FL 33401
(561) 655-3500
(Address, including zip code, and telephone number, including
area code of Registrant's principal executive offices)

---------

Abraham D. Gosman
PhyMatrix Corp.
777 South Flagler Drive
West Palm Beach, FL 33401
(561) 655-3500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

---------

Copies of communications to:
Michael J. Bohnen, Esquire
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
(617) 439-2000

----------

Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933 check the following box. [x]

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
===============================================================================================================================
Proposed maximum Amount of
Title of each class of securities Amount to be offering price per Proposed maximum registration
to be registered registered share (1) aggregate offering price (1) fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 5,000,000 shares $23.63 $118,150,000 $40,742 (2)
================================================================================================================================
</TABLE>

(1) Determined pursuant to Rule 457(c) under the Securities Act of 1933,
as amended, based upon the average of the high and low prices per
share of Common Stock reported on The Nasdaq National Market on July
26, 1996.

(2) Previously paid.

The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

<PAGE>

PHYMATRIX CORP.
Cross Reference Sheet Showing Location in Prospectus
of Information Required by Form S-4

<TABLE>
<CAPTION>
Registration Statement Item Location in Prospectus
------------------------------------------ --------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus Outside Front Cover Page of Registration
Statement and Prospectus;

2. Inside Front and Outside Back Cover Pages Inside Front Cover Pages
of Prospectus

3. Risk Factors, Ratio of Earnings to Fixed Risk Factors; The Company; Front Cover Page
Charges and Other Information of Prospectus

4. Terms of the Transaction Front Cover Page of Prospectus; Plan of
Distribution

5. Pro Forma Financial Information *

6. Material Contracts with the Company Being *
Acquired

7. Additional Information Required for *
Reoffering by Persons and Parties Deemed
to be Underwriters

8. Interests of Named Experts and Counsel *

9. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities

10. Information with Respect to S-3 *
Registrants

11. Incorporation of Certain Information by *
Reference

12. Information with Respect to S-2 or S-3 *
Registrants

13. Incorporation of Certain Information by *
Reference

14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants The Company; Summary Financial Data; Price
Range of Common Stock; Dividend Policy;
Selected Financial Data; Unaudited Pro Forma
Financial Information; Management's
Discussion and Analysis of Financial
Condition and Results of Operation;
Business; Description of Capital Stock;
Combined Financial Statements

15. Information with Respect to S-3 Companies *

16. Information with Respect to S-2 or S-3 *
Companies

17. Information with Respect to Companies *
Other Than S-3 or S-2 Companies

18. Information if Proxies, Consents or
Authorizations are to be Solicited Management; Certain Transactions; Principal
Stockholders

19. Information if Proxies, Consents or
Authorizations are not to be Solicited or Management; Certain Transactions; Principal
in an Exchange Offer Stockholders
</TABLE>

- -------------
* Omitted as inapplicable as of the date of filing this Registration
Statement; such information may be included in pre- effective or
post-effective amendments to this Registration Statement or supplements to
this prospectus contained herein.

<PAGE>

PROSPECTUS
5,000,000 Shares
PhyMatrix Corp.
a Physician Practice Management Company
Common Stock

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

This Prospectus relates to 5,000,000 shares of common stock, $.01 par
value per share (the "Common Stock"), of PhyMatrix Corp. (the "Company") that
may be offered and issued by the Company from time to time in connection with
acquisitions of other businesses or properties by the Company.

PhyMatrix intends to concentrate its acquisitions in areas related to the
current business of PhyMatrix. If the opportunity arises, however, PhyMatrix
may attempt to make acquisitions that are either complementary to its present
operations or which it considers advantageous even though they may be
dissimilar to its present activities. The consideration for any such
acquisition may consist of shares of Common Stock, cash, notes or other
evidences of debt, assumptions of liabilities or a combination thereof, as
determined from time to time by negotiations between PhyMatrix and the owners
or controlling persons of businesses or properties to be acquired.

The shares covered by this Prospectus may be issued in exchange for
shares of capital stock, partnership interests or other assets representing
an interest, direct or indirect, in other companies or other entities, in
exchange for assets used in or related to the business of such companies or
entities, or otherwise pursuant to the agreements providing for such
acquisitions. The terms of such acquisitions and of the issuance of shares of
Common Stock under acquisition agreements will generally be determined by
direct negotiations with the owners or controlling persons of the businesses
or properties to be acquired or, in the case of entities that are more widely
held, through exchange offers to stockholders or documents soliciting the
approval of statutory mergers, consolidations or sales of assets. It is
anticipated that the shares of Common Stock issued in any such acquisition
will be valued at a price reasonably related to the market value of the
Common Stock either at the time of agreement on the terms of an acquisition
or at or about the time of delivery of the shares.

It is not expected that underwriting discounts or commissions will be
paid by the Company in connection with issuances of shares of Common Stock
under this Prospectus. However, finders' fees or brokers' commissions may be
paid from time to time in connection with specific acquisitions, and such
fees may be paid through the issuance of shares of Common Stock covered by
this Prospectus. Any person receiving such a fee may be deemed to be an
underwriter within the meaning of the Securities Act of 1933, as amended (the
"Securities Act").

PhyMatrix's Common Stock is listed on The Nasdaq National Market under
the symbol "PHMX." The closing market price of PhyMatrix Common Stock on The
Nasdaq National Market on September 18, 1996 was $21.50.

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

Prospective investors should carefully consider the factors set forth
under the section "Risk Factors" beginning on page 7.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The Date of this Prospectus is September 20, 1996

<PAGE>

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information and representations must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell or a solicitation of any offer to buy
the securities described herein by anyone in any jurisdiction in which such
offer or solicitation is not authorized, or in which the person making the
offer or solicitation is not qualified to do so, or to any person to whom it
is unlawful to make such offer or solicitation. Under no circumstances shall
the delivery of this Prospectus or any sale made pursuant to this Prospectus
create any implication that the information contained in this Prospectus is
correct as of any time subsequent to the date of this Prospectus.

--------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S> <C>
Page
-----
The Company 3
Summary Financial Data 5
Risk Factors 7
Price Range of Common Stock 13
Dividend Policy 13
Selected Financial Data 14
Unaudited Pro Forma Financial Information 16
Management's Discussion and Analysis of Financial
Condition and Results of Operations 34
Business 46
Management 58
Certain Transactions 63
Principal Stockholders 65
Description of Capital Stock 66
Plan of Distribution 68
Validity of Common Stock 69
Experts 69
Additional Information 71
Index to Financial Statements F-1
</TABLE>

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
See "Risk Factors" for information that should be considered by prospective
investors.

The Company

Phymatrix Corp. (the "Company") was incorporated in October 1995 to
combine the business operations of certain companies (the "Related
Companies") controlled by Abraham D. Gosman, the Company's Chairman,
President and Chief Executive Officer. The business operations of the Related
Companies were acquired from third parties in transactions completed since
September 1994. Simultaneously with the closing of the Company's initial
public offering on January 23, 1996, the Related Companies were transferred
to the Company in exchange for 13,307,450 shares of Company Common Stock (the
"Formation"). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Certain Transactions." The Related
Companies or the Company have acquired those companies and physician
practices discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Acquisition Summary."

The Company is a physician practice management company which provides
management services to disease specialty and primary care physicians and
provides related medical support services. The Company's primary strategy is
to develop disease management networks in specific geographic locations by
acquiring physician practices and affiliating with disease specialty and
primary care physicians. Where appropriate, the Company supports its
affiliated physicians with related diagnostic and therapeutic medical support
services. The Company's medical support services include radiation therapy,
diagnostic imaging, infusion therapy, home health care and lithotripsy
services. Since its first acquisition in September 1994, the Company has
acquired the practices of and affiliated with 163 physicians and acquired
several medical support service companies and a medical facility development
company. The Company also owns a newly formed management services organization
in Connecticut and a 50% interest in a newly formed management services
organization in Georgia that provide management services to independent
physician associations composed of over 375 multi-specialty physicians.

Increasing concern over the cost of health care in the United States has
led to numerous changes affecting the physician provider community, including
the development of managed care and risk-based contracting arrangements.
Based on data from the United States Health Care Financing Administration,
industry sources have estimated that in 1995 the nation's 650,000 physicians
generated approximately $200 billion in physician service revenues. The
Company believes independent physicians are inadequately prepared to respond
to the changing health care market because they typically have high operating
costs relative to revenue and lack both purchasing power with vendors and
sufficient capital to purchase new clinical equipment and management
information systems. In order to be competitive, many physicians are seeking
affiliations with larger entities, including physician practice management
companies.

The Company believes that the providers of disease management services in
the United States, including cancer care providers, are highly fragmented.
There are approximately 6,000 oncologists practicing in the United States,
most of whom practice alone or in small groups, and there are hundreds of
independent outpatient and free-standing cancer treatment centers. This
fragmentation results, in part, from the fact that the treatment of cancer
frequently requires a multi-disciplinary approach in a variety of settings
involving numerous health care professionals with different specializations.

The Company believes that its strategy of acquiring and integrating
independent physician practices and medical support services into specialty
networks creates synergies, achieves operating efficiencies and responds to
the cost-containment initiatives of payors, particularly managed care
companies. The Company has focused its disease management efforts on the
acquisition of oncology practices and, to date, has acquired the practices of
and affiliated with 61 oncologists. The Company also provides comprehensive
cancer-related support services at 10 radiation treatment centers and two
diagnostic imaging centers and manages infusion therapy services from three
regional offices. The Company intends to develop additional disease
management services for the treatment of other chronic illnesses such as
diabetes, cardiovascular diseases and infectious diseases.

3
<PAGE>

In certain targeted markets, the Company organizes its affiliated
physicians and related medical support services into integrated clusters of
disease specialty and primary care networks, which it terms local provider
networks ("LPNs"). LPNs are designed to provide a comprehensive range of
physician and medical support services within specific geographic regions.
The Company believes that its LPN structure will achieve operating
efficiencies and enhance its ability to secure contracts with managed care
organizations. The Company currently has contracts with managed care
organizations under which the Company and its affiliated physicians provide
certain cancer- related health care services to over 200,000 covered lives.
To date, the Company has established an LPN in each of the Southeast Florida,
Atlanta, Connecticut and Washington, D.C./Baltimore areas. The Company
intends to establish additional LPNs by affiliating with IPAs.

The Company also provides medical facility development services to related
and unrelated third parties for the establishment of health parks, medical
malls and medical office buildings. Such services include project finance
assistance, project management, construction management, construction design
engineering, physician recruitment, leasing and marketing. While the Company
incurs certain administrative and other expenses in the course of providing
such services, it does not incur costs of construction or risks of project
ownership. The Company's strategy in financing its projects is to involve
future tenants as significant investors in and owners of the developed
medical facilities. Because most of its tenants are physicians and medical
support service companies, the Company believes that the relationships that
it develops with these parties through its medical facility development
efforts will greatly enhance the Company's ability to affiliate with
physicians and acquire physician practices and medical support service
companies. Further, the Company believes that medical facility development in
certain markets will aid in the integration of its affiliated physicians and
medical support services.

The Company affiliates with physicians through management agreements with
physician practices or employment agreements with individual physicians. When
affiliating with physicians, the Company generally acquires the assets of the
physicians' practices, including its equipment, furniture, fixtures and
supplies and, in some cases, goodwill and management service agreements, of
the physicians' practices. Currently, the Company manages the practices of
132 physicians and employs another 31 physicians. The Company derives
revenues from affiliated physicians through management fees charged to
managed physician practices and from charges to third parties for services
provided by employed physicians.

The Company manages its home health care and lithotripsy services from
eight local or regional offices. The Company also operates seven mobile
lithotripters which provide services to approximately 70 hospitals and other
health care facilities.

The Company's objective is to be a leader in the physician practice
management industry. The Company plans to achieve this objective by: (i)
developing disease management networks in specific geographic locations by
acquiring the practices of and affiliating with high profile disease
specialty and primary care physicians, multi- specialty physician groups and
independent practice associations, (ii) organizing its physician practices
and related medical support services into LPNs, (iii) utilizing its medical
facility development services to promote its affiliations and acquisitions as
well as the integration of its affiliated physicians and medical support
services, (iv) pursuing contractual arrangements with managed care
organizations, (v) implementing information systems to improve patient care
and provide outcome studies and other data and (vi) achieving operating
efficiencies through the consolidation of the overhead and administrative
functions of its physician practices.

The Company's principal place of business is 777 South Flagler Drive, West
Palm Beach, Florida 33401; and its telephone number at that address is (561)
655-3500. Unless otherwise indicated or required by the context, references
to the "Company" include its consolidated subsidiaries.

Prospective investors are cautioned that the statements in this Prospectus
that are not descriptions of historical facts may be forward-looking
statements, including, but not limited to, statements contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Such statements reflect management's current views, are based on
many assumptions and are subject to risks and uncertainties. Actual results
could differ materially from those currently anticipated due to a number of
factors, including, but not limited to, those discussed in "Risk Factors."

4
<PAGE>

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
Historical (1) Pro Forma (2)
----------------------------------------------------------------------- --------------------------

Combined Combined Consolidated Consolidated
June 24, 1994 Combined Consolidated Six Six Six Combined
(inception) Year Month Months Months Months Year
to Ended Ended Ended Ended Ended Ended
December 31, December 31, January 31, June 30, July 31, July 31, December 31,
1994 1995 1996 (3) 1995 1996 (3) 1996 1995
------------- ------------ ------------ -------- ---------- ---------- ------------

(Audited) (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenue $2,447 $70,733 $10,715 $19,984 $77,631 $88,211 $150,229
------ ------- ------- ------- ------- ------- --------
Operating expenses:
Cost of affiliated
physician management
services -- 9,656 2,797 -- 17,412 21,837 44,737
Salaries, wages and
benefits 2,142 31,976 3,637 12,202 23,833 26,461 50,306
Depreciation and
amortization 107 3,863 535 1,394 3,266 3,678 7,300
Rent 249 4,503 565 1,398 3,441 3,965 7,342
Earn out payment -- 1,271 -- 1,111 -- -- --
Provision for closure
loss -- 2,500 -- -- -- -- 2,500
Other 1,098 22,900 3,434 6,847 20,986 23,237 40,762
------ ------- ------- ------- ------- ------- --------
3,596 76,669 10,968 22,952 68,938 79,178 152,947
------ ------- ------- ------- ------- ------- --------
Income (loss) from
operations (1,149) (5,936) (253) (2,968) 8,693 9,033 (2,718)
------ ------- ------- ------- ------- ------- --------
Interest expense 95 4,852 812 1,110 810 3,448 6,907
Minority interest 52 806 81 292 58 -- --
Other nonoperating
(revenue) expense -- -- -- -- -- -- (48)
(Income) loss from
investment in
affiliates -- (569) 30 (219) (269) (269) (647)
------ ------- ------- ------- ------- ------- --------
Income (loss) before
income taxes (1,296) (11,025) (1,176) (4,151) 8,094 5,854 (8,930)
Income tax expense (4) -- -- -- -- 3,032 2,193 --
------ ------- ------- ------- ------- ------- --------
Net income (loss) $(1,296) $(11,025) $ (1,176) $ (4,151) $ 5,062 $ 3,661 $ (8,930)
====== ======= ======= ======= ======= ======= ========
Net income per share (5) $ 0.23
=======
Pro forma income (loss)
per share (6) $ 0.16 $ (0.49)
======= =========
Operating Data
(Unaudited):
Number of Affiliated
physicians (7):
Cancer -- 55 55 18 61 61 61
Primary care -- 14 14 10 21 21 21
Other speciality -- 34 34 -- 56 81 81
Revenues:
Cancer services $ 685 $ 44,905 $ 6,712 $10,667 $44,273 $45,628 $ 81,969
Non-cancer physician
services -- 7,705 2,281 1,121 15,873 24,145 45,789
Other medical services 1,762 18,123 1,722 8,196 10,086 11,039 18,842
Medical facility
development -- -- -- -- 7,399 7,399 3,629
------ ------- ------- ------- ------- ------- --------
Total $2,447 $70,733 $10,715 $19,984 $77,631 $88,211 $150,229
====== ======= ======= ======= ======= ======= ========
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
July 31, 1996
-------------------------
As Adjusted
Actual (8)
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(Unaudited) (Unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $111,666 $ 94,726
Working capital 131,566 125,908
Total assets 264,621 277,181
Long-term debt, less current maturities 13,646 13,646
Convertible Subordinated Debentures 100,000 100,000
Total shareholders' equity 132,813 141,313
</TABLE>

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(1) The Company was incorporated in October 1995 to combine the business
operations of certain companies (the "Related Companies") controlled by
Abraham D. Gosman, the Company's Chairman, President and Chief Executive
Officer. See Note 3 of Notes to Combined Financial Statements of the
Company. The business operations of the Related Companies were acquired
from third parties in transactions completed since September 1994.
Simultaneously with the closing of the Company's initial public offering
on January 23, 1996, the Related Companies were transferred to the
Company in exchange for 13,307,450 shares of the Company's Common Stock (the
"Formation"). The historical combined (representing periods prior to the
Formation) or consolidated financial data represents the combined or
consolidated financial position and results of operations of the Company
and the Related Companies for the periods presented, in each case from
the respective dates of acquisition. Each of the Acquisitions (as defined
herein), except where noted, was accounted for under the purchase method
of accounting. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

(2) Gives effect to (i) the Acquisitions, (ii) the sale of the Common Stock
offered in the Company's January 1996 initial public offering and the
application of the net proceeds therefrom and (iii) the issuance of the
Company's 6 3/4% Convertible Subordinated Debentures (the "Debentures")
in the debt offering completed on June 26, 1996 (the "Debt Offering") and
the application of the net proceeds therefrom, as if such transactions
had occurred as of January 1, 1995. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Acquisition
Summary." Adjustments have been made as required to each of the entities'
historical results of operations to give effect to the completion of such
Acquisitions and the initial public offering. See "Unaudited Pro Forma
Financial Information."

(3) In January 1996, the Company changed its fiscal year end from December 31
to January 31.

(4) Provisions for income taxes have not been reflected in the combined
financial statements because there is no taxable income on a combined
basis.

(5) Net income per share is calculated based upon 21,689,631 weighted average
shares outstanding.

Pro forma net income per share for the six months ended July 31, 1996 has
been calculated based upon 22,573,777 shares outstanding which was derived
as follows: 21,864,202 actual shares outstanding at July 31, 1996 plus
363,442 shares committed to be issued pursuant to an Acquisition plus
346,126 shares (assuming a share price of $21.625) committed to be issued
during the next year in connection with several Acquisitions. The
conversion of the Debentures issued in June 1996 is not assumed because
the effect is anti-dilutive.

(7) Includes both employed and managed physicians. There were 31 employed
physicians at July 31, 1996.

(8) Adjusted to give effect to the Acquisitions subsequent to July 31, 1996.

6
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective purchasers should carefully consider the factors set forth below
before purchasing the shares of Common Stock offered hereby.

Limited Operating History

The Company has a limited operating history and acquired its first
operating company in September 1994. All of the businesses acquired by the
Company in the Acquisitions, with the exception of DASCO Development
Corporation and DASCO Development West, Inc. (collectively, "DASCO"), were
operated by managements unaffiliated with the Company's management or with
each other. From the Company's inception in June 1994 through January 31,
1996, the Company recorded losses in the amount of approximately $13.5
million. Although the Company recorded a profit in the amount of $5.1 million
from February 1, 1996 to July 31, 1996, there can be no assurance that the
Company will continue to be profitable. See "Unaudited Pro Forma Combined
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Risks Related to Growth Strategy

The Company's strategy involves growth primarily through acquisition. The
Company is subject to various risks associated with its acquisition growth
strategy, including the risk that the Company will be unable to identify,
recruit or acquire suitable acquisition candidates or to integrate and manage
the acquired practices or companies. The growth of the Company is largely
dependent on the Company's ability to form networks of affiliated physicians
from its acquired practices, to manage and control costs, and to realize
economies of scale. Any failure of the Company to implement economically
feasible acquisitions and affiliations may have a material adverse effect on
the Company. There can be no assurance that the Company will be able to
achieve and manage planned growth, that the assets of physician practice
groups or other health care providers will continue to be available for
acquisition by the Company, that the liabilities assumed by the Company in
any acquisition will not have a material adverse effect on the Company, or
that the addition of physician practice groups or other health care providers
will be profitable for the Company.

The Company has entered into letters of intent and agreements to acquire
the practices of and affiliate with additional physicians and with other
entities. While the Company intends to pursue the consummation of the
transactions described in these letters of intent and agreements, there can
be no assurance that any or all of these transactions will be consummated.

Need for Additional Financing

The Company's acquisition and expansion programs will require substantial
capital resources. In addition, the operation of physician groups, integrated
networks and related medical support service companies requires ongoing
capital expenditures. The Company expects that its capital needs over the
next several years will substantially exceed capital generated from
operations, the net proceeds of the initial public offering and the net
proceeds of the Debt Offering. To finance its capital needs, the Company
plans to incur indebtedness and to issue, from time to time, additional debt
or equity securities, including Common Stock or convertible notes, in
connection with its acquisitions and affiliations. The Company has received a
commitment from PNC Bank, National Association, for a $30 million revolving
credit facility and anticipates closing this financing during September 1996.
If additional funds are raised through the issuance of equity securities,
dilution to the Company's stockholders may result, and if additional funds
are raised through the incurrence of debt, the Company likely would become
subject to restrictions on its operations and finances. There can be no
assurance that the Company will be able to raise additional capital when
needed on satisfactory terms or at all. Any limitation on the Company's
ability to obtain additional financing could have a material adverse effect
on the Company. See "Certain Transactions."

Government Regulation

Providers of health care services, including physicians and other
clinicians, are subject to extensive federal and state regulation. The fraud
and abuse provisions of the Social Security Act prohibit the solicitation,
payment, receipt or offering of any direct or indirect remuneration in return
for, or the inducement of, the referral of patients, items or services that
are paid for, in whole or in part, by Medicare or Medicaid. These laws also
impose significant penalties for false or improper billings for physician
services and impose restrictions on physicians' referrals for

7
<PAGE>

designated health services to entities with which they have financial
relationships. Violations of these laws may result in substantial civil or
criminal penalties for individuals or entities, including large civil
monetary penalties and exclusion from participation in the Medicare and
Medicaid programs. Similar state laws also apply to the Company. Such
exclusion and penalties, if applied to the Company's affiliated physician
groups or medical support service providers, could have a material adverse
effect on the Company. See "Business--Government Regulation."

The laws of many states prohibit business corporations such as the Company
from exercising control over the medical judgments or decisions of physicians
and from engaging in certain financial arrangements, such as splitting fees
with physicians. These laws and their interpretations vary from state to
state and are enforced by both the courts and regulatory authorities, each
with broad discretion. Expansion of the operations of the Company to certain
jurisdictions may require structural and organizational modifications of the
Company's form of relationship with physician groups, which could have an
adverse effect on the Company. There can be no assurance that the Company's
physician management agreements will not be challenged as constituting the
unlicensed practice of medicine or that the enforceability of the provisions
of such agreements, including non-competition agreements, will not be
limited.

Under certain provisions of the Omnibus Budget Reconciliation Act of 1993
known as "Stark II," physicians who refer Medicare and Medicaid patients to
the Company for certain designated services may not own stock in the Company,
and the Company may not accept such referrals from physicians who own stock
in the Company. Stark II contains an exemption which applies to the Company
during any year if at the end of the previous fiscal year the Company had
stockholders' equity in the amount of at least $75 million. The Company was
not eligible for this exemption as of its fiscal year ending December 31,
1995. In 1996, the Company changed its fiscal year end to January 31, at
which time it satisfied the Stark II stockholders' equity exception.
Violation of Stark II by the Company could have a material adverse effect on
the Company.

The Company believes that its operations are conducted in material
compliance with applicable laws, however, the Company has not received a
legal opinion to this effect and many aspects of the Company's business
operations have not been the subject of state or federal regulatory
interpretation. Moreover, as a result of the Company providing both physician
practice management services and medical support services, the Company may be
the subject of more stringent review by regulatory authorities, and there can
be no assurance that a review of the Company's operations by such authorities
will not result in a determination that could have a material adverse effect
on the Company or its affiliated physicians. Additionally, there can be no
assurance that the health care regulatory environment will not change so as
to restrict the Company's or the affiliated physicians' existing operations
or their expansion. The regulatory framework of certain jurisdictions may
limit the Company's expansion into, or ability to continue operations within,
such jurisdictions if the Company is unable to modify its operational
structure to conform to such regulatory framework or to obtain necessary
approvals, licenses and permits. Any limitation on the Company's ability to
expand could have a material adverse effect on the Company. See
"Business--Government Regulation."

Dependence on Third Party Reimbursement; Trends and Cost Containment

Substantially all of the Company's patient service revenues are derived
from third party payors. For the year ended December 31, 1995, the Company
derived approximately 60% of its net patient service revenues from non-
government payors and approximately 40% from government sponsored health care
programs (principally, Medicare and Medicaid). The Company's revenues and
profitability may be materially adversely affected by the current trend
within the health care industry toward cost containment as government and
private third party payors seek to impose lower reimbursement and utilization
rates and negotiate reduced payment schedules with service providers. The
Company believes that this trend will continue to result in a reduction from
historical levels of per- patient revenue. Continuing budgetary constraints
at both the federal and state level and the rapidly escalating costs of
health care and reimbursement programs have led, and may continue to lead, to
significant reductions in government and other third party reimbursements for
certain medical charges and to the negotiation of reduced contract rates or
capital or other financial risk-shifting payment systems by third party
payors with service providers. Both the federal government and various states
are considering imposing limitations on the amount of funding available for
various health care services. The Company cannot predict whether or when any
such proposals will be adopted or, if adopted and implemented, what effect,
if any, such proposals would have on the Company. Further reductions in
payments to physicians or other changes in reimbursement for health care
services could have a material adverse effect on the Company, unless the
Company is otherwise able to offset such payment reductions.

8
<PAGE>

Rates paid by private third party payors, including those that provide
Medicare supplemental insurance, are based on established physician, clinic
and hospital charges and are generally higher than Medicare payment rates.
Changes in the mix of the Company's patients among the non-government payors
and government sponsored health care programs, and among different types of
non-government payor sources, could have a material adverse effect on the
Company.

The Company is a provider of certain medical treatment and diagnostic
services including, but not limited to radiation therapy, infusion therapy,
lithotripsy and home care. Because many of these services receive
governmental reimbursement, they may be subject from time to time to changes
in both the degree of regulation and level of reimbursement. Additionally,
factors such as price competition and managed care also could reduce the
Company's revenues. See "Business--Reimbursement and Cost Containment."

There can be no assurance that payments under governmental and private
third party payor programs will not be reduced or will, in the future, be
sufficient to cover costs allocable to patients eligible for reimbursement
pursuant to such programs, or that any reductions in the Company's revenues
resulting from reduced payments could be offset by the Company through cost
reductions, increased volume, introduction of new procedures or otherwise.
See "Business--Reimbursement and Cost Containment."

Risks Related to Goodwill

At July 31, 1996, the Company's total assets were approximately $264.6
million, of which approximately $47.9 million, or approximately 18.1% of
total assets, was goodwill. Goodwill is the excess of cost over the fair
value of the net assets of businesses acquired. There can be no assurance
that the value of such goodwill will ever be realized by the Company. This
goodwill is being amortized on a straight-line basis over varying periods.
The Company evaluates on a regular basis whether events and circumstances
have occurred that indicate all or a portion of the carrying amount of
goodwill may no longer be recoverable, in which case an additional charge to
earnings would become necessary. Although at July 31, 1996, the net
unamortized balance of goodwill is not considered to be impaired, any such
future determination requiring the write-off of a significant portion of
unamortized goodwill would adversely affect the Company's results of
operations. See "Unaudited Pro Forma Combined Financial Information."

Risks Associated with Managed Care Contracts

As an increasing percentage of patients come under the control of managed
care entities, the Company believes that its success will be, in part,
dependent upon the Company's ability to negotiate contracts with health
maintenance organizations ("HMOs"), employer groups and other private third
party payors pursuant to which services will be provided on a risk-sharing or
capitated basis. Under some of these agreements, a health care provider
accepts a predetermined amount per member per month in exchange for providing
all covered services to patients. Such contracts pass much of the economic
risk of providing care from the payor to the provider. The Company's success
in implementing its strategy of entering into such contracts in markets
served by the Company could result in greater predictability of revenues, but
increased risk to the Company resulting from uncertainty regarding expenses.
To the extent that patients or enrollees covered by such contracts require
more frequent or extensive care than is anticipated, additional costs would
be incurred, resulting in a reduction in operating margins. In the worst
case, revenues associated with risk-sharing contracts or capitated provider
networks would be insufficient to cover the costs of the services provided.
Any such reduction or elimination of earnings could have a material adverse
effect on the Company. Moreover, there is no certainty that the Company will
be able to establish and maintain satisfactory relationships with third party
payors, many of which already have existing provider structures in place and
may not be able or willing to re-arrange their provider networks.
Increasingly, some jurisdictions are taking the position that capitated
agreements in which the provider bears the risk should be regulated by
insurance laws. As a consequence, the Company may be limited in some of the
states in which it operates in its attempt to enter into or arrange capitated
agreements for its affiliated physician practices, employee physicians or
medical support service providers when those capitated arrangements involve
the assumption of risk.

9
<PAGE>

Dependence on Physicians and Other Medical Service Providers

The Company is dependent upon its affiliations with physicians and other
medical support service providers. The Company has entered into management
and/or employment agreements with most of its physicians and other medical
service providers for terms ranging from seven to 40 years. A significant
number of the Company's affiliated physicians and other medical service
providers have the right to terminate their contracts before the expiration
of their respective terms. In the event that a significant number of such
physicians or providers terminate their contracts or become unable or
unwilling to continue in their roles, the Company's business could be
materially adversely affected. Intangible assets related to management
service agreements were $19.1 million at July 31, 1996. Under certain of its
agreements, the Company guarantees that the net revenues of the practices
managed by the Company will not decrease below the net revenues that existed
immediately prior to the dates of such agreements. See "Business."

Competition

Competition in the physician practice management industry is intense.
Several companies that have established operating histories and greater
resources than the Company are pursuing acquisition, development and
management activities similar to those of the Company. In addition, some
hospitals, clinics, health care companies, HMOs and insurance companies
provide services similar to those provided by the Company. There can be no
assurance that the Company will be able to compete effectively with such
competitors, that additional competitors will not enter the market or that
such competition will not make it more difficult to consummate acquisitions,
undertake development projects and provide management services on terms
beneficial to the Company. The Company also believes that changes in
governmental and private reimbursement policies among other factors have
resulted in increased competition among providers of medical services to
consumers. There can be no assurance that the Company will be able to compete
effectively in the markets that it serves. In addition, from time to time,
medical facilities developed by the Company may lease space to physician
practices or medical support service companies that compete with the
Company's services in a particular local market. See "Business--Competition."

Potential Liability and Insurance; Legal Proceedings

The provision of medical services entails an inherent risk of professional
malpractice and other similar claims. The Company believes that it does not
engage in the practice of medicine, however, the Company could be implicated
in such a claim through one of its providers, and there can be no assurance
that claims, suits or complaints relating to services delivered by an
affiliated physician or medical service provider will not be asserted against
the Company in the future. Although the Company maintains insurance it
believes is adequate both as to risks and amounts, there can be no assurance
that any claim asserted against the Company for professional or other
liability will be covered by, or will not exceed the coverage limits of, such
insurance.

The availability and cost of professional liability insurance has been
affected by various factors, many of which are beyond the control of the
Company. There can be no assurance that the Company will be able to maintain
insurance in the future at a cost that is acceptable to the Company, or at
all. Any claim made against the Company not fully covered by insurance could
have a material adverse effect on the Company.

The Company is currently a party to, or has agreed to indemnify certain
other parties with respect to, various lawsuits relating to the acquisition
of one of its subsidiaries and the operation of the subsidiary prior to the
acquisition. There can be no assurance that such lawsuits will be resolved
favorably to the Company. See "Business--Legal Proceedings."

Medical Facility Development

The Company engages in the development of health parks, medical malls and
medical office buildings and, in connection with these projects, enters into
development contracts for the provision of all or some of the following
services: project finance assistance, project management, construction
management, construction design engineering consultation, physician
recruitment, leasing and marketing. Many of these contracts hold the Company
liable for any development cost overruns and also require the Company to
indemnify the owner of the medical facility and the owner of the land on
which a medical facility is developed against certain liabilities or losses.
As a result, the Company, which is not a contractor, enters into construction
contracts with general contractors to construct its projects for a
"guaranteed maximum cost" and requires the general contractors to maintain
performance

10
<PAGE>

bonds and to indemnify the Company against certain liabilities and losses.
Any claim for development cost overruns not covered by a performance bond or
any request for indemnification by the owner of the medical facility or the
owner of the land on which a medical facility is developed, if the Company is
not indemnified by others, could have a material adverse effect on the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Medical Facility Development" and "Business--Medical
Facility Development."

Control by Existing Stockholders

Mr. Gosman, Donald A. Sands and Bruce A. Rendina, the Company's principal
promoters beneficially own approximately 45.1% of the outstanding shares of
Common Stock and all of the Company's executive officers and directors as a
group beneficially own approximately 52.3% of the outstanding shares of
Common Stock. In addition, the Company has granted and is likely in the
future to grant the Company's executive officers and directors options to
acquire shares of Common Stock pursuant to the Company's 1995 Equity
Incentive Plan. As a result, such executive officers and directors, should
they choose to act together, will be able to determine the outcome of
corporate actions requiring stockholder approval and to control the election
of the Company's Board of Directors. This ownership may have the effect of
discouraging unsolicited offers to acquire the Company. See "Principal
Stockholders."

Dependence Upon Key Personnel and DASCO

The Company is dependent upon the ability and experience of its executive
officers, and there can be no assurance that the Company will be able to
retain all of such officers. The failure of such officers to remain active in
the Company's management could have a material adverse effect on the Company.
The Company currently has employment contracts with Messrs. Sands and
Rendina, Edward E. Goldman, M.D., Robert A. Miller and William A. Sanger. The
Company also has been dependent upon the existing and anticipated
contributions of its principal promoters, Messrs. Gosman, Sands and Rendina,
and DASCO. The Company believes that DASCO and the experience of Messrs.
Sands and Rendina in the medical facility development business will
contribute to the profitability of the Company's medical facility development
services and to the success of the Company as a whole by facilitating the
Company's acquisition of physician practices, affiliation with physicians and
integration of affiliated physicians and medical support service companies.
See "Business--Strategy." There can be no assurance that the anticipated
contributions of Messrs. Sands and Rendina and of DASCO will be realized, and
the failure of such contributions to be realized could have a material
adverse effect on the Company.

Rights of Holders of the Company's Debentures

On June 26, 1996, the Company completed the Debt Offering of $100,000,000
aggregate principal amount of the Debentures pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"). The Debentures were initially issued under an indenture
dated as of June 15, 1996 (the "Indenture"). The Indenture provides the
holders of the Debentures with certain rights that could affect the market
price of the Common Stock and could have the effect of discouraging a third
party from attempting to obtain control of the Company. The following summary
of certain provisions of the Indenture does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of the Indenture, including the definition therein of certain
terms.

The Debentures are convertible into Common Stock at any time after the
60th day following the date of original issuance and prior to redemption or
final maturity, initially at a conversion price of $28.20 per share. The
conversion price is subject to adjustment upon the occurrence of certain
events including the distribution of additional shares of the Common Stock to
holders of the capital stock of the Company at a price below fair market
value, the distribution of other securities of the Company or the Company's
assets to holders of the Common Stock and extraordinary cash distributions
and tender offers by the Company. In addition, the Company may reduce the
conversion price in order that any event treated for federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
recipient or, if that is not possible, to diminish any income taxes that are
payable because of such event.

In the event of a consolidation or merger or the sale or transfer of the
Company's assets, the holders of the Debentures have the right to convert
their Debentures into the kind and amount of consideration receivable upon
such an event by a holder of the number of shares of Common Stock into which
such Debentures might have been

11
<PAGE>

converted immediately prior to such an event. Furthermore, the Company may
not engage in a consolidation or merger or a sale, conveyance or transfer of
property or assets, unless the other party to such transaction is a
corporation, partnership or trust organized under the laws of the United
States or any state thereof or the District of Columbia and expressly assumes
the obligations of the Company under the Indenture and the transaction
complies with the terms of the Indenture.

In the event of a change in control of the Company, each holder of the
Debentures will have the right, at the holder's option, to require the
Company to repurchase all or a portion of such holder's Debentures at a price
equal to 100% of the principal amount thereof, plus accrued interest to the
date of repurchase. Failure by the Company to repurchase the Debentures when
required will result in an Event of Default (as such term is defined in the
Indenture). Upon the occurrence of an Event of Default, the principal and
premium, if any, on the outstanding Debentures may be declared, or may
automatically become, due and payable immediately.

The Company has filed a registration statement on Form S-1 with the
Securities and Exchange Commission (the "Commission") relating to the resale
of the Debentures and the resale of the shares of Common Stock initially
issuable upon conversion of the Debentures by any holders of the Debentures
that did not purchase the Debentures under the registration statement. If the
registration statement ceases to be effective or usable for the offer and
sale of the Debentures and such shares of Common Stock for a period of time
exceeding 90 days in the aggregate in any one-year period or 30 days in any
calendar quarter, the Company is required to pay liquidated damages to each
holder of the Debentures or such shares Common Stock.

Shares Eligible for Future Sale

Sales of substantial amounts of Common Stock in the public market during
or after the offering of securities hereby, or otherwise, or the perception
that such sales could occur, may adversely affect prevailing market prices of
the Common Stock and could impair the future ability of the Company to raise
capital through an offering of its equity securities. In connection with the
Formation, the Company issued 13,307,450 shares of Common Stock to Messrs.
Gosman, Sands and Rendina and certain other management and founder
stockholders. An additional 687,694 shares of Common Stock were issued in
connection with subsequent Acquisitions. All of such 13,995,144 shares are
"restricted securities" within the meaning of the Securities Act. Subject to
the contractual lockup provisions discussed below and unless the resale of
the shares is registered under the Securities Act, these shares may not be
sold in the open market until after the second anniversary of the closing
date of the offering and then only in compliance with the applicable
requirements of Rule 144. In connection with the Company's initial public
offering of Common Stock, the Company and the holders of all of the
13,307,450 shares of Common Stock issued in connection with the Formation
agreed not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock until July 21, 1996 without the prior written
consent of Smith Barney Inc. In addition, in connection with the Debt
Offering, the Company and its directors and executive officers agreed not to
offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock, or any securities convertible into or exercisable or exchangeable for
Common Stock until September 20, 1996. At such time as the Company becomes
eligible to use a registration statement on Form S-3 which could occur
approximately one year after the date of the initial public offering, holders
of all the above-mentioned securities have the right to demand registration
under the Securities Act of shares of Common Stock. See "Description of
Common Stock--Registration Rights." Such holders also have the right to have
shares of Common Stock included in certain future registered public offerings
of Common Stock. The Securities and Exchange Commission has proposed certain
amendments to Rule 144 that would reduce to one year the holding period
required prior to restricted securities becoming eligible for resale in the
public market under Rule 144 and would reduce to two years the holding period
required prior to a person becoming eligible to effect sales under Rule
144(k). This proposal, if adopted, would result in a substantial number of
shares of Common Stock becoming eligible for resale in the public markets
significantly sooner than would otherwise be the case, which could adversely
affect the market price for the Common Stock. No assurance can be given
concerning whether or when such proposal will be adopted by the Commission.

In connection with the Debt Offering, the Company filed a registration
statement on Form S-1 with the Commission relating to the resale of
$100,000,000 aggregate principal amount of the Debentures, and the resale of
up to 3,546,099 shares of the Common Stock initially issuable upon conversion
of the Debentures by any holders of the Debentures that did not purchase the
Debentures under the registration statement.

12
<PAGE>

Possible Volatility of Stock Price

There can be no assurance that any active public market for the Common
Stock will continue during or after the offering of securities hereby. From
time to time during or after the offering of securities hereby, there may be
significant volatility in the market price for the Common Stock. Quarterly
operating results of the Company, changes in general conditions in the
economy or the health care industry, or other developments affecting the
Company or its competitors could cause the market price of the Common Stock
to fluctuate substantially. The equity markets have, on occasion, experienced
significant price and volume fluctuations that have affected the market
prices for many companies' securities and that have often been unrelated to
the operating performance of these companies. Concern about the potential
effects of health care reform measures has contributed to the volatility of
stock prices of companies in health care and related industries and may
similarly affect the price of the Common Stock. Any such fluctuations that
occur during or after the closing of the offering may adversely affect the
market price of the Common Stock.

PRICE RANGE OF COMMON STOCK

The Common Stock is quoted on The Nasdaq National Market under the symbol
"PHMX." The following table sets forth for each period indicated the high and
low sale prices for the Common Stock as reported by The Nasdaq National
Market.

<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
January 23, 1996 through January 31, 1996 $23.50 $15.00
February 1, 1996 through April 30, 1996 23.63 18.50
May 1, 1996 through July 31, 1996 25.75 18.00
August 1, 1996 through September 18, 1996 25.50 21.25
</TABLE>

On September 18, 1996, the last reported sale price of the Common Stock
was $21.50. As of September 18, 1996, there were approximately 100 holders of
record of the Company's Common Stock.

DIVIDEND POLICY

The Company has never paid cash dividends and does not anticipate paying
cash dividends in the foreseeable future. It is the present intention of the
Board of Directors to reinvest all earnings in the business of the Company to
support future growth.

13
<PAGE>

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(In thousands, except share data)

The selected historical financial data set forth below have been derived
from the financial statements of the Company. The combined financial
statements of the Company as of December 31, 1994 and December 31, 1995 and
for the period from June 24, 1994 (inception) to December 31, 1994 and the
year ended December 31, 1995, together with the notes thereto and the related
report of Coopers & Lybrand L.L.P., independent accountants, are included
elsewhere in this Prospectus. The selected historical financial data of the
Company should be read in conjunction with the related financial statements
and notes thereto appearing elsewhere in this Prospectus. The selected pro
forma financial data set forth below at July 31, 1996 and for the year ended
December 31, 1995 and the six months ended July 31, 1996 have been derived
from the unaudited pro forma financial statements of the Company. The pro
forma selected financial data are not necessarily indicative of the actual
results of operations or financial position that would have been achieved had
the Acquisitions been completed as of January 1, 1995, nor are the statements
necessarily indicative of the Company's future results of operations or
financial position. See "Unaudited Pro Forma Financial Information."

<TABLE>
<CAPTION>
Historical (1) Pro Forma (2)
----------------------------------------------------------------------- --------------------------
Combined Combined Consolidated Consolidated
June 24, 1994 Combined Consolidated Six Six Six Combined
(inception) Year Month Months Months Months Year
to Ended Ended Ended Ended Ended Ended
December 31, December 31, January 31, June 30, July 31, July 31, December 31,
1994 1995 1996 (3) 1995 1996 (3) 1996 1995
------------- ------------ ------------ -------- ---------- ---------- ------------
(Audited) (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenue $2,447 $70,733 $10,715 $19,984 $77,631 $88,211 $150,229
------ ------- ------- ------- ------- ------- ---------
Operating expenses:
Cost of affiliated
physician management
services -- 9,656 2,797 -- 17,412 21,837 44,737
Salaries, wages and
benefits 2,142 31,976 3,637 12,202 23,833 26,461 50,306
Depreciation and
amortization 107 3,863 535 1,394 3,266 3,678 7,300
Rent 249 4,503 565 1,398 3,441 3,965 7,342
Earn-out payment -- 1,271 -- 1,111 -- -- --
Provision for closure
loss -- 2,500 -- -- -- -- 2,500
Other 1,098 22,900 3,434 6,847 20,986 23,237 40,762
------ ------- ------- ------- ------- ------- --------
3,596 76,669 10,968 22,952 68,938 79,178 152,947
------ ------- ------- ------- ------- ------- --------
Income (loss) from
operations (1,149) (5,936) (253) (2,968) 8,693 9,033 (2,718)
------ ------- ------- ------- ------- ------- --------
Interest expense 95 4,852 812 1,110 810 3,448 6,907
Minority interest 52 806 81 292 58 -- --
Other nonoperating
(revenue) expense -- -- -- -- -- -- (48)
income from investments
in affiliates -- (569) 30 (219) (269) (269) (647)
------ ------- ------- ------- ------- ------- --------
Income (loss) before
income taxes (1,296) (11,025) (1,176) (4,151) 8,094 5,854 (8,930)
Income tax expense (4) -- -- -- -- 3,032 2,193 --
------ ------- ------- ------- ------- ------- --------
Net income (loss) $(1,296) $(11,025) $ (1,176) $ (4,151) $ 5,062 $ 3,661 $ (8,930)
====== ======= ======= ======= ======= ======= ========
Net income per share (5) $ 0.23
=======
Pro forma income (loss)
per share (6) $ 0.16 $ (0.49)
======= ========
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
July 31, 1996
-------------------------
As Adjusted
Actual (7)
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $111,666 $ 94,726
Working capital 131,566 125,908
Total assets 264,621 277,181
Long-term debt, less current maturities 13,646 13,646
Convertible Subordinated Debentures 100,000 100,000
Total shareholders' equity 132,813 141,313
</TABLE>

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

(1) The Company was incorporated in October 1995 to combine the business
operations of certain companies (the "Related Companies") controlled by
Abraham D. Gosman, the Company's Chairman, President and Chief Executive
Officer. See Note 3 of Notes to Combined Financial Statements of the
Company. The business operations of the Related Companies were acquired
from third parties in transactions completed since September 1994.
Simultaneously with the closing of the Company's initial public offering
on January 23, 1996, the Related Companies were transferred to the
Company in exchange for 13,307,450 shares of Company Common Stock (the
"Formation"). The historical combined (representing periods prior to the
Formation) or consolidated financial data represents the combined or
consolidated financial position and results of operations of the Company
and the Related Companies for the periods presented, in each case from
the respective dates of acquisition. Each of the Acquisitions (as defined
herein), except where noted, was accounted for under the purchase method
of accounting.

(2) Gives effect to (i) the Acquisitions, (ii) the sale of the Common Stock
offered in the Company's January 1996 initial public offering and the
application of the net proceeds therefrom, and (iii) the issuance of the
Debentures in the Debt Offering and the application of the net proceeds,
therefrom as if all such transactions had occurred as of January 1, 1995.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Acquisition Summary." Adjustments have been made
as required to each of the entities' historical results of operations to
give effect to the completion of such Acquisitions, the initial public
offering and the Debt Offering. See "Unaudited Pro Forma Financial
Information."

(3) In January 1996, the Company changed its fiscal year end from December 31
to January 31.

(4) Provisions for income taxes have not been reflected in the combined
financial statements because there is no taxable income on a combined
basis.

(5) Net income per share is calculated based upon 21,689,631 weighted average
shares outstanding.

(6) Pro forma loss per share for the year ended December 31, 1995 has been
calculated based upon 18,074,117 shares outstanding which was derived as
follows: (i) total shares outstanding prior to the Company's January 1996
initial public offering of 13,307,450 shares (which includes pro forma
total shares outstanding at December 31, 1995 of 11,207,450 shares plus
266,666 shares issued for the purchase of the Nutrichem, Inc. minority
interest plus 1,833,334 shares issued in the Formation to certain
stockholders of DASCO), plus (ii) 4,766,667 shares from which the initial
public offering proceeds were used to repay debt and amounts due to
shareholder in the amount of $71,500.
Pro forma net income per share for the six months ended July 31, 1996 has
been calculated based upon 22,573,777 shares outstanding which was
derived as follows: 21,864,202 actual shares outstanding at July 31, 1996
plus 363,442 shares committed to be issued pursuant to an Acquisition
plus 346,126 shares (assuming a share price at $21.625) committed to be
issued during the next year, in connection with several Acquisitions. The
conversion of the Debentures issued in June 1996 is not assumed because
the effect is anti-dilutive.

(7) Adjusted to give effect to the Acquisitions subsequent to July 31, 1996.

15
<PAGE>

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following Unaudited Pro Forma Statements of Operations for the six
months ended July 31, 1996 and the year ended December 31, 1995 have been
prepared to reflect the Acquisitions as if they had been completed on January
1, 1995. Adjustments have been made as required to each of the entities'
historical results of operations to give effect to the completion of the
Acquisitions. The Unaudited Pro Forma Statements of Operations for the six
months ended July 31, 1996 and the year ended December 31, 1995 give effect
to both the Company's January 1996 initial public offering and the Debt
Offering and the application of the net proceeds therefrom, as if such
transactions had occurred as of January 1, 1995. The Unaudited Pro Forma
Consolidated Balance Sheet at July 31, 1996 gives effect to the Acquisitions
that were completed subsequent to July 31, 1996 as if they had occurred on
July 31, 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

The Unaudited Pro Forma Financial Information has been prepared by the
Company based on the audited financial statements of certain of the
Acquisitions, which statements are included elsewhere in this Prospectus, and
the unaudited financial statements of other Acquisitions, which statements
are not included herein (as they are not significant), adjusted where
necessary, with respect to pre-acquisition periods, to the basis of
accounting used in the Company's Audited Financial Statements. The Unaudited
Pro Forma Financial Information is not indicative of the results that would
have occurred if the transactions had occurred on the dates indicated or
which may be realized in the future. The Unaudited Pro Forma Financial
Information should be read in conjunction with the historical financial
statements of the companies acquired in connection with the Acquisitions and
the notes thereto included elsewhere in this Prospectus.

16
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
July 31, 1996
(In thousands)

<TABLE>
<CAPTION>
Acquisitions
Completed
Subsequent
to Pro Forma
July 31, Notes As Adjusted
Historical 1996 Receivable July 31,
(A) (B) (C) 1996
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $111,666 ($6,940) ($10,000) $ 94,726
Receivables
Accounts receivable, net 29,434 1,283 -- 30,717
Other receivables 229 -- -- 229
Notes receivable -- -- 10,000 10,000
Prepaid assets and other current assets 3,588 -- -- 3,588
-------- ------- -------- --------
Total current assets 144,917 (5,657) -- 139,260
-------- ------- -------- --------
Property, plant and equipment, net 40,011 353 -- 40,364
Notes receivable 350 2,800 -- 3,150
Goodwill, net 47,914 8,211 -- 56,125
Management services agreements, net 19,108 6,853 -- 25,961
Investments in affiliates 3,237 -- -- 3,237
Other assets 9,084 -- 9,084
-------- ------- -------- --------
Total assets $264,621 $12,560 -- $277,181
======== ======= ======== ========
Liabilities
Accounts payable 5,631 -- -- 5,631
Current portion of debt and capital leases 2,650 -- -- 2,650
Current portion of related party debt 130 -- -- 130
Due to shareholder, current 77 -- -- 77
Accrued compensation 884 -- -- 884
Other accrued liabilities 3,980 -- -- 3,980
Accrued interest -- shareholder -- -- -- --
-------- ------- -------- --------
Total current liabilities 13,352 -- -- 13,352
-------- ------- -------- --------
Due to shareholder -- -- -- --
Long term debt, less current maturities 13,646 -- -- 13,646
Convertible Subordinated Debentures 100,000 -- -- 100,000
Other long term liabilities 3,067 5,349 -- 8,416
Minority interest 1,743 (1,289) -- 454
-------- ------- -------- --------
Total liabilities 131,808 4,060 -- 135,868
-------- ------- -------- --------
Shareholders' Equity
Common stock 219 -- -- 219
Additional paid-in capital 140,317 8,500 -- 148,817
Retained earnings (7,723) -- -- (7,723)
-------- ------- -------- --------
Total shareholders' equity 132,813 8,500 -- 141,313
-------- ------- -------- --------
Total liabilities &
shareholders' equity $264,621 $12,560 $ -- $277,181
======== ======= ========= ========
</TABLE>

See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet.

17
<PAGE>

UNAUDITED PRO FORMA COMBINED BALANCE SHEET--SUPPLEMENTAL INFORMATION
July 31, 1996
(In thousands)

<TABLE>
<CAPTION>
Ankle
and Foot Physician's Acquisitions
Insignia Care Center of Choice Georgia Completed
for Woman, Atlantic Tampa Bay, Management, Surgical Subsequent to
Kelley P.A. Pediatrics P.A. LLC Associates July 31, 1996
------- -------------- --------- -------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash and cash
equivalents $ (100) $(1,430) $(163) $ (695) $(3,800) $ (752) $(6,940)
Receivables
Accounts receivable,
net -- 800 96 -- -- 387 1,283
Other receivables -- -- -- -- -- -- --
Notes receivable -- -- -- -- -- -- --
Prepaid assets and
other
current assets -- -- -- -- -- -- --
------ ------- ----- ------ ------- ------ -------
Total current assets (100) (630) (67) (695) (3,800) (365) (5,657)
Property, plant and
equipment, net -- 150 68 135 -- -- 353
Notes receivable -- -- -- -- 2,800 -- 2,800
Goodwill, net -- -- -- -- 8,211 -- 8,211
Management services
agreements, net 500 2,400 95 2,800 -- 1,058 6,853
Investments in
affiliates -- -- -- -- -- -- --
Other assets -- -- -- -- -- -- --
------ ------- ----- ------ ------- ------ -------
Total assets $ 400 $ 1,920 $ 96 $2,240 $ 7,211 $ 693 $12,560
====== ======= ===== ====== ======= ====== =======
Liabilities
Accounts payable -- -- -- -- -- -- --
Current portion of debt
and capital leases -- -- -- -- -- -- --
Current portion of
related party debt -- -- -- -- -- -- --
Due to shareholder,
current -- -- -- -- -- -- --
Accrued compensation -- -- -- -- -- -- --
Other accrued
liabilities -- -- -- -- -- -- --
Accrued interest --
shareholder -- -- -- -- -- -- --
------ ------- ----- ------ ------- ------ -------
Total current
liabilities -- -- -- -- -- -- --
------ ------- ----- ------ ------- ------ -------
Due to shareholder -- -- -- -- -- -- --
Long term debt, less
current maturities -- -- -- -- -- -- --
Convertible Subordinated
Debentures -- -- -- -- -- -- --
Other long term
liabilities 400 1,920 96 2,240 693 5,349
Minority interest -- -- -- -- (1,289) -- (1,289)
------ ------- ----- ------ ------- ------ -------
Total liabilities 400 1,920 96 2,240 (1,289) 693 4,060
------ ------- ----- ------ ------- ------ -------
Shareholders' Equity
Common stock -- -- -- -- -- -- --
Additional paid in
capital -- -- -- -- 8,500 -- 8,500
Retained earnings -- -- -- -- -- -- --
------ ------- ----- ------ ------- ------ -------
Total shareholders'
equity -- -- -- -- 8,500 -- 8,500
------ ------- ----- ------ ------- ------ -------
Total liabilities &
shareholders'
equity $ 400 $ 1,920 $ 96 $2,240 $ 7,211 $ 693 $12,560
====== ======= ===== ====== ======= ====== =======
</TABLE>

See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet.

18
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(In thousands)

(A) Represents the historical unaudited consolidated balance sheet of the
Company at July 31, 1996.

(B) Represents the Acquisitions completed subsequent to July 31, 1996.

19
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended July 31, 1996
(In thousands, except share data)

<TABLE>
<CAPTION>
Historical Pro Forma
--------------------- ----------------------------------------
Financing/
PhyMatrix Acquisitions Offering
Corp. Acquisitions Adjustments Adjustments
(A) (B) (B) (M) Combined
------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues from services $41,107 $ 804 $ -- $ -- $ 41,911
Net revenues from management
service agreements 36,524 9,776 -- -- 46,300
------- ------- ----- ----- -----------
Total revenue 77,631 10,580 -- -- 88,211
------- ------- ----- ----- -----------
Operating expenses:
Cost of affiliated physician
management services 17,412 4,545 (120) -- 21,837
Salaries, wages and benefits 23,833 2,494 134 -- 26,461
Professional fees 2,004 277 -- -- 2,281
Supplies 11,580 741 -- -- 12,321
Utilities 1,179 172 -- -- 1,351
Depreciation and amortization 3,266 69 343 -- 3,678
Rent 3,441 524 -- -- 3,965
Other 6,223 1,061 -- -- 7,284
------- ------- ----- ----- -----------
68,938 9,883 357 -- 79,178
------- ------- ----- ----- -----------
Income (loss) from operations 8,693 697 (357) -- 9,033
------- ------- ----- ----- -----------
Interest (income) expense, net 810 18 19 2,601 3,448
Minority interest 58 -- (58) -- --
Other nonoperating (revenue) expenses -- (25) 25 -- --
Income from investments in affiliates (269) -- -- -- (269)
------- ------- ----- ----- -----------
Income (loss) before income taxes 8,094 704 (343) (2,601) 5,854
Income tax expense 3,032 -- - (839) 2,193
------- ------- ----- ----- -----------
Net income (loss) $ 5,062 $ 704 $(343) $(1,762) $ 3,661
======= ======= ====== ======= ===========
Net income per share $ 0.23
=======
Pro forma net income per share $ 0.16
============
Number of shares used in pro forma
net income per share 22,573,777(Q)
</TABLE>

See accompanying notes to Unaudited Pro Forma Consolidated Statement of
Operations.

20
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS --
SUPPLEMENTAL SCHEDULE
Summary of Acquisitions (C)
For the Six Months Ended July 31, 1996
(In thousands)

<TABLE>
<CAPTION>
Atlanta All
Gastroenterology Other Total
Associates, P.C. (R) Acquisitions
-------------------- ---- -------------
<S> <C> <C> <C>
Net revenues from services $ -- $ 804 $ 804
Net revenues from management service agreements 1,434 8,342 9,776
------ ------ -------
Total revenue 1,434 9,146 10,580
Operating expenses:
Cost of affiliated physician management
services 741 3,804 4,545
Salaries, wages and benefits 356 2,138 2,494
Professional fees 39 238 277
Supplies 51 690 741
Utilities 32 140 172
Depreciation and amortization 17 52 69
Rent 83 441 524
Other 106 955 1,061
------ ------ -------
1,425 8,458 9,883
------ ------ -------
Income (loss) from operations 9 688 697
------ ------ -------
Interest (income) expense, net 3 15 18
------ ------ -------
Minority interest -- -- --
Other nonoperating (revenue) expenses (8) (17) (25)
Income from investment in affiliates -- -- --
------ ------ -------
Net income (loss) $ 14 $ 690 $ 704
====== ====== =======
</TABLE>

See accompanying notes to Unaudited Pro Forma Consolidated Statements of
Operations.

21
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS --
SUPPLEMENTAL SCHEDULE
Summary of Adjustments for Acquisitions (D)
For the Six Months Ended July 31, 1996
(In thousands)

<TABLE>
<CAPTION>
Uromed Atlanta Physician's All
Technologies, Gastroenterology Choice Other Total
Inc. Associates, P.C. Management, LLC (R) Adjustments
------------- ----------------- ---------------- ------- --------------

<S> <C> <C> <C> <C> <C>
Net revenues from services $-- $ -- $ -- $ -- $ --
Net revenues from management service
agreements -- -- -- -- --
--- ----- ----- ----- -----

Total revenue -- -- -- -- --
Operating expenses:
Cost of affiliated physician management
services (F) -- (107) -- (13) (120)
Salaries, wages and benefits -- -- -- 134 134
Professional fees -- -- -- -- --
Supplies -- -- -- -- --
Utilities -- -- -- -- --
Depreciation and amortization (L) -- -- 156 187 343
Rent -- -- -- -- --
Other -- -- -- -- --
--- ----- ----- ----- -----

-- (107) 156 308 357
--- ----- ----- ----- -----

Income (loss) from operations -- 107 (156) (308) (357)
--- ----- ----- ----- -----

Interest (income) expense, net -- (5) 39 (15) 19
Minority interest (I) (69) -- 11 -- (58)
Other nonoperating (revenue) expenses -- 8 -- 17 25
Income from investment in affiliates
--- ----- ----- ----- -----

Net income (loss) $(69) $ 104 $(206) $(310) $(343)
==== ===== ===== ===== =====

</TABLE>

See accompanying notes to Unaudited Pro Forma Consolidated Statements of
Operations.

22
<PAGE>

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(In thousands, except share data)

<TABLE>
<CAPTION>
Historical Pro Forma
---------------------- ----------------------------------------
Financing/
PhyMatrix Acquisitions Offering
Corp. Acquisitions Adjustments Adjustments
(A) (B) (B) (M) Combined
-------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues from services $ 48,360 $15,267 $(1,425) $ -- $ 62,202
Net revenues from management
service agreements
22,373 63,923 1,731 -- 88,027
-------- ------- ------- ------- -----------
Total revenue 70,733 79,190 306 -- 150,229
-------- ------- ------- ------- -----------
Operating expenses:
Cost of affiliated physician
management services 9,656 25,466 9,615 -- 44,737
Salaries, wages and benefits 31,976 19,547 (1,217) -- 50,306
Professional fees 2,845 4,434 (2,267) -- 5,012
Supplies 11,864 9,078 (1,061) -- 19,881
Utilities 1,308 856 (166) -- 1,998
Depreciation and amortization 3,863 1,936 1,501 -- 7,300
Rent 4,503 4,607 (1,768) -- 7,342
Earn out payment 1,271 -- (1,271) -- --
Provision for closure loss 2,500 -- -- -- 2,500
Other 6,883 8,888 (1,900) -- 13,871
-------- ------- ------- ------- -----------
76,669 74,812 1,466 -- 152,947
-------- ------- ------- ------- -----------
Income (loss) from operations (5,936) 4,378 (1,160) -- (2,718)
-------- ------- ------- ------- -----------
Interest (income) expense, net 4,852 184 (5,036) 6,907 6,907
Minority interest 806 -- (806) -- --
Other nonoperating (revenue) expenses -- (302) 254 -- (48)
Income from investments in affiliates (569) -- (78) -- (647)
-------- ------- ------- ------- -----------
Net income (loss) (N) $(11,025) $ 4,496 $ 4,506 $(6,907) $ (8,930))
======== ======= ======== ======= ===========
Pro forma net loss per share $ (0.49)
===========
Number of shares used in pro forma
net loss per share 18,074,117(Q)
==========
</TABLE>

See accompanying notes to Unaudited Pro Forma Combined Statement of
Operations.

23
<PAGE>

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS--SUPPLEMENTAL SCHEDULE
Summary of Acquisitions (C)
For the Year Ended December 31, 1995
(In thousands)

<TABLE>
<CAPTION>
Oncology-
Hematology
Associates,
P.A. and
Whittle DASCO Oncology-
Aegis Varnell Development Hematology
Health and Corporation Georgia Infusion Osler
Systems, Bedoya, and Cancer Therapy, Medical,
Inc. P.A. Affiliates Specialists Inc. Inc.
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues from services $719 $ -- $3,629 $ -- $ -- $ --
Net revenues from
management service
agreements -- 2,201 -- 10,910 2,404 9,031
---- ------ ------ ------- ------ ------
Total revenue 719 2,201 3,629 10,910 2,404 9,031
---- ------ ------ ------- ------ ------
Operating expenses:
Cost of affiliated
physician management
services -- 1,211 -- 3,465 580 3,923
Salaries, wages and
benefits 230 440 2,815 878 537 1,932
Professional fees 18 36 217 1,589 -- 168
Supplies 70 29 -- 3,158 628 493
Utilities 9 27 -- 18 -- 18
Depreciation and
amortization 70 -- 12 113 25 214
Rent 37 59 166 749 113 730
Other 165 238 249 1,123 157 669
---- ------ ------ ------- ------ ------
599 2,040 3,459 11,093 2,040 8,147
---- ------ ------ ------- ------ ------
Income (loss) from
operations 120 161 170 (183) 364 884
---- ------ ------ ------- ------ ------
Interest (income) expense,
net 26 8 (6) 42 18 79
Minority interest -- -- -- -- -- --
Other nonoperating
(revenue) expenses -- -- -- (25) (23) (3)
Income from investments
in affiliates -- -- -- -- -- --
---- ------ ------ ------- ------ ------
Net income (loss) $ 94 $ 153 $ 176 $ (200) $ 369 $ 808
==== ====== ====== ======= ====== ======
</TABLE>

<TABLE>
<CAPTION>
Oncology Atlanta
and Radiation Gastro- Physician's
Radiation Care, Inc. enterology Choice All
Associates, and Associates, Management, Other Total
Pinnacle Inc. Subsidiaries P.C. LLC (R) Acquisitions
----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues from services $1,353 $ -- $ 5,279 $ -- $ 8 $ 4,279 $15,267
Net revenues from
management service
agreements -- 10,858 -- 4,991 -- 23,528 63,923
------ ------- ------- ------ ---- ------- -------
Total revenue 1,353 10,858 5,279 4,991 8 27,807 79,190
------ ------- ------- ------ ---- ------- -------
Operating expenses:
Cost of affiliated
physician management
services -- 3,275 -- 2,795 -- 10,217 25,466
Salaries, wages and
benefits 640 1,326 2,597 1,085 65 7,002 19,547
Professional fees 8 1,825 87 56 3 427 4,434
Supplies 490 1,014 228 192 -- 2,776 9,078
Utilities 57 76 100 109 1 441 856
Depreciation and
amortization 29 (63) 1,195 45 1 295 1,936
Rent 91 287 512 264 4 1,595 4,607
Other 185 897 2,019 443 (14) 2,757 8,888
------ ------- ------- ------ ---- ------- -------
1,500 8,637 6,738 4,989 60 25,510 74,812
------ ------- ------- ------ ---- ------- -------
Income (loss) from
operations (147) 2,221 (1,459) 2 (52) 2,297 4,378
------ ------- ------- ------ ---- ------- -------
Interest (income) expense,
net 42 15 (72) 17 (10) 25 184
Minority interest -- -- -- -- -- -- --
Other nonoperating
(revenue) expenses (108) -- (48) (1) -- (94) (302)
Income from investments
in affiliates -- -- -- -- -- -- --
------ ------- ------- ------ ---- ------- -------
Net income (loss) $ (81) $ 2,206 $(1,339) $ (14) $(42) $ 2,366 $ 4,496
====== ======= ======= ====== ==== ======= =======
</TABLE>

See accompanying notes to Unaudited Pro Forma Combined Statements
of Operations.

24
<PAGE>

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATION--SUPPLEMENTAL SCHEDULE
Summary of Adjustments For Acquisitions (D)
For the Year Ended December 31, 1995
(In thousands)

<TABLE>
<CAPTION>
Oncology-
Hematology
Associates,
DASCO P.A. and
Whittle Development Oncology-
Aegis Varnell Corporation Hematology
Uromed Health and and Georgia Infusion
Technologies Systems, Bedoya, Affiliate Cancer Therapy,
Inc. Inc. Inc. (P) Specialists Inc.
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues from services $ -- $ -- $ -- $ -- $ -- $ --
Net revenues from management
service agreements -- -- -- -- 1,731 (K) --
---- ----- ----- ----- ------- -----
Total revenue -- -- -- -- 1,731 --
---- ----- ----- ----- ------- -----
Operating expenses:
Cost of affiliated physician
management services (F) -- -- 308 -- 2,480 457
Salaries, wages and benefits -- -- -- -- -- --
Professional fees -- -- -- -- (439) --
Supplies -- -- -- -- -- --
Utilities -- -- -- -- -- --
Depreciation and amortization
(L) (3) 71 43 240 323 11
Rent (H) -- -- -- -- (291) --
Earnout payment (O) -- -- -- -- -- --
Other (H) -- (167) (J) -- -- 165 --
---- ----- ----- ----- ------- -----
(3) (96) 351 240 2,238 468
---- ----- ----- ----- ------- -----
Income (loss) from operations 3 96 (351) (240) (507) (468)
---- ----- ----- ----- ------- -----
Interest (income) expense, net 47 (206) (8) (165) (19) (18)
Minority interest (I) (149) -- -- -- -- --
Other nonoperating (revenue)
expense -- -- -- -- 25 --
Income from investments
in affiliates -- -- -- (78) (P) -- --
---- ----- ----- ----- ------- -----
$ 105 $ 302 $(343) $ 3 $ (513) $(450)
==== ===== ===== ===== ======= =====
</TABLE>

<TABLE>
<CAPTION>
Radiation Atlanta
Oncology Care, Gastro- Physician's
Osler Radiation Inc. enterology Choice Total
Nutrichem, Medical, Associates, and Associates, Management, All Acquisition
Inc. Inc. Pinnacle P.A. Subsidiaries P.C. LLC Other (R) Adjustments
------- --------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues from
services $ -- $ -- $ -- $ -- $ (1,425)(E) $ -- $ -- $ -- $(1,425)
Net revenues from
management
service
agreements -- -- -- -- -- -- -- -- 1,731
------- ------ ----- -------- -------- ----- ----- ------- ------
Total revenue -- -- -- -- (1,425) -- -- -- 306
------- ------ ----- -------- -------- ----- ----- ------- ------
Operating
expenses:
Cost of affiliated
physician
management
services (F) -- 1,044 -- 5,253 -- (396) -- 469 9,615
Salaries, wages
and benefits -- 38 504 (1,326)(F) (1,509)(E) -- -- 1,076(G) (1,217)
Professional fees -- -- -- (1,825)(F) (3)(E) -- -- -- (2,267)
Supplies -- -- -- (1,014)(F) (47)(E) -- -- -- (1,061)
Utilities -- -- -- (76)(F) (90)(E) -- -- -- (166)
Depreciation and
amortization (L) 182 320 (14) 402 (735) -- 151 510 1,501
Rent (H) -- (488) -- (287) (562)(E) -- -- (140) (1,768)
Earnout payment (O) (1,271) -- -- -- -- -- -- -- (1,271)
Other (H) -- -- -- (897)(F) (1,444)(E) -- 27 416 (1,900)
------- ------ ----- -------- -------- ----- ----- ------- ------
(1,089) 914 490 230 (4,390) (396) 178 2,331 1,466
------- ------ ----- -------- -------- ----- ----- ------- ------
Income (loss) from
operations 1,089 (914) (490) (230) 2,965 396 (178) (2,331) (1,160)
------- ------ ----- -------- -------- ----- ----- ------- ------
Interest (income)
expense, net (395) (282) (56) (160) (1,532) (17) 10 (2,235) (5,036)
Minority interest
(I) (657) -- -- -- -- -- -- -- (806)
Other nonoperating
(revenue) expense -- 2 108 -- 48(E) -- -- 71 254
Income from
investments
in affiliates -- -- -- -- -- -- -- -- (78)
------- ------ ----- -------- -------- ----- ----- ------- ------
$ 2,141 $ (634) $(542) $ (70) $ 4,449 $ 413 $(188) $ (167) $4,506
======= ====== ===== ======== ======== ===== ===== ======= ======
</TABLE>

See accompanying notes to Unaudited Pro Forma Combined Statements of
Operations.

25
<PAGE>

NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(Dollars in thousands)

A.Represents the unaudited historical consolidated statement of operations of
the Company for the six months ended July 31, 1996 and the audited
historical combined statement of operations of the Company for the year
ended December 31, 1995.

B.Represents the historical combined statement of operations of the
Acquisitions and the adjustments to the historical combined statement of
operations of the Acquisition from either January 1, 1995 or February 1,
1996 until the earlier of the date such Acquisitions were completed by the
Company or July 31, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Acquisition Summary" for a
summary of the Acquisitions.

C.Represents the historical statement of operations of each of the
Acquisitions from either January 1, 1995 or February 1, 1996 until the
earlier of the date such Acquisitions were completed by the Company or July
31, 1996. In the case of Georgia Cancer Specialists, the historical
statement of operations includes Georgia Oncology-Hematology Clinic, P.C.
and Cancer Specialists of Georgia, P.C., as the two entities merged to form
Georgia Cancer Specialists. All Other represents Acquisitions which are not
significant to the Unaudited Pro Forma Statement of Operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Acquisition Summary" for a summary of the Acquisitions.

D.Represents the adjustments to the historical statement of operations for
each of the Acquisitions from either January 1, 1995 or February 1, 1996
until the earlier of the date such Acquisitions were completed by the
Company or July 31, 1996. All Other represents Acquisitions which are not
significant to the Unaudited Pro Forma Statement of Operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Acquisition Summary" for a summary of the Acquisitions.

E.During March 1995, the Company purchased the stock of Oncology Therapies,
Inc. ("OTI") which owns and operates outpatient radiation therapy centers
utilized in the treatment of cancer and diagnostic imaging centers. The
unaudited pro forma adjustments related to this purchase are as follows:

1.The Company closed five of the radiation therapy centers. The unaudited pro
forma adjustments include the elimination of the results of operations for
these closed centers. The following unaudited pro forma adjustments exclude
the elimination of depreciation (which amounted to $1,140 for the year
ended December 31, 1995). See Note L, as it relates to the unaudited pro
forma adjustments for depreciation for OTI on a consolidated basis.

<TABLE>
<CAPTION>
Year Ended
December 31,
1995
-------------
(In thousands)
<S> <C>
Net revenues from services $ 1,425
Operating Expenses
Salaries, wages and benefits 1,509
Professional fees 3
Supplies 47
Utilities 90
Rent 562
Other 290
-------
2,501
-------
Net loss $(1,076)
=======
</TABLE>

2.The unaudited pro forma adjustments also include the elimination of the
following non-recurring income and expenses as follows:

26
<PAGE>

<TABLE>
<CAPTION>
Year Ended
December 31,
1995
-------------
(In thousands)
<S> <C>
Merger transaction expenses $1,106
</TABLE>

F.Adjusts costs of affiliated physician services to the percentage or amount
specified in each of the management services agreements.

G.Adjusts employed physicians salaries (included in all other) to the amount
as specified per the employment agreements entered into as a result of the
Acquisitions. Such changes in salary are supported by the employment
contracts.

Increases salaries, wages and benefits by $504 for the year ended December
1995 to reflect employment agreements entered into during October 1995 in
conjunction with the acquisitions of Pinnacle.

H.Adjusts for rent and other expenses based on the terms of the agreements.

I.Eliminates minority interest expense as shown below for the year ended
December 31, 1995 and the six months ended July 31, 1996, respectively,
related to Uromed and Nutrichem. Such minority stockholders have or will be
exchanging their shares for shares in the Company.

<TABLE>
<CAPTION>
Six Months
Ended Year Ended
July 31, December 31,
1996 1995
------------ ----------------
(In thousands)
<S> <C> <C>
Nutrichem $-- $657
Uromed 69 149
--- ----
Total $69 $806
=== ====
</TABLE>

J. Eliminates $167 of Other expenses for the year ended December 31, 1995
reflected on the financial statements of Aegis prior to the purchase by the
Company. The financial statements of Aegis reflect expenses related to
another business operated by Aegis which was not purchased by the Company.
Therefore, since such expenses were not related to the operations of the
assets purchased by the Company, they were eliminated.

K. Increases revenue for the year ended December 31, 1995 by $1,731 to reflect
the terms of an amended management services agreement which now requires
the Company to purchase the revenues of a practice that the Company began
managing in April 1995. Such amended management services agreement was the
result of a merger between a medical oncology practice managed by the
Company starting in April 1995 and a medical oncology practice which began
to be managed by the Company during August 1995.

L. Adjusts depreciation and amortization expense to properly reflect the
allocation of the purchase price as required per purchase accounting for
each of the Acquisitions.

Amounts allocated or to be allocated to intangibles (Goodwill and Management
Service Agreements) and the related amortization expense on a pro forma basis
for each of the Acquisitions is as follows:

<TABLE>
<CAPTION>
Amounts Allocated
to Intangibles
--------------------
Management Six Twelve Amortization
Service Months Months Period
Business Acquired Goodwill Agreements Amortization Amortization (Years)
- ------------------------------------------ ------- --------- ----------- ----------- ------------
(In thousands)

<S> <C> <C> <C> <C> <C>
Recent Acquisitions
Employed physicians (1) $5,702 -- $143 $285 20
Medical support service companies:
(bullet) Phylab/Miramer Lab 118 -- 3 6 20
(bullet) Pinnacle Associates, Inc. 472 -- 6 12 40

27
<PAGE>

Amounts Allocated
to Intangibles
--------------------
Management Six Twelve Amortization
Service Months Months Period
Business Acquired Goodwill Agreements Amortization Amortization (Years)
- ------------------------------------------ ------- --------- ----------- ----------- ------------
(In thousands)

Recent Acquisitions
(bullet) Aegis Health Systems, Inc. $ 6,227 -- $ 156 $ 311 20
(bullet) Lithotripsy America, Inc. 3 -- -- -- 20
(bullet) Radiation Care, Inc. and
Subsidiaries 8,623 -- 108 216 40
(bullet) First Choice Home Care Services
of Boca Raton, Inc. 2,622 -- 66 131 20
First Choice Health Care Services of
Ft. Lauderdale, Inc.
First Choice Home Care Services Inc.
(bullet) Nutrichem, Inc. 9,800 -- 123 245 40
(bullet) Uromed Technologies, Inc. 2,376 -- 59 119 20
Managed physician practices
(bullet) Symington -- 30 2 3 10
(bullet) Venkat Mani -- 141 7 14 10
(bullet) Whittle, Varnell & Bedoya, Inc. -- 289 7 14 20
(bullet) West Shore Urology -- 27 1 1 20
(bullet) Oncology Care Associates -- 47 1 2 20
(bullet) Oncology & Radiation Associates,
P.A. -- 9,582 240 479 20
(bullet) Osler Medical, Inc. -- 4,277 107 214 20
(bullet) Georgia Cancer Specialists -- 3,384 169 339 10
(bullet) Oncology-Hematology Associates,
P.A. and Oncology-Hematology
Infusion Therapy, Inc. -- 313 10 21 15
(bullet) Busch -- 430 11 22 20
(bullet) Dal Yoo -- 260 7 13 20
(bullet) Bress & Sinor (2) -- 500 13 25 20
(bullet) Kelley -- 500 13 25 20
(bullet) Atlanta Metro Urology -- 350 9 18 20
(bullet) Koerner, Taub & Flaxman -- 211 5 11 20
(bullet) Georgia Surgical Associates -- 1,058 13 26 40
(bullet) Insignia Care for Women, P.A. -- 2,400 30 60 40
(bullet) Atlantic Pediatrics -- 95 2 5 20
(bullet) Ankle and Foot Center of Tampa
Bay, P.A. -- 2,800 35 70 40
Management Services Organization
(bullet) Physicians Choice Management,
LLC 11,232 -- 140 281 40
(bullet) Central Georgia Management, LLC 900 -- 23 45 20
Medical facility development
(bullet) DASCO Development Corporation
and Affiliate ("DASCO") 9,814 -- 123 245 40
------- ------- ------ ------
Total Acquisitions $57,889 $26,694 $1,632 $3,258
======= ======= ====== ======
</TABLE>

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

(1) Includes Drs. Bansal, Mistry, Dandiya, Canasi, Alpert, Hunter, Jaffer,
Cano, Herman, Novoa, Lawler, Cutler and Surowitz.

(2) This practice was merged into Oncology Care Associates during June 1996.

28
<PAGE>

Amount recorded as fixed assets and the related depreciation expense on a
pro forma basis for each of the Acquisitions is as follows:

<TABLE>
<CAPTION>
Fixed Six Twelve
Assets Months Months Depreciable
Business Acquired Acquired Depreciation Depreciation Life
- -------------------------------------------- ---------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Acquisitions
Employed Physicians (1) $ 764 $ 55 $ 109 7
Medical Support Service Companies:
(bullet) Phylab 18 2 3 7
(bullet) Pinnacle Associates, Inc. 70 5 10 7
(bullet) Aegis Health Systems, Inc. 705 50 101 7
(bullet) Lithotripsy America, Inc. 295 21 42 7
(bullet) Radiation Care, Inc. and 23,000 (2)
Subsidiaries 1,115 2,230 Various
(bullet) First Choice Home Care Services of
Boca Raton, Inc. 28 2 4 7
First Choice Health Care Services of Ft.
Lauderdale, Inc.
First Choice Health Care Services, Inc.
(bullet) Nutrichem, Inc. 173 13 25 7
(bullet) Uromed Technologies, Inc. 1,400 100 200 7
Managed Physicians Practices:
(bullet) Symington 17 2 3 7
(bullet) Venkat Mani 50 3 7 7
(bullet) Whittle, Varnell and Bedoya, P.A. 253 18 36 7
(bullet) Oncology Care Associates 156 11 22 7
(bullet) West Shore Urology 1,853 73 145 (3)
(bullet) Osler Medical, Inc. 7,452 240 481 (4)
(bullet) Cancer Specialists of Georgia,
Inc. 1,561 112 223 7
(bullet) Oncology-Hematology Associates,
P.A. and Oncology-Hematology
Infusion Therapy, Inc. 281 20 40 7
(bullet) Georgia Oncology-Hematology
Clinic, P.C. 631 45 90 7
(bullet) Busch 203 15 29 7
(bullet) Dal Yoo 37 3 5 7
(bullet) Atlanta Metro Urology 125 9 18 7
(bullet) Koerner, Taub & Flaxman 165 12 24 7
(bullet) Atlanta Gastroenterology
Associates, P.C. 635 17 45 Various
(bullet) Insignia Care for Women, P.A. 150 11 21 7
(bullet) Atlantic Pediatrics 68 5 10 7
(bullet) Ankle and Foot Center of Tampa
Bay, P.A. 135 10 19 7
Medical Facility Development
(bullet) DASCO 45 3 6 7
------- ------ ------
Total Acquisitions $40,270 $1,972 $3,948
======= ====== ======
</TABLE>

29
<PAGE>

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

(1) Includes Drs. Bansal, Mistry, Dandiya, Canasi, Alpert, Hunter, Jaffer,
Cano, Herman, Novoa, Lawler, Cutler and Surowitz.

(2) Excludes equipment written off at the closed centers.

(3) Capital leases of $1,569 are being depreciated over 15 years, which
represents the terms of the lease, all other fixed assets are being
depreciated over 7 years.

(4) A capital lease of $6,283 is being depreciated over 20 years, which
represents the term of the lease, all other fixed assets are being
depreciated over 7 years.

M. The following table represents pro forma interest expense based on the debt
outstanding on the Unaudited Pro Forma Balance Sheet at July 31, 1996. The
Unaudited Pro Forma Statements of Operations reflect interest expense,
based on the $116,502,693 of outstanding debt, of $8,400,000 and $4,194,000
for the year ended December 31, 1995 and the six months ended July 31,
1996, respectively. The Unaudited Pro Forma Statements of Operations also
reflect interest income, based on the $12,800,000 of notes receivable
entered into subsequent to July 31, 1996, of $1,493,000 and $746,000 for
the year ended December 31, 1995 and the six months ended July 31, 1996,
respectively.

30
<PAGE>

<TABLE>
<CAPTION>
Pro Forma
-------------------------------
Six Months
Ended Year Ended
July 31, December 31,
July 31, 1996 1995
1996 (1) Interest Interest
----------- ------------ ----------------
(In thousands)
<S> <C> <C> <C>
Notes payable due to four individuals
payable in eight equal semi-annual
installments of $28,125, including
interest at 8% through November
1998. $ 113 $ 4 $ 9
Note payable to a bank collateralized
by the assets of a multi-specialty
group practice, payable in monthly
installments of $14,027, including
interest at 7.50% and a final
payment in February 1999. 394 15 30
Notes payable assumed in conjunction
with the acquisition of Pinnacle
with interest rates ranging from 6%
to 10%. 731 29 57
Notes payable to a bank collateralized
by the assets of a multi-specialty
group practice, payable in monthly
installments of $20,608, at 8.75%
and a final payment in August 2000. 797 35 70
Note payable to the former
shareholders of a medical oncology
practice in South Florida, payable
in ten equal semi-annual
installments of $682,867, including
interest at 9%. The note payable is
collateralized by an irrevocable
letter of credit. 4,964 223 447
Convertible note payable to Oncology
Care Associates with a maturity date
of May 1997 and an interest rate at
6%. 300 4 18
Note payable to Mr. Gosman with a
maturity date of January 1998 and an
interest rate at the prime rate. 77 3 6
Convertible Subordinated Debentures,
due 2003 with interest due
semi-annually at 6.75%. 100,000 3,375 6,750
Capital lease obligations with
maturity dates through September
2015 and interest rates ranging from
8.75% to 12%. 9,127 506 1,013
-------- ------ ------
$116,503 $4,194 $8,400
======== ====== ======
</TABLE>

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

(1)Includes actual debt at July 31, 1996.

31
<PAGE>

N. No income tax provision is required due to the Company's tax losses and
the inability of the Company to use the benefits which primarily accrued
to Mr. Gosman.

O. Adjusts to eliminate the expenses recorded during the year ended December
31, 1995 on the Nutrichem contingent note. These expenses relate to a
bonus based on earnings and continued employment. This represents the
maximum amount that can be earned because the earnings threshold upon
which the payment is based was reached at December 31, 1995.

P. Adjusts for income from investment in affiliates as follows:

<TABLE>
<CAPTION>
Year Ended
December 31,
1995
-------------
(In thousands)
<S> <C>
DASCO (Purchased 50% interest in May 1995) $(78)
----
</TABLE>

Q. Pro forma loss per share for the year ended December 31, 1995 has been
calculated based upon 18,074,117 shares outstanding which was derived as
follows: total shares outstanding prior to offering of 13,307,450 plus
shares of 4,766,667 from which the proceeds of such shares were used to
repay debt and amounts due to shareholder in the amount of $71,500.
Pro forma net income per share for the six months ended July 31, 1996 has
been calculated based upon 22,573,777 shares outstanding which was derived
as follows: 21,864,202 actual shares outstanding at July 31, 1996 plus
363,442 shares committed to be issued pursuant to an Acquisition plus
346,126 shares (assuming a share price at $21.625) committed to be issued
during the next year, pursuant to several Acquisitions. The conversion of
the Debentures issued in June 1996 is not assumed because the effect is
anti-dilutive.

R. "All Other" for Acquisitions represents those entities which individually
are not material to the Unaudited Pro Forma Statement of Operations. A
summary of these entities with the respective historical revenues,
historical net income (loss), adjustments to revenue and adjustments to
net income (loss) are as follows:

Acquisitions

<TABLE>
<CAPTION>
Six Months Ended July 31, 1996
----------------------------------------------------------
(In thousands)
Pro Forma
Historical Pro Forma Adjustments to
Historical Net Income Adjustments to Net Income
Entity Revenues (Loss) Revenue (Loss)
- --------------------------------------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Lawler $ 210 $ 61 $-- $ (89)
Busch 226 (1) -- (1)
Dal Yoo 132 9 -- 14
Kelley 382 68 -- (32)
Bress & Sinor 840 1 -- 80
Family Practice Associates 594 33 -- (103)
Koerner, Taub & Flaxman 717 -- -- (6)
Atlanta Metro Urology 850 (20) -- 25
Insignia Care for Women, P.A. 1,835 76 -- 65
Georgia Surgical Associates 1,429 301 -- (264)
Atlantic Pediatrics 366 7 -- --
Ankle and Foot Center of Tampa Bay, P.A. 1,565 155 -- 1
------ ---- --- -----
Total $9,146 $690 $-- $(310)
====== ==== === =====
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
Year Ended December 31, 1995
----------------------------------------------------------
(In thousands)
Pro Forma
Historical Pro Forma Adjustments to
Historical Net Income Adjustments to Net Income
Entity Revenues (Loss) Revenue (Loss)
- --------------------------------------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
West Shore Urology $ 2,035 $ 275 $ -- $ (340)
Oncology Care Associates 2,438 157 -- (148)
Venkat Mani 767 455 -- (485)
Symington 340 23 -- (60)
Novoa 306 26 -- (73)
Jaffer 257 125 -- (180)
Hunter 245 1 -- (16)
Herman 181 131 -- (131)
Dandiya 126 45 -- (15)
Cano 221 (9) -- (60)
Canasi 169 75 -- (59)
Bansal & Mistry 316 185 -- (150)
Phylab -- -- -- (6)
Lithotripsy America, Inc. -- -- -- (21)
Alpert 286 (2) -- (40)
Lawler 1,007 290 -- (402)
Busch 776 4 -- 21
Dal Yoo 396 31 -- 51
Kelley 764 141 -- (65)
Bress & Sinor 2,016 1 -- 198
Family Practice Associates 1,165 (3) -- (68)
Koerner, Taub & Flaxman 1,725 118 -- (262)
Atlanta Metro Urology 2,084 50 -- (36)
Insignia Care for Women, P.A. 3,671 151 -- 130
Georgia Surgical Associates 2,800 (27) -- 98
Atlantic Pediatrics 776 70 -- (32)
Ankle and Foot Center of Tampa Bay,
P.A. 2,940 53 -- 265
Central Georgia Management, LLC -- -- -- (45)
Corporate Overhead -- -- -- 1,764
------- ------ ------ ------
Total $27,807 $2,366 $ -- $ (167)
======= ====== ====== ======
</TABLE>

33
<PAGE>

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

Introduction

The Company is a physician practice management company that provides
management services to disease specialty and primary care physicians and
provides related medical support services. The Company's strategy is to
develop networks of disease specialty and primary care physicians supported
by related diagnostic and therapeutic medical support services in order to
provide a continuum of health care services in specific geographic locations.
The Company also provides medical facility development services to related
and unrelated third parties in connection with the establishment of health
parks, medical malls and medical office buildings.

Since the Company commenced operations in June 1994, it has developed its
current business primarily through the acquisition of the businesses and
assets of physician practices and medical support service companies. As of
July 31, 1996, the Company had affiliated with 138 physicians, acquired
several medical support service companies, acquired a medical facility
development company, and acquired a 43.75% interest in a management services
organization in Connecticut and a 50% interest in a management services
organization in Georgia that provide management services to independent
physician associations composed of over 375 multi-specialty physicians.

In January 1996, the Company changed its fiscal year end from December 31
to January 31.

Acquisition Summary

The following table sets forth the acquisitions (collectively, the
"Acquisitions") made by the Company with the respective purchase dates,
purchase prices, and amounts allocated to intangibles:

<TABLE>
<CAPTION>
Amounts Allocated
to Intangibles
-----------------------
Management
Date Purchase Service
Business Acquired Purchased Price Goodwill Contracts
- ------------------------------------------------------------ -------------------- ------------ --------- ----------
<S> <C> <C> <C> <C>
Employed physicians (A) Various $ 7,078,162 $5,702,296 --
Medical support service companies:
(bullet) Uromed Technologies, Inc. September 1994 3,661,751 2,375,914 --
(bullet) Nutrichem, Inc. November 1994 12,924,371 9,799,793 --
(bullet) First Choice Home Care Services of Boca Raton,
Inc. November 1994 2,910,546 2,622,061 --
(bullet) First Choice Health Care Services of Ft.
Lauderdale, Inc.
(bullet) First Choice Health Care Services, Inc.
(bullet) Mobile Lithotripter of Indiana Partners December 1994 2,663,000 -- --
(bullet) Radiation Care, Inc. and Subsidiaries March 1995 41,470,207 8,623,330 --
(bullet) Aegis Health Systems, Inc. April 1995 7,162,770 6,227,770 --
(bullet) Phylab/Miramer Lab October 1995 133,081 118,649 --
(bullet) Pinnacle Associates, Inc. November 1995 --(B) 471,576 --
Managed physician practices:
(bullet) Georgia Oncology-Hematology Clinic, P.C. April 1995 2,099,353 -- 645,448
(bullet) Oncology-Hematology Associates P.A. and
Oncology-Hematology Infusion Therapy, Inc. July 1995 1,542,953 -- 314,170
(bullet) Cancer Specialists of Georgia, Inc. August 1995 6,100,492 -- 2,738,429
(bullet) Oncology & Radiation Associates, P.A. September 1995 10,786,997 -- 9,581,773
(bullet) Osler Medical, Inc. 4,276,969
September 1995 6,696,104 --

34
<PAGE>

Amounts Allocated
to Intangibles
-----------------------
Management
Date Purchase Service
Business Acquired Purchased Price Goodwill Contracts
- ------------------------------------------------------------ -------------------- ------------ --------- ----------
Employed physicians (A) Various $ 7,078,162 $ 5,702,296 --
Medical support service companies:
(bullet) Uromed Technologies, Inc. September 1994 3,661,751 2,375,914 --
(bullet) West Shore Urology October 1995 554,447 -- 27,204
(bullet) Whittle, Varnell and Bedoya, P.A. November 1995 984,711 -- 288,564
(bullet) Oncology Care Associates November 1995/
July 1996 1,032,939 -- 547,886
(bullet) Symington December 1995 121,667 -- 29,566
(bullet) Venkat Mani December 1995 443,429 -- 140,839
(bullet) Atlanta Gastroenterology April 1996 6,100,000 -- --
(bullet) Busch May 1996 759,637 -- 429,545
(bullet) Kelley June 1996 500,000 -- 500,000
(bullet) Dal Yoo June 1996 394,427 -- 259,874
(bullet) Koerner, Taub & Flaxman July 1996 830,339 -- 210,567
(bullet) Atlanta Metro Urology July 1996 705,189 -- 350,000
(bullet) Insignia Care for Women, P.A. August 1996 3,350,000 -- 2,400,000
(bullet) Atlantic Pediatrics August 1996 259,000 -- 95,000
(bullet) Ankle and Foot Center of Tampa Bay, P.A. August 1996 2,935,000 -- 2,800,000
(bullet) Georgia Surgical Associates August 1996 1,445,000 -- 1,058,000
Medical facility development:
(bullet) DASCO Development Corporation and Affiliate May 1995/ January
1996 9,813,856(C) 9,813,856 --
Management Services Organizations:
(bullet) Physicians Choice Management, LLC December 1995/ 13,350,000 11,232,413 --
September 1996
(bullet) Central Georgia Medical Management, LLC --
April 1996 1,250,000 900,000
</TABLE>

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

(A) Includes Drs. Bansal, Mistry, Dandiya, Canasi, Alpert, Hunter, Jaffer,
Cano, Herman, Barza, Novoa, Lawler, Cutler and Surowitz.

(B) Entire purchase price is contingent and is based on earnings with a
maximum purchase price of $5.2 million.

(C) The Company acquired 50% of DASCO in May 1995 and the remaining 50% was
acquired simultaneous with the initial public offering in January 1996.
See "Medical Facility Development Acquisitions."

Physician Practice Acquisitions

During the year ended December 31, 1995, the Company purchased the assets
of Drs. Bansal, Mistry, Dandiya, Canasi, Alpert, Hunter, Jaffer, Cano,
Herman, Barza and Novoa and in conjunction with those purchases entered into
employment agreements with 14 physicians in Florida. The total purchase price
for these assets was $3,950,386. The purchase price was allocated to these
assets at their fair market value, including goodwill of $2,925,885. During
the six months ended July 31, 1996, the Company purchased the assets of and
entered into employment agreements with Drs. Lawler, Cutler and Surowitz. The
total purchase price for these assets was $2,069,376 in cash and $1,058,400
payable in Common Stock of the Company to be issued during the second quarter
of 1997. The Common Stock to be issued is based upon the average price of the
stock during the five business days prior to the issuance and was allocated
to the assets at their fair market value including goodwill of $2,776,411.
The resulting goodwill is being amortized over 20 years.

35
<PAGE>

$1,542,953 in cash. An affiliate of the Company guarantees the performance of
the Company's obligations under the management agreement. For its management
services, the Company will receive 41.6% of the net revenues of the practice
less the salaries and benefits of medical personnel whose services are billed
incident to the practice of medicine and which are employed by the practice.
The Company has guaranteed that the minimum amount that will be retained by
the practice for each of the first eight years will be $1,627,029 and for
each of years nine and ten will be $1,301,619. The purchase price was
allocated to the assets at their fair market value, including management
service agreements of approximately $314,170. The resulting intangible is
being amortized over 15 years.

During August 1995, the Company purchased the assets of Cancer Specialists
of Georgia, Inc. a medical oncology practice with 11 oncologists in Atlanta,
Georgia. The purchase price for these assets was approximately $6,100,492 in
cash. In addition, during April 1995, the Company purchased the assets of and
entered into a 10-year management agreement with Georgia Oncology-Hematology
Clinic, P.C. a medical oncology practice with eight oncologists in Atlanta,
Georgia. The purchase price for these assets was approximately $2,099,353 in
cash. During August 1995, these two medical oncology practices consolidated
and formed a new entity, Georgia Cancer Specialists, Inc. The Company entered
into a new 10-year management agreement with the consolidated practice during
August 1995. For its services under this management agreement, the Company
receives 41.5% of the net practice revenues less the cost of pharmaceutical
and/or ancillary products. In each of the second through fifth years of the
term of this agreement, the fee payable to the Company is decreased by 1%.
The Company also purchased for $180,000 a 46% interest in I Systems, Inc., a
company affiliated with one of the practices which is engaged in the business
of claims processing and related services. The purchase of this 46% interest
is being accounted for by the equity method. The Company has the option to
purchase up to an additional 30% interest in the affiliated Company for
$33,333 in cash for each additional one percent of ownership interest
purchased. The Company and the affiliated company entered into a three-year
service agreement pursuant to which certain billing and collection services
will be provided to the Company. The purchase price of the above acquisitions
was allocated to the assets at their fair market value, including management
service agreements of $3,383,877. The resulting intangible is being amortized
over 10 years.

During September 1995, the Company purchased the assets of and entered
into a 20-year management agreement with Osler Medical, Inc., a 22 physician
multi-specialty group practice in Melbourne, Florida. The purchase price for
these assets was approximately $4,318,832 plus the assumption of debt of
$1,490,272. The Company also entered into a 20-year capital lease for the
main offices of the practice with a total obligation of $6,283,483. An
affiliate of the Company has provided a guarantee of such payments under the
lease. During the first five years of the management agreement, the Company
will receive a management fee equal to 45% of the annual net revenues of the
practice. Thereafter, the management fee increases to 47% of annual net
revenues. The management fee percentage for net revenues of the initial
physician group will be reduced based upon a set formula to a minimum of 31%
based upon the achievement of certain predetermined benchmarks. The
management agreement also provides that, during the period from January 1,
1996 through December 31, 2005, to the extent annual net revenues of the
practice are less than $10,838,952, the Company's management fee is reduced
up to a maximum reduction of $1,500,000 per year. The Company has agreed to
expend up to $1,500,000 per year for each of the first three years of the
management agreement to assist in the expansion activities of the practice.
During the second quarter of 1996, the Company also acquired certain
copyright and trademark interests for a purchase price of $887,000. The
purchase price for the practice's assets acquired to date was allocated to
such assets at their fair market value, including management service
agreements of $4,276,969. The resulting intangible is being amortized over 20
years.

During September 1995, the Company purchased the assets of and entered
into a 20-year management agreement with Oncology & Radiation Associates,
P.A. a medical oncology practice with 19 oncologists in South Florida. The
purchase price for these assets was $5,383,660 in cash plus the assumption of
debt of $5,403,337. The debt is collateralized by an irrevocable letter of
credit issued by NationsBank of Florida, N.A. ("NationsBank"), the collateral
for which had been provided by Mr. Gosman prior to the Company's initial
public offering. The management fee paid to the Company for services rendered
has two components: a base management fee and a variable management fee. The
base management fee is $2,100,000 per year, subject to adjustment to an
amount not less than $1,350,000 during the first five years of the agreement
and not less than $700,000 thereafter. The variable management fee is equal
to 35.5% of certain revenues, subject to increase in certain circumstances.
The

36
<PAGE>

purchase price for the practice's assets was allocated to the assets at their
fair market value, including management service agreements of $9,581,773. The
resulting intangible is being amortized over 20 years.

During the fourth quarter of 1995, the Company purchased the assets of and
entered into management service agreements with West Shore Urology; Whittle,
Varnell and Bedoya, P.A.; Oncology Care Associates; Venkat Mani; and
Symington consisting of 14 physicians including two oncologists. The total
purchase price for these assets was $2,637,193 in cash. The Company also
entered into a 15-year capital lease with a total obligation of $1,569,171.
The purchase price for the practices' assets was allocated to assets at their
fair market value, including management service agreements of $534,059. The
resulting intangible is being amortized over ten to 20 years.

During May 1996, the Company purchased the stock of Atlanta
Gastroenterology Associates, P.C. pursuant to a tax free merger and entered
into a 40-year management agreement with the medical practice in exchange for
324,252 shares of Common Stock of the Company having a value of approximately
$6,100,000. The transaction has been accounted for using the
pooling-of-interests method of accounting. Pursuant to the management
agreement, the Company will receive a base management fee, an incentive
management fee, and a percentage of all net ancillary service income.

During May 1996, the Company amended its existing management agreement
with Oncology Care Associates and extended the term of the agreement to 20
years. Simultaneously, the Company expanded the Oncology Care Associates
practice by adding three oncologists the practices of whom the Company
acquired for $500,000. $200,000 of such purchase price was paid in cash and
$300,000 was paid in the form of a convertible note with a maturity in May
1997. The Company has the option to make such $300,000 payment at its
discretion in either cash or Common Stock of the Company with such number of
shares to be based upon the average price of the stock during the five
business days preceding such date. The purchase price has been allocated to
the assets at their fair market value, including management service
agreements of approximately $500,000. The Company will receive an annual base
management fee and an incentive management fee. The resulting intangible is
being amortized over 20 years.

During May and June 1996, the Company entered into agreements to purchase
the assets of and enter into 20-year management agreements with three
physician practices consisting of four physicians. All of the acquisitions
have since been consummated, except that one of the acquisitions closed in
escrow pending the satisfaction of certain conditions. These practices are
located in South Florida, Bethesda, Maryland and Washington, D.C. The total
purchase price for the assets of these practices was $1,654,064. Of this
amount, $703,110 was paid in cash and $950,954 of such purchase price is
payable in Common Stock of the Company to be issued during May and June 1997.
The number of shares of Common Stock of the Company to be issued is based
upon the average price of the stock during the five business days prior to
the issuance. The value of the Common Stock to be issued has been recorded in
other long term liabilities at July 31, 1996. The purchase price has been
allocated to the assets at their fair market value, including management
service agreements of approximately $1,189,419. The Company will receive an
annual base management fee and an incentive management fee under each
agreement. The resulting intangible is being amortized over 20 years.

During July 1996, the Company purchased the assets of and entered into a
20-year management agreement with four physicians in Florida. The purchase
price for these assets was approximately $830,339, which was paid in cash.
The purchase price has been allocated to these assets at their fair market
value, including management service agreements of approximately $210,567. The
Company will receive a management fee under the management agreements based
upon a percentage of the net revenues of the practice. The resulting
intangible is being amortized over 20 years.

During July 1996, the Company purchased the assets of and entered into a
20-year management agreement with three urologists in Atlanta, Georgia. The
purchase price for these assets was $705,189. Of such purchase price,
$425,189 was paid in cash and $280,000 is payable during July 1997 in Common
Stock of the Company with such number of shares to be based upon the average
price of the stock during the five business days prior to the issuance. The
value of the Common Stock to be issued has been recorded in other long term
liabilities at July 31, 1996. The purchase price has been allocated to these
assets at their fair market value, including management service agreements of
approximately $350,000. The Company will receive an annual base management
fee and an incentive management fee. The resulting intangible is being
amortized over 20 years.

37
<PAGE>

During August 1996, the Company purchased the assets of and entered into a
40-year management agreement with eight physicians in Florida. The purchase
price for these assets was $3,350,000. Of such purchase price, $1,430,000 was
paid in cash and $1,920,000 is payable during August 1997 in Common Stock of
the Company with such number of shares to be purchased based upon the average
price of the stock during the five business days prior to the issuance. The
purchase price will be allocated to these assets at their fair market value,
including management service agreements of approximately $2,400,000. The
Company will receive an annual base management fee and an incentive
management fee. The resulting intangible will be amortized over 40 years.

During August 1996, the Company purchased the assets of three physicians
in Florida. The purchase price for these assets was $259,071. Of such
purchase price, $163,435 was paid in cash and $95,636 is payable during
August 1997 in Common Stock of the Company with such number of shares to be
purchased based upon the average price of the stock during the five business
days prior to the issuance. The purchase will be allocated to these assets at
their fair market value, including management service agreements of
approximately $95,636. The resulting intangible will be amortized over 20
years.

During August 1996, the Company purchased the assets of and entered into a
40-year management agreement with 10 physicians in Florida. The purchase
price for these assets was $2,935,139. Of such purchase price, $695,139 was
paid in cash and $2,240,000 is payable during August 1997 in Common Stock of
the Company with such number of shares to be purchased based upon the average
price of the stock during the five business days prior to the issuance. The
purchase price will be allocated to these assets at their fair market value,
including management service agreements of approximately $2,800,000. The
Company will receive an annual base management fee and an incentive
management fee. The resulting intangible will be amortized over 40 years.

During August 1996, the Company purchased the assets of and entered into a
40-year management agreement with four physicians in Georgia. The purchase
price for these assets was $1,445,278. Of such purchase price, $752,478 was
paid in cash and $692,800 is payable during August 1997 in Common Stock of
the Company with such number of shares to be purchased based upon the average
price of the stock during the five business days prior to the issuance. The
purchase price will be allocated to these assets at their fair market value,
including management service agreements of approximately $1,057,631. The
Company will receive an annual base management fee and an incentive
management fee. The resulting intangible will be amortized over 40 years.

Medical Support Service Companies Acquisitions

During September 1994, an 80% owned subsidiary of the Company purchased
substantially all of the assets of Uromed Technologies, Inc. ("Uromed"), a
provider of lithotripsy services in Florida, for a Base Purchase Price of
$2,564,137 plus the assumption of capital lease obligations of $1,097,614.
The Final Purchase Price equals the Base Purchase Price plus the amount by
which Stockholders' Equity exceeded $450,000 on the Closing Date. A Final
Purchase Price payment of $283,000 was accrued at December 31, 1994 and paid
during May 1995. The former shareholders of Uromed will also receive an
earnings contingency payment of $274,000 which has been accrued at December
31, 1995. The acquisition was accounted for under the purchase method of
accounting. The purchase price was allocated to assets at their fair market
value including goodwill of $2,375,914. The resulting intangible is being
amortized over 20 years. The Company intends to acquire the outstanding 20%
interest in the subsidiary.

During November 1994, the Company purchased 80% of the stock of Nutrichem,
Inc. ("Nutrichem"), an infusion therapy company doing business in Maryland,
Virginia and the District of Columbia, for $3,528,704 in cash and a
contingent note in the amount of $6,666,667, subject to adjustments. During
the year ended December 31, 1995, the Company made payments on the contingent
note of $2,657,732 (including interest of $435,510). Subsequent to the
Company's initial public offering, the contingent note (which had an
outstanding principal balance of $4,444,444 at December 31, 1995) was paid
from the net proceeds of the offering. A charge of $1,271,000 related to this
contingent note was recorded during the year ended December 31, 1995. The
remaining $5,395,667 was allocated to goodwill at December 31, 1995 and is
being amortized. The purchase price was allocated to assets at the fair
market value including total goodwill of $7,007,833. The resulting intangible
is being amortized over 40 years. Subsequent to the initial public offering,
the Company acquired the outstanding 20% interest in Nutrichem in exchange
for 266,666 shares of Common Stock resulting in additional purchase price and
goodwill of $4,000,000 and $2,791,960, respectively.

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During November 1994, the Company acquired all of the assets and assumed
certain liabilities of First Choice Health Care Services of Ft. Lauderdale,
Inc., First Choice Health Care Services, Inc. and First Choice Home Care
Services of Boca Raton, Inc., home health care companies doing business in
Florida, for a total purchase price of $2,910,546 in cash. The purchase price
was allocated to assets at the fair market value, including goodwill of
$2,622,061. The resulting intangible is being amortized over 20 years.

During December 1994, the Company purchased a 36.8% partnership interest
in Mobile Lithotripter of Indiana Partners, a provider of lithotripsy
services in Indiana, from Mobile Lithotripter of Indiana, Limited, for
$2,663,000 in cash. This investment is being accounted for by the equity
method.

During March 1995, the Company acquired by merger all of the outstanding
shares of stock of Oncology Therapies, Inc. (formerly known as Radiation
Care, Inc. and referred to herein as "OTI") for $2.625 per share. OTI owns
and operates outpatient radiation therapy centers utilized in the treatment
of cancer and diagnostic imaging centers. OTI's centers are located in
Alabama, California, Florida, Georgia, North Carolina, South Carolina,
Tennessee and Virginia. The total purchase price for the stock (not including
transaction costs and 26,800 shares subject to appraisal rights) was
approximately $41,470,207. The purchase price was paid by a combination of
cash on hand, loans from Mr. Gosman and net proceeds from long term debt
financing of approximately $17,278,000. The long term debt financing was paid
in full during January 1996 with the proceeds of the Company's initial public
offering. The Company closed five of OTI's radiation therapy centers and has
accrued approximately $3,134,028 primarily as a reserve for the estimated
amount of the remaining lease obligation. Of this amount $2,188,635 was
recorded as an adjustment to the purchase price and $945,393 was recorded as
a charge in the fourth quarter of 1995. In addition, the Company also
recorded a charge during the fourth quarter of 1995 of $1,554,607, which
represents the writedown of assets to their estimated fair market value. The
purchase price paid in connection with the OTI merger was allocated to assets
at their fair market value, including goodwill of $8,623,330. The resulting
intangible is being amortized over 40 years.

During April 1995, the Company purchased from Aegis Health Systems, Inc.
for $7,162,770 all of the assets used in its lithotripsy services business.
The purchase price consisted of approximately $3,592,362 in cash and
$3,570,408 in a promissory note. The outstanding principal balance and any
unpaid interest became due and payable upon the closing of the Company's
initial public offering and was paid in full during January 1996. The
obligations, evidenced by the promissory note, were secured by $1,000,000
which was in escrow and included in other assets at December 31, 1995. The
purchase price was allocated to assets at their fair market value including
goodwill of $6,227,770. The resulting intangible is being amortized over 20
years.

During November 1995 the Company acquired by merger Pinnacle Associates,
Inc. ("Pinnacle"), an Atlanta, Georgia infusion therapy services company. In
connection with the Pinnacle merger there is a $5,200,000 maximum payment
that may be required to be paid that is based on earnings and will be made in
the form of shares of Common Stock of the Company valued as of the earnings
measurement date. The amount of such contingent payment has not yet been
determined, however, the Company believes that the impact on the financial
statements is immaterial. The contingent consideration represents the full
purchase price. On the merger date, the liabilities assumed exceeded the fair
market value of the assets acquired by approximately $471,576 and such amount
was recorded as goodwill and is being amortized over 40 years.

Management Services Organization

During December 1995, the Company obtained a 43.75% interest in Physicians
Choice Management, LLC, a newly formed management services organization
("MSO") that provides management services to an independent physician
association ("IPA") composed of over 330 physicians based in Connecticut. The
Company acquired this interest in exchange for a payment of $1.5 million to
existing shareholders, ($1.0 million paid during 1995 and $.5 million paid
during the second quarter of 1996) and a capital contribution of $2.0 million
to the Company ($1.5 million paid during 1995 and $.5 million paid during the
second quarter of 1996). The Company's balance sheet as of July 31, 1995
includes the 56.25% interest not owned by the Company as minority interest.
The Company acquired an option, which expires in May 1998, to increase its
ownership in the MSO to 50% for an additional investment of $2.0 million, of
which $1.0 million would represent an additional capital contribution to the
MSO and $1.0 million would represent the purchase of additional units
currently owned by the IPA. The Company has paid a nonrefundable amount of
$350,000 for such option. In addition, upon the IPO the Company granted
options

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to purchase 300,000 shares of Common Stock to certain MSO employees in
conjunction with their employment agreements. These options vest over a two
year period with the exercise price equaling the fair market value of the
Company's stock on the date such shares become exercisable. During September
1996, the Company purchased the remaining 56.25% interest for a payment of
$1,000,000 in cash plus 363,442 shares of Common Stock. The Company has also
agreed to loan the selling shareholders $2.8 million in the event that they
incur a tax liability related to the sale.

During April 1996, the Company purchased a 50% interest in Central Georgia
Medical Management, LLC, a newly formed MSO that provides management services
to an IPA composed of 45 physicians based in Georgia. The Company acquired
this interest in exchange for a payment of $550,000 to existing shareholders
and a capital contribution of $700,000 to the MSO. The Company's balance
sheet as of July 31, 1996 includes the 50% interest not owned by the Company
as minority interest. The owners of the other 50% interest in the MSO have a
put option to the Company to purchase their interests. This put option vests
over a four year period. The price to the Company to purchase these interests
shall equal 40% of the MSO's net operating income as of the most recent
fiscal year multiplied by the price earnings ratio of the Company. The
minimum price earnings ratio used in such calculation will be 4 and the
maximum 10.

Medical Facility Development Acquisitions

On May 31, 1995, Mr. Gosman purchased a 50% ownership interest in DASCO
Development Corporation and DASCO Development West, Inc. (collectively,
"DASCO"), a medical facility development services company providing such
services to related and unrelated third parties in connection with the
development of medical malls, health parks and medical office buildings. The
purchase price consisted of $5.2 million in cash and $4.6 million in notes,
which were guaranteed by Mr. Gosman. Upon the closing of the Company's
initial public offering, Messrs. Gosman, Sands and Rendina, the Company's
principal promoters, and certain management and founder stockholders
exchanged their ownership interests in DASCO for shares of Common Stock equal
to a total of $55 million or 3,666,667 shares. The Company believes that its
medical facility development services and project finance strategy are a
significant component of the Company's overall business strategy. The
historical book value of Messrs. Sands and Rendina's interest in DASCO is
$22,735. The initial 50% purchase price was allocated to assets at their fair
market value, primarily goodwill of $9.8 million with the exchange recorded
at historical value. At December 31, 1995 DASCO was being accounted for using
the equity method.

Accounting Treatment

Each of the Acquisitions was accounted for under the purchase method of
accounting, except where noted otherwise above.

The Company's relationships with its affiliated physicians are set forth
in various asset purchase agreements, management service agreements, and
employment and consulting agreements. Through the asset purchase agreement,
the Company acquires the equipment, furniture, fixtures, supplies and, in
certain instances, service agreements, of a physician practice at the fair
market value of the assets. The accounts receivable are typically purchased
at the net realizable value. The purchase price of the practice generally
consists of cash and the assumption of certain debt, leases and other
contracts necessary for the operation of the practice. The management
services or employment agreements delineate the responsibilities and
obligations of each party.

Net revenues from management service agreements include the contractual
fees earned (which equals the net revenues generated by the physician
practices) under its management services agreements with physicians. Under
the agreements, the Company is contractually responsible and at risk for the
operating costs of the medical groups. The costs include the reimbursement of
all medical practice operating costs and the fixed and variable contractual
management fees (which are reflected as cost of affiliated physician
management services) as defined and stipulated in the agreements.

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Results of Operations

Historical
Three Months and Six Months Ended July 31, 1996 Compared to Three Months and
Six Months Ended June 30, 1995

The following discussion reviews the results of operations for the three
and six months ended July 31, 1996 (the "1996 Quarter" and "1996 Period"),
respectively, compared to the three and six months ended June 30, 1995 (the
"1995 Quarter" and "1995 Period"), respectively.

Historical Revenues

The Company derives revenues from health care services, medical facility
development services and management service organizations. Within the health
care segment, the Company distinguishes between revenues from cancer
services, non-cancer physician services and other medical support services.
Cancer services include physician practice management services to oncology
practices and certain medical support services, including radiation therapy,
diagnostic imaging and infusion therapy. Non-cancer physician services
include physician practice management services to all practices managed by
the Company other than oncology practices. Other medical support services
include home health care services and lithotripsy.

Net revenues were $13.3 million and $20.0 million for the 1995 Quarter and
the 1995 Period, respectively. Of these amounts, $8.6 million and $10.7
million or 64.3% and 53.4% of such revenues was attributable to cancer
services; $.9 million and $1.1 million or 6.8% and 5.6% was related to
non-cancer physician services; and $3.9 million and $8.2 million or 28.9% and
41.0% of such revenues was attributable to other medical support services for
the 1995 Quarter and the 1995 Period, respectively.

Net revenues were $40.4 million and $77.6 million for the 1996 Quarter and
the 1996 Period, respectively. Such revenues during this period consisted of
$23.1 million and $44.3 million or 57.2% and 57.0% related to cancer
services; $8.6 million and $15.9 million or 21.4% and 20.4% related to
non-cancer physician services; $4.9 million and $10.1 million or 12.2% and
13.0% related to other medical support services; and $3.7 million and $7.4
million or 9.2% and 9.5% related to medical facility development. As of July
31, 1996, the Company had affiliations with 61 physicians providing cancer
related services, 20 employed primary care physicians and 57 other multigroup
or specialty physicians.

Historical Expenses

For the 1996 Quarter, the 1996 Period, the 1995 Quarter and the 1995
Period, expressed as a percentage of net revenues, general corporate expenses
were 5.0%, 4.4%, 7.2% and 8.5%, respectively. General corporate expenses, as
a percentage of net revenues, were higher during the 1995 Quarter and the
1995 Period than the 1996 Quarter and the 1996 Period due to the commencement
of operations of the Company during the 1995 Quarter and the 1995 Period.

The Company's cost of affiliated physician management services was $8.9
million and $17.4 million for the 1996 Quarter and the 1996 Period,
respectively. There were no costs of affiliated physician management services
during the 1995 Quarter or the 1995 Period. Cost of affiliated physician
management services represents the fixed and variable contractual management
fees as defined and stipulated in the management agreements. Revenue for
these managed physician practices was $19.4 million and $36.5 million for the
1996 Quarter and the 1996 Period, respectively.

The Company's depreciation and amortization expense increased by $.6
million from the 1995 Quarter to the 1996 Quarter and $1.9 million from the
1995 Period to the 1996 Period. The increase is a result of the Acquisitions
and the allocation of the purchase prices as required per purchase
accounting.

The Company's rent expense increased by $.7 million from the 1995 Quarter
to the 1996 Quarter and $2.0 million from the 1995 Period to the 1996 Period.
Rent and lease expenses as a percentage of net revenue will vary based on the
size of each of the affiliated practice offices, the number of satellite
offices and the current market rental rate for medical office space in the
particular geographic markets.

The Company's earn-out payment during the 1995 Period of $1.1 million
represents a payment to Nutrichem on the contingent note entered into in
conjunction with the acquisition of Nutrichem.

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The Company's net interest expense decreased by $.2 million from the 1995
Quarter to the 1996 Quarter and $.3 million from the 1995 Period to the 1996
Period. Interest income of $.6 million and $1.1 million was earned during the
1996 Quarter and the 1996 Period, respectively, on the remaining proceeds
from the Company's 1996 initial public offering and Convertible Subordinated
Debenture Offering.

No income tax provision was required during the 1995 Quarter or the 1995
Period due to the Company's tax loss and the inability of the Company to use
the benefits which prior to the completion of the initial public offering
primarily accrued to Mr. Gosman.

Medical Facility Development

The Company, through its investment in DASCO, provides medical facility
development services to related and unrelated third parties in connection
with the establishment of health parks, medical malls and medical office
buildings. The Company believes that the development of such facilities, in
certain markets, will aid in the integration of its affiliated physicians and
medical support services and will provide future opportunities to affiliate
with physicians and acquire future physician practices or support services.
Further, the Company believes that the development of health parks, medical
malls and medical office buildings in certain markets will aid in the
integration of its affiliated physicians and medical support services.

The Company derives its medical facility development service revenues from
the provision of a variety of services. In rendering such services, the
Company generates income without bearing the costs of construction, expending
significant capital or incurring substantial indebtedness. Generally,
revenues are recognized at the time services are performed, except for
development fees which are recognized in accordance with the related
development agreements.

The Company typically receives the following compensation for its
services: development fees (including management of land acquisition,
subdivision, zoning, surveying, site planning, permitting and building
design), general contracting management fees, leasing and marketing fees,
project cost savings income (based on the difference between total budgeted
project costs and actual costs) and consulting fees.

The amount of development fees and leasing and marketing fees are stated
in the development and marketing agreements. Those agreements also provide
the basis for payment of the fees. The financing fees and consulting fees are
generally not included in specific agreements but are negotiated and
disclosed in project pro formas provided to the owners of the buildings and
hospital clients. Specific agreements usually incorporate those pro formas
and provide that the projects will be developed in conformity therewith.
General contracting management fees and project cost savings income are
included in guaranteed maximum cost contracts entered into with the general
contractor. These contracts are usually approved by the owners which in many
cases include hospital clients and prospective tenants. During the 1996
Quarter and the 1996 Period, the Company's medical facility development
generated revenues of $3.7 million and $7.4 million and pre-tax income (prior
to allocation of general corporate expenses) of $2.0 million and $3.8
million, respectively.

Year Ended December 31, 1995 Compared to Period from June 24, 1994 to
December 31, 1994
The following discussion reviews the historical results of operations for
the year ended December 31, 1995 and the period from June 24, 1994 to
December 31, 1994.

The Combined Historical Audited Financial Statements and the Notes thereto
and the Unaudited Pro Forma Combined Financial Information and Notes thereto
included elsewhere in this Prospectus present the results of operations of the
entities which were operated under common control on a combined basis. All of
the entities were acquired by the Company subsequent to June 23, 1994. As a
result of the Acquisitions, the Company believes that any period to period
comparisons and percentage relationships within periods are not meaningful.

Historical Revenues
Net revenues of $2.4 million for the period from June 24, 1994 to December
31, 1994 include revenues from the Acquisitions completed during the period
September through December 1994. Of this amount, $.7 million or 28% of such
revenues was attributable to cancer services; and $1.8 million or 72% of such
revenues was attributable to other medical support services. The Company had
no physician related revenues during this period.

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Net revenues of $70.7 million for the period from January 1, 1995 to
December 31, 1995 include revenues from the Acquisitions completed during the
period June 24, 1994 to December 31, 1995. Such revenues during this period
consisted of $44.9 million or 63% related to cancer services; $7.7 million or
11% related to non-cancer physician services; and $18.1 million or 26%
related to other medical support services. As of December 31, 1995, the
Company had affiliations with 55 physicians providing cancer related
services, 14 employed primary care physicians, and 34 other multigroup or
specialty physicians.

Historical Expenses
For the period from June 24, 1994 to December 31, 1994 and for the year
ended December 31, 1995, expressed as a percentage of net revenues, general
corporate expenses were 67% and 5%, respectively. In 1994, general corporate
expenses were relatively high due to the expenses incurred in connection with
the commencement of operations of the Company. General corporate expenses
will continue to increase in gross dollars, but this expense as a percentage
of net revenues is expected to continue to decline. No income tax provision
is required due to the Company's current tax loss and the inability of the
Company to use the benefits which prior to the completion of the initial
public offering primarily accrued to Mr. Gosman.

Pro Forma

The Unaudited Pro Forma Statements of Operations present the results of
operations of the Company for the year ended December 31, 1995 and the six
months ended July 31, 1996 as if the Acquisitions, the sale of the Common
Stock offered in the Company's January 1996 initial public offering and the
application of the net proceeds therefrom had been consummated on January 1,
1995, and the issuance of the Debentures in the Debt Offering and the
application of the net proceeds therefrom as if such transactions had
occurred as of January 1, 1995. The Unaudited Pro Forma Combined Balance
Sheet reflects the Acquisitions subsequent to July 31, 1996 as if they had
occurred on July 31, 1996. Such Pro Forma Combined Financial Information is
based on the historical financial information of the Acquisitions adjusted to
reflect the purchase price and the elimination of various non-recurring
income and expenses as further described in the Notes to the Unaudited Pro
Forma Combined Financial Information. Such Unaudited Pro Forma Combined
Financial Information does not include operational or other changes which
might have been effected by the Company's management. The Unaudited Pro Forma
Combined Financial Information is not necessarily indicative of the results
that would have occurred if the transactions had occurred on the dates
indicated or which may be realized in the future.

Pro Forma Revenues
The pro forma results of operations reflect the Acquisitions, including
the Company's affiliation with 163 physicians, revenues from the related
medical support services, and revenues from medical facility development.

Pro forma net revenues for the year ended December 31, 1995 include
revenues from all of the Acquisitions as if the Acquisitions had occurred on
January 1, 1995. Such revenues consisted of $82.0 million or 54.6% related to
cancer services (of which $49.9 million or 60.9% of cancer services revenues
related to oncologists' services); $45.8 million or 30.5% related to
non-cancer physician services; $18.8 million or 12.5% related to other
medical support services, and $3.6 million or 2.4% related to medical
facility development services.

Pro forma net revenues for the six months ended July 31, 1996 include
revenues from all of the Acquisitions as if the Acquisitions had occurred on
February 1, 1996. Such revenues consisted of $45.6 million or 51.7% related
to cancer services (of which $26.4 million or 57.9% of cancer services
revenues related to oncologists' services); $24.2 million or 27.4% related to
non-cancer physician services; $11.0 million or 12.5% related to other
medical support services; and $7.4 million or 8.4% related to medical
facility development services.

Pro Forma Expenses
The pro forma results of operations included the actual general corporate
expenses incurred by the Company. General corporate expenses as a percent of
net revenues were 2.4% and 3.9% for the year ended December 31, 1995 and the
six months ended July 31, 1996, respectively.

The pro forma results of operations include the cost of affiliated
physician management services which were $44.7 million and $21.8 million for
the year ended December 31, 1995 and the six months ended July 31, 1996,

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respectively. Revenue for these managed physician practices was $88.0 million
and $46.3 million for the year ended December 31, 1995 and the six months
ended July 31, 1996, respectively. No income tax provision is required for
the year ending December 31, 1995 due to the Company's current pro forma tax
loss.

The nature of the affiliated practices affects the cost of affiliated
physician management services, salaries, wages and benefits, supplies,
depreciation and amortization. These expenses as a percentage of net revenue
will vary based on the mix of physician specialties.

Rent and lease expenses as a percentage of net revenue will vary based on
the size of each of the affiliated practice offices, the number of satellite
offices and the current market rental rate for medical office space in the
particular geographic markets.

Other costs as a percentage of net revenue will vary based on the ability
of the Company to centralize these costs, negotiate more favorable pricing
and institute stronger budgeting controls.

Medical Facility Development

On a pro forma basis the Company's medical facility development generated
revenues of $3.6 million and $7.4 million and a pre-tax loss of $.2 million
and pre-tax net income of $3.8 million (prior to corporate overhead) for the
year ended December 31, 1995 and the six months ended July 31, 1996,
respectively.

Liquidity and Capital Resources

Cash used by operating activities was $1.0 million for the 1996 Period and
$1.3 million for the 1995 Period. During the 1995 Period the Company had a
loss of $4.2 million which included $1.4 million of depreciation and
amortization. In addition, during the 1995 Period accounts receivables
decreased by approximately $.5 million. During the 1996 Period the Company
had net income of $5.1 million which included $3.3 million of depreciation
and amortization. In addition, during the 1996 Period accounts receivable
increased by approximately $6.5 million and accounts payables and accrued
liabilities decreased by approximately $1.0 million.

Cash used by investing activities was $9.0 million and $31.5 million for
the 1996 Period and 1995 Period, respectively. This primarily represents the
funds required by the Company for the acquisition of physician practices and
medical support service companies.

Cash provided by financing activities was $75.6 million for the 1996
Period and represents (i) net proceeds from the issuance of Convertible
Subordinated Debentures of $97.1 million; (ii) proceeds from the issuance of
Common Stock pursuant to stock options and offering costs related to the
initial public offering of $.2 million and $2.2 million, respectively; (iii)
repayment of debt and amounts due to shareholder of $5.5 million and $15.4
million, respectively; (iv) the release of restricted cash collateralizing
debt of $1.5 million; and (v) financing costs and fees of $.1 million. Cash
provided by financing activities was $33.2 million for the 1995 Period which
primarily represents the $35.1 million in capital contributions and advances
from shareholder offset by the repayment of $1.9 million in debt outstanding.

At July 31, 1996, the Company's principal source of liquidity consisted of
$111.7 million in cash. Working capital of $131.6 million increased by $153.9
million from December 31, 1995 to July 31, 1996 primarily as a result of the
$209.4 million of net proceeds received from the Company's initial public
offering and Convertible Subordinated Debenture offering, offset by the
repayment of approximately $87.4 million of indebtedness and certain
obligations arising from the Acquisitions. The Company also had $13.4 million of
current liabilities, including approximately $2.9 million of indebtedness
maturing before July 31, 1997. Further, the Company also has completed
Acquisitions subsequent to July 31, 1996 which required approximately $4.1
million in cash to complete and has also used $12.8 million in cash to loan to
third parties.

During 1995, the Company entered into a management agreement with a
22-physician multi-specialty group practice pursuant to which the Company has
agreed to expend up to $1.5 million per year in each of the next three years
to assist in the expansion activities of the practice. In addition, the
Company agreed to acquire certain copyright and trademark interests of the
practice for $.9 million. These interests were acquired during June 1996.

In conjunction with certain of its acquisitions the Company has agreed to
make payments in shares of Common Stock of the Company which are generally
issued one year from the closing date of such acquisitions with the

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number of shares generally determined based upon the average price of the
stock during the five business days prior to the date of issuance. As of July
31, 1996 the Company had committed to issue $1,889,354 of Common Stock of the
Company using the methodology discussed above. Subsequent to July 31, 1996
the Company has committed to issue an additional $5,349,000 of Common Stock
of the Company using this same methodology.

The Company's acquisition and expansion programs will require substantial
capital resources. In addition, the operation of physician groups, integrated
networks and related medical support service companies, and the development
and implementation of the Company's management information systems, will
require ongoing capital expenditures. The Company expects that its capital
needs over the next several years will substantially exceed capital generated
from operations. To finance its capital needs, the Company plans both to
incur indebtedness and to issue, from time to time, additional debt or equity
securities, including Common Stock or convertible notes, in connection with
its acquisitions and affiliations. The Company currently has a commitment
from a bank to fund $30 million of working capital and acquisition financing
needs.

The Company expects that the working capital and cash generated from
operations and amounts available under an acquisition/working capital line
for which the Company has received a commitment from a bank together with the
proceeds of the Convertible Subordinated Debenture offering will be adequate
to satisfy the Company's cash requirements for the next 12 months. However,
there can be no assurance that the Company will not be required to seek
additional financing during this period. The failure to raise the funds
necessary to finance its future cash requirements would adversely affect the
Company's ability to pursue its strategy and could adversely affect its
results of operations for future periods.

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BUSINESS

The Company provides management services to disease specialty and primary
care physicians and related medical support services. The Company's primary
strategy is to develop disease management networks in specific geographic
locations by acquiring physician practices and affiliating with disease
specialty and primary care physicians. Where appropriate, the Company
supports its affiliated physicians with related diagnostic and therapeutic
medical support services. The Company's medical support services include
radiation therapy, diagnostic imaging, infusion therapy, home health care and
lithotripsy services. Since its first acquisition in September 1994, the
Company has acquired the practices of and affiliated with 163 physicians and
acquired eight medical support service companies and a medical facility
development company. The Company also owns a newly formed management services
organization that provides management services to an independent physician
association composed of over 330 multi-specialty physicians and a 50%
interest in a second management services organization that provides
management services to an independent practice association composed of 45
primary care physicians.

The Company believes that its strategy of acquiring and integrating
independent physician practices and medical support services into specialty
networks creates synergies, achieves operating efficiencies and responds to
the cost-containment initiatives of payors, particularly managed care
companies. The Company has focused its disease management efforts on the
acquisition of oncology practices. To date, the Company has acquired the
practices of and affiliated with 61 oncologists and provides comprehensive
cancer-related support services including radiation therapy, infusion therapy
and diagnostic imaging. The Company intends to develop additional disease
management services for the treatment of other chronic illnesses such as
diabetes, cardiovascular diseases and infectious diseases.

In certain targeted markets, the Company organizes its affiliated
physicians and related medical support services into integrated clusters of
disease specialty and primary care networks, which it terms local provider
networks ("LPNs"). LPNs are designed to provide a comprehensive range of
physician and medical support services within specific geographic regions.
The Company believes that its LPN structure will achieve operating
efficiencies and enhance its ability to secure contracts with managed care
organizations. To date, the Company has contracts with managed care
organizations under which the Company and its affiliated physicians provide
cancer-related health care services to over 200,000 covered lives. To date,
the Company has established an LPN in each of the Southeast Florida, Atlanta,
Connecticut and Washington, D.C./Baltimore areas.

As part of its strategy to integrate physician practices, the Company
provides medical facility development services to related and unrelated third
parties for the development of health parks, medical malls and medical office
buildings. Such services include project finance assistance, project
management, construction management, construction design engineering,
physician recruitment, leasing and marketing. While the Company incurs
certain administrative and other expenses in the course of providing such
services, it does not incur costs of construction or risks of project
ownership. The Company's strategy in financing its projects is to involve
future tenants as significant investors in and owners of the developed
medical facilities. Because most of its tenants are physicians and medical
support service companies, the Company believes that the relationships that
it develops with these parties through its medical facility development
efforts will greatly enhance the Company's ability to affiliate with
physicians and acquire physician practices and medical support service
companies. Further, the Company believes that the development of health
parks, medical malls and medical office buildings in certain markets will aid
in the integration of its affiliated physicians and medical support services.

Industry

Overview
Industry sources forecast that national health care spending in 1995 will
exceed $1 trillion with approximately $200 billion directly attributable to
physician services. Increasing concern over the cost of health care in the
United States has led to numerous initiatives to contain the growth of health
care expenditures, particularly in the government entitlement programs of
Medicare and Medicaid. These concerns and initiatives have contributed to the
growth of managed care. Managed care typically involves a third party
(frequently the payor) governing the provision of health care with the
objective of ensuring delivery in a high quality and cost effective manner.
One

46
<PAGE>

method for achieving this objective is the implementation of capitated
payment systems in which traditional fee for service methods of compensating
health care providers are abandoned or modified in favor of systems that
create incentives for the provider to manage the health care needs of a
defined population for a set fee.

Physician Practice Management
Health care in the United States historically has been delivered by a
fragmented system of health care providers, including hospitals, individual
physicians and small groups of specialist and primary care physicians.
According to industry sources, approximately 650,000 physicians are actively
involved in patient care in the United States. A 1993 American Medical
Association study estimates that there are over 86,000 physicians practicing
in 3,600 multi-specialty group practices of three or more physicians and over
82,000 physicians practicing in 12,700 single specialty group practices in
the United States.

The focus on cost containment has placed many solo practices, small to
mid-sized physician groups and single specialty group practices at a
significant disadvantage because they typically have high operating costs
relative to revenue and little purchasing power with vendors of supplies.
These physician practices often lack the capital to purchase new clinical
equipment and technologies, such as information systems, necessary to enter
into sophisticated risk sharing contracts with payors. Additionally, these
physicians often do not have formal ties with other providers nor the ability
to offer coordinated care across a variety of specialties, thus reducing
their competitive position, particularly with managed care companies,
relative to larger provider organizations.

As a result of these changes in the market place, physicians are
increasingly abandoning traditional private practice in favor of affiliations
with larger organizations, such as the Company, that offer sophisticated
information systems, management expertise and capital resources. Many payors
and their intermediaries, including governmental entities and HMOs, are
increasingly looking to outside providers of physician management services to
develop and maintain quality outcome management programs and patient care
data. In addition, such payors and intermediaries look to share the risk of
providing health care services through capitation arrangements which provide
for fixed payments for patient care over a specified period of time.

Disease Management: Cancer and Other Diseases
Disease management is the comprehensive management of a patient's medical
care as it relates to the treatment of a specific chronic illness. According
to industry sources, costs (including direct health care costs and indirect
costs) associated with cancer, diabetes, cardiovascular disease and certain
infectious diseases exceeded $500 billion in 1994. Despite the current
consolidation of the health care industry, the providers of the components of
disease management services, including cancer care providers, remain highly
fragmented.

The provision of cancer care is a significant and growing market.
According to the American Cancer Society, the estimated number of cancer
cases diagnosed annually in the United States (excluding certain skin
cancers) increased from approximately 782,000 in 1980 to approximately 1.2
million in 1994, an increase of 53%. This increase is attributable to a
number of factors, including a growing and aging population. In addition,
earlier diagnosis and more effective treatment have increased the five-year
survival rate of cancer patients from approximately 33% in the 1960s to 53%
in 1994, and over eight million Americans alive today have been diagnosed
with cancer.

Because more than 100 complex diseases compose what is commonly termed
cancer, its treatment often requires a multi-disciplinary approach, involving
numerous health care professionals with different specializations and a
variety of treatment settings, including physician offices, hospitals,
outpatient facilities and free-standing cancer treatment centers. Cancer
treatment centers may provide certain services, including radiation therapy
and infusion therapy, but they generally do not integrate these services with
the physician practice. The Company believes that the current fragmented
system for treating cancer is inefficient, costly and inhibits effective
disease management.

The Company believes that the acquisition and integration of previously
independent health care practices into a disease specialty network provides a
substantial opportunity both to derive significant synergies and operating
efficiencies and to contract with managed care companies for a full continuum
of disease specific care. The Company expects the development of such
networks and systems not only to enhance productivity and improve the quality
of care, but also to meet the cost containment objectives of third party
payors. The Company believes that the

47
<PAGE>

evolution of disease specialty treatment networks will play a major role in
managed care contracting as payors recognize that both cost savings and the
quality of care are improved when reimbursement and health care services
target a specific illness or disease through coordinated networks of health
care providers.

Strategy

The Company's strategy is to develop, operate and manage integrated
disease specialty and primary care physician networks which provide high
quality, cost-effective physician and related medical support services. The
key elements of this strategy are to:

Acquire Physician Practices. The Company seeks to acquire the practices of
and affiliate, in its target markets, with (i) high profile disease specialty
and primary care physicians, (ii) multi-specialty physician groups and (iii)
independent physician associations. By affiliating with leading physicians
and physician groups in a given community, the Company can secure a large
patient base, ensure appropriate, quality treatment and maintain patient
satisfaction. Additionally, as the Company affiliates with physicians in
certain markets, it makes available to these physicians medical support
services, including the Company's radiation therapy, diagnostic imaging,
lithotripsy, infusion and home health care services. By integrating these
acquired disease specialty and primary care medical practices with related
medical support services, the Company is able to develop a continuum of care
in its target markets.

Develop Practice Networks. In conjunction with its acquisition strategy,
the Company seeks to build integrated networks of disease specialty and
primary care physicians in targeted markets termed local provider units or
"LPNs." To form the foundation of an LPN, the Company typically acquires a
core physician practice, which may be either a disease specialty or primary
care practice. The Company then seeks to acquire or affiliate with additional
physician practices and medical support services related to that core
practice as well as other medical specialties outside the scope of the core
practice. Through the implementation of this strategy, the Company seeks to
provide a comprehensive range of health care services within a given region,
thereby enhancing its ability to enter into contractual arrangements with
managed care organizations.

Facilitate Acquisitions and Integration Through Development. As a part of
its strategy to affiliate with physicians and acquire physician practices and
medical support service companies, the Company provides medical facility
development services to related and unrelated third parties for the
establishment of health parks, medical malls and medical office buildings.
The Company believes that the relationships that it fosters with physicians
and medical support service companies (which may be tenants and/or owners of
the medical facilities developed by the Company), will enhance the Company's
affiliation and acquisition prospects and aid in the integration of its
affiliated physicians and medical support service companies.

Contract with Managed Care Companies. The Company actively pursues
contractual arrangements with managed care organizations. Within its LPNs,
the Company seeks to provide an appropriate balance of physician and medical
services to attract managed care payors. Depending upon the particular
market, the Company may develop disease specialty networks which can be used
to procure managed care contracts pursuant to which the Company's affiliated
physicians are responsible for providing all or a portion of disease specific
health care services to a particular patient population, or the Company may
develop a broader array of services designed to enhance its ability to
attract comprehensive managed care contracts.

Implement Integrated Information Systems. The Company intends to continue
to develop its integrated information management systems so as to improve
patient care by improving physician access to patient information. The
Company believes these processing capabilities will further enhance its
ability to service managed care contracts by providing access to the clinical
and financial data necessary to perform outcome studies, cost analyses,
utilization reviews and other analyses which can provide the information
necessary for the managed care community to evaluate and contract with the
Company and its health care providers.

Achieve Operating Efficiencies. The Company seeks to achieve operating
efficiencies through the consolidation of physician practices. By
consolidating overhead, including billing, collections, accounting and
payroll, the Company believes that it can realize significant operating
efficiencies. In addition, by rendering support and management functions, the
Company enables its affiliated physicians to spend a higher proportion of
their time with patients, thereby improving patient care and enhancing
revenue.

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<PAGE>

Physician Affiliation

To date, the Company has affiliated with 163 physicians in the following
locations:

<TABLE>
<CAPTION>
No. of
Physicians
Under
LPN Contract Specialties
- --- -------- -----------
<S> <C> <C>
South Florida 104 Primary Care, Oncology, Cardiology,
Gastroenterology, Neurology, Podiatry,
Rheumatology, Obstetrics-Gynecology, General
and Vascular Surgery, Dermatology, Pulmonary,
Orthopedic and Radiology
Atlanta 39 Oncology, Gastroenterology, Urology and Surgery
Washington,
D.C./Baltimore 12 Oncology and Infectious Diseases
Other Markets 8 Oncology and Surgery
---
Total Physicians 163
===
</TABLE>

The Company affiliates with physicians through management agreements with
physician practices or employment agreements with individual physicians. When
affiliating with physicians, the Company generally acquires the assets of the
physician practice, including its equipment, furniture, fixtures and supplies
and, in some cases, service contracts and goodwill. Currently, the Company
manages the practices of 132 physicians and employs another 31 physicians.
With the exception of 10 radiation oncologists employed by the Company
through OTI, the Company purchased the practices of all of its 163 affiliated
physicians. The Company derives revenues from affiliated physicians through
management fees charged to managed physician practices and from charges to
third parties for services provided by employed physicians.

The Company's relationships with its affiliated physicians are set forth
in various asset purchase, management services, employment and consulting
agreements. Through the asset purchase agreement, the Company acquires at
fair market value the assets of the practice. The accounts receivable are
typically purchased at the net realizable value. The purchase price of the
assets of a physician practice generally consists of cash and the assumption
of certain debt, leases and other contracts necessary for the operation of
the practice.

The Company and its affiliated physicians enter into management services
or employment agreements which delineate the responsibilities and obligations
of each party. The management services agreements generally have a 10 to
40-year term. The employment agreements generally have a seven to 10-year
term, and in most instances, the contracting physicians can extend the terms
of their employment agreements in five-year increments for an unlimited
duration until they reach a specified age. The management services agreements
provide that the physicians are responsible for the provision of all medical
services and the Company is responsible solely for the management and
operation of all other aspects of the affiliated practice. The Company
provides the equipment, facilities and supplies necessary to operate the
medical practice and employs substantially all of a practice's non-physician
personnel, except those whose services are directly related to the provision
of medical care. The management and administration of the practice, including
managed care contracting, rests with the Company. Generally, a management
services agreement with a physician practice group cannot be terminated by
either the Company or the practice group prior to its stated expiration date
without cause. The Company's employment agreements generally are terminable
by the physicians upon 90 to 180-days notice. Ordinarily, the Company
reserves the right to renegotiate terms of the management services agreement
if there are significant changes in reimbursement levels. Upon termination
for cause or at the expiration of a physician's relationship with the
Company, the Company has the right to require the affiliated physicians to
repurchase certain assets originally purchased by the Company and assets
acquired during the term of the relationship.

For providing services under the management services agreements entered
into prior to April 30, 1996, physicians generally receive a fixed percentage
of net revenue of the practice. "Net revenue" is defined as all revenue
computed on an accrual basis generated by or on behalf of the practice after
taking into account certain contractual adjustments or allowances. The
revenue is generated from professional medical services furnished to patients
personally by physicians or other clinicians under physician supervision. In
several of the practices, the Company has guaranteed that the net revenues of
the practice will not decrease below the net revenues that existed
immediately

49
<PAGE>

prior to the agreement with the Company. Additionally, in certain practices,
the Company charges a fixed or variable management fee. Under management
services agreements entered into after April 30, 1996, the Company has
generally received a fixed base management fee and a variable incentive fee.
Net revenues for these management services agreements for the six months
ended July 31, 1996 were $36.5 million.

The Company believes a shared governance approach is critical to the
long-term success of a physician practice management company. In this regard,
the Company's agreements provide for physician concurrence on critical
strategic issues such as annual operating and capital budgets, fee structures
and schedules and the practice's strategic plan. The strategic plan developed
for the affiliated physician practices addresses both the future addition of
practitioners and the expansion of locations and services. The Company works
closely with its affiliated physicians to target and recruit new physicians
and merge or integrate other groups and specialties.

Medical Support Services

As part of its strategy to provide a comprehensive range of health care
services in its markets, the Company provides certain medical support
services related to the management of disease and episodic care, including
radiation therapy, diagnostic imaging, infusion therapy, home health care and
lithotripsy services.

These services are provided both as part of the Company's LPN structure
and separately in certain markets in which there is a competitive advantage
to do so.

Within the scope of its disease specialty networks, the Company delivers a
broad array of medical support services. The Company supports its cancer
networks with radiation therapy (the Company has 10 radiation therapy centers
in six states), infusion therapy (the Company provides infusion therapy in
several states which are managed from three regional offices), diagnostic
imaging (the Company has two centers in two states) and home health care
services (the Company provides home health care services in six South Florida
counties which are managed from five local offices).

The Company also provides lithotripsy services and currently operates one
fixed site and seven mobile lithotripters which provide lithotripsy services
in Arkansas, Florida, Indiana, Kansas, Kentucky, Missouri, Oklahoma,
Tennessee and Texas. These services are managed from three regional offices.
Lithotripsy is a non- invasive procedure that utilizes shock waves to
fragment kidney stones, and is the preferred alternative to surgery for
kidney stones, suitable for the treatment of over 90% of the applicable
patients. The Company provides its mobile lithotripsy services under
contracts with approximately 70 hospitals and other health care facilities.
The hospital or health care facility normally pays the Company on a per
procedure basis. The Company's contracts with such hospitals and facilities
generally have terms of one to three years.

LPNs

Upon entering a target market, the Company seeks to acquire a core
practice group, affiliate with additional physician group practices and
acquire, develop or affiliate with related medical support services to form
an LPN. The Company undertakes market analyses and demographic studies to
evaluate the business opportunities in a particular geographic area and seeks
to capitalize on these opportunities by developing relationships with
appropriate physicians and other health care providers. Within each LPN, the
Company seeks a balance between primary care and specialty physicians and to
integrate certain related medical support services for the ultimate purpose
of providing a strategic network of comprehensive medical services attractive
to managed care and risk- based third party contractors. In certain markets,
the Company establishes relationships with unaffiliated entities for the
purpose of contracting with managed care companies. The Company currently has
identified the South Florida, Atlanta, Connecticut and Baltimore/Washington,
D.C. areas as its initial target markets and the Arizona, Pittsburgh and
Tampa Bay areas as its secondary target markets.

The development of the Company's Atlanta LPN provides an example of the
implementation of the Company's development strategy. In Atlanta, the Company
acquired three radiation centers in March 1995 and has since created a
comprehensive cancer disease management network of 22 oncologists in 17
sites. The Company's Atlanta LPN continues to develop by affiliating with
primary care and multi-specialty groups to create a comprehensive, fully-
integrated regional network. During May 1996, the Company entered into a
management agreement with eight gastroenterologists in Atlanta. During July
1996, the Company entered into a management agreement with three urologists
in Atlanta. During August 1996, the Company entered into a management
agreement with four surgeons

50
<PAGE>

in Atlanta. The Company is presently negotiating with over 75 physician
providers and is assessing the opportunity to create a comprehensive health
park in the Atlanta area.

In the South Florida market, the Company initially developed affiliate
relationships with six primary care physicians. Subsequently, the Company has
contracted with 19 oncologists and currently operates a cancer care network
which through capitated managed care contracts provides services to
approximately 137,000 covered lives. In addition, the Company provides
infusion therapy, home health, diagnostic and rehabilitation services in its
South Florida LPN.

In the Washington, D.C./Baltimore area, the Company operates three
radiation centers and provides infusion therapy services through its managed
care contracts and physician affiliations. The Company has affiliated with
eight medical and radiation oncologists. In addition, the Company entered
into a letter of intent with the Medlantic Healthcare Group in Washington,
D.C. (and its Washington Hospital Center and Washington Cancer Institute) for
the formation and operation of the Washington Regional Oncology Network. This
network will be dedicated to obtaining contracts for cancer care in the
Washington region and also includes the formation of a joint venture for the
management of the Washington Ambulatory Infusion Center.

The Company believes that cancer-related LPNs provide the greatest
opportunity for contracting with managed care and risk-based third party
payors and has entered into affiliate agreements with 61 oncologists. Net
revenues for the cancer related LPNs for the six months ended July 31, 1996
were $44.3 million. In its South Florida, Atlanta and Washington,
D.C./Baltimore LPNs, the Company has assembled three discrete networks of
cancer physicians and related cancer care services, and as a result, the
Company provides services pursuant to managed care contracts to over 200,000
covered lives. Under these contracts, the Company and its affiliate
physicians provide some or all of the following services: medical and
radiation oncology services, bone marrow transplants, infusion therapy,
diagnostic services and home care. The Company has also developed cancer care
networks with unaffiliated entities for contracting purposes in certain
markets.

Independent Physician Associations

The Company owns a newly formed management services organization that
provides management services to an independent physician association ("IPA")
composed of over 330 physicians based in Connecticut and a 50% interest in a
newly formed management services organization that provides management
services to an IPA composed of 45 primary care physicians in Georgia. An IPA
is generally composed of a group of geographically diverse independent
physicians who form an association for the purpose of contracting as a single
entity. The IPA structure not only increases the purchasing power of the
constituent practices, but also provides a foundation for the development of
an integrated physician network. The Company believes that many IPAs will
merge with other practice groups to develop larger integrated medical groups,
thereby becoming increasingly attractive to managed care companies. The
Company intends to capitalize on its affiliations with IPAs to establish
additional LPNs.

The Company also seeks to enter into agreements to manage capitated
provider networks. The Company expects that under these agreements, it would
receive a fixed management fee based upon contract revenues as well as a
certain percentage of risk pools.

Medical Facility Development

The Company provides medical facility development services to related and
unrelated third parties for the establishment of health parks, medical malls
and medical office buildings. A "health park" is an integrated health care
environment comprised of several buildings which links physician practices,
medical support services and subacute care facilities on a single campus. A
"medical mall," often found in a health park, combines physician offices with
related medical support services such as diagnostic imaging, physical
rehabilitation, laboratory services and wellness programs in one facility.
The Company also develops office buildings which serve physicians and
providers of ancillary medical services.

The Company believes that the convenience of "one-stop" scheduling and
medical related services together with on-site treatment provided at the
Company's developed medical facilities will increase patient satisfaction and
cost-efficiency. By providing a centralized delivery site for
state-of-the-art technology, information systems and patient care models, a
full continuum of care can be provided by a wide range of physician
specialties and medical

51
<PAGE>

support services at one location. The Company believes that physicians will
find affiliation with such facilities attractive and that third party payors
will seek to contract with physician practices and related medical support
service companies operating in such facilities.

The Company's medical facility development services include project
finance assistance, project management, construction management, construction
design engineering, consulting, physician recruitment, leasing and marketing.
The Company currently has 15 projects under development and has facilities
under construction in Florida, Texas, California and Arizona. The Company
also has four projects under contract and anticipates that construction of
such facilities will begin during 1996. Net revenues for the six months ended
July 31, 1996 were $7.4 million.

Under its development agreements, the Company is generally obligated to
secure funding for and guaranty the maximum cost of a project. In order to
minimize the risks from these obligations, the Company enters into
construction agreements with general contractors to construct the project for
a "guaranteed maximum cost." Furthermore, each construction agreement
provides for indemnification of the Company by the general contractor for
certain losses and damages. Each construction agreement also requires the
contractor to obtain and maintain a performance bond and a labor and material
payment bond, written by a surety company with a Best's Key Guide Rating of
not less than A+12 and satisfactory to the owner of the land on which a
project is developed and the construction lender.

Among the Company's development clients are some of the largest for-profit
public hospital companies in the United States. To date, the Company's
clients and primary negotiators of the Company's fees generally have been the
land owners or land lessors of the developed sites. Negotiations generally
include the Company, the entities which own the developed projects, the land
lessor (if applicable) and, in many cases, the prospective tenants of the
office space. The Company offers its physician-tenants an opportunity to
become equity investors in the facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Medical Facility
Development." The compensation received by the Company is based upon
negotiated amounts for each service provided. Although the Company does not
maintain an ownership interest in the facilities it develops, certain of the
Company's officers and directors have an interest in such facilities. See
"Certain Transactions." In each transaction between the Company and a
facility in which certain of its officers and directors have an interest,
third parties, including the land owners and land lessors of the sites and
the unaffiliated investors in the facility, participate in establishment of
fees to the Company. All transactions between the Company and affiliated
owners and physicians are and will continue to be based upon competitive
bargaining and are and will be on terms no less favorable to the Company than
those provided to unaffiliated parties. In addition, the Company monitors
development fees in the industry to ensure that its fees in such transactions
meet this standard.

The Company believes that its medical facility development services and
project finance strategy are a significant component of the Company's overall
business strategy. The Company's project finance strategy focuses upon the
involvement of its future tenants as significant investors in and owners of
the medical facilities developed by the Company. Because its tenants are
physicians and medical support service companies, the Company believes that
the relationships that it develops through its medical facility development
efforts will greatly enhance the Company's ability to affiliate with
physicians and acquire physician practices and medical support service
companies. The development of medical facilities by the Company is intended
to enhance the creation of the new group practices, increase the number of
integrated medical service delivery sites and promote alternative delivery
models for third party payors in its developed sites. The Company believes
that such activity, in turn, will aid in the integration of its affiliated
physicians and medical support service companies.

Information Systems

The Company believes that effective and efficient integration of clinical
and financial data provides a competitive advantage in bidding for managed
care contracts and contributes to a company's success in the complex
reimbursement environment of the health care industry. The Company also
believes that the use of technology can improve patient care by improving
physician access to patient information. Therefore, the Company is in the
process of selecting management information systems designed to facilitate
the transmittal and coordination of important patient and operational data.
The Company's objective is to implement a system which consists of three
specific

52
<PAGE>

areas: practice management, electronic clinical records and comprehensive
care and management reporting. The implementation of the system selected will
occur in stages, as the Company continues to analyze and support the systems
in place in its existing and acquired physician practices and medical support
service companies.

Competition

The physician practice management industry is highly competitive. The
Company competes with local and national providers of physician management
and certain other medical services and for the recruitment of physicians.
Certain of the Company's competitors have access to substantially greater
financial, management and other resources than the Company. The majority of
the competition faced by the Company is based primarily on cost and quality.
Each of the affiliated physicians has entered into an agreement not to
compete with the operations of the Company both during the term of the
applicable agreement and a period of one year or greater thereafter.

Government Regulation

Various state and federal laws regulate the relationship between providers
of health care services, physicians and other clinical services, and as a
business in the health care industry, the Company is subject to these laws
and regulations. The Company's medical support services, for example, are
subject to various licensing and certification requirements including
Certificate of Need regulations. The Company is also subject to laws and
regulations relating to business corporations in general. The Company
believes its operations are in material compliance with applicable laws;
however, the Company has not received a legal opinion from counsel that its
operations are in material compliance with applicable laws and many aspects
of the Company's business operations have not been the subject of state or
federal regulatory interpretation. Moreover, as a result of the Company
providing both physician practice management services and medical support
services, the Company may be the subject of more stringent review by the
regulatory authorities, and there can be no assurance that a review of the
Company's or the affiliated physicians' businesses by courts or regulatory
authorities will not result in a determination that could adversely affect
the operations of the Company or the affiliated physicians or that the health
care regulatory environment will not change so as to restrict the Company's
or the affiliated physicians' existing operations or their expansion.

The laws of many states prohibit business corporations such as the Company
from practicing medicine and employing physicians to practice medicine. In
those states where the Company employs physicians, it believes its operations
are in material compliance with applicable laws. The Company does not
exercise influence or control over the practice of medicine by the physicians
with whom it contracts. Accordingly, the Company believes that it is not in
violation of applicable state laws relating to the practice of medicine. The
laws in most states regarding the corporate practice of medicine have been
subjected to limited judicial and regulatory interpretation and, therefore,
no assurances can be given that the Company's activities will be found to be
in compliance, if challenged. In addition to prohibiting the practice of
medicine, numerous states prohibit entities like the Company from engaging in
certain health care related activities such as fee-splitting with physicians.

There are state and federal statutes imposing substantial penalties,
including civil and criminal fines and imprisonment, on health care providers
that fraudulently or wrongfully bill governmental or other third party payors
for health care services. The federal law prohibiting false billings allows a
private person to bring a civil action in the name of the United States
government for violations of its provisions. The Company believes it is in
material compliance with such laws, but there can be no assurances that the
Company's activities will not be challenged or scrutinized by governmental
authorities. Moreover, technical Medicare and other reimbursement rules
affect the structure of physician billing arrangements. The Company believes
it is in material compliance with such regulations, but upon review,
regulatory authorities could conclude otherwise, and in such event, the
Company may have to modify its relationship with its affiliated physician
groups. Noncompliance with such regulations may adversely affect the
operation of the Company and subject it and such physician groups to
penalties and additional costs.

Certain provisions of the Social Security Act, commonly referred to as the
"Anti-kickback Amendments," prohibit the offer, payment, solicitation or
receipt of any form of remuneration either in return for the referral of
Medicare or state health program patients or patient care opportunities, or
in return for the recommendation, arrangement, purchase, lease or order of
items or services that are covered by Medicare or state health programs. The
Anti-kickback Amendments are broad in scope and have been broadly interpreted
by courts in many jurisdictions. Read literally, the statute places at risk
many otherwise legitimate business arrangements, potentially

53
<PAGE>

subjecting such arrangements to lengthy, expensive investigations and
prosecutions initiated by federal and state governmental officials. In
particular, the Office of the Inspector General of the U.S. Department of
Health and Human Services has expressed concern that the acquisition of
physician practices by entities in a position to receive referrals from such
physicians in conjunction with the physicians' continued practice in
affiliation with the purchaser could violate the Anti-kickback Amendments.

In July 1991, in part to address concerns regarding the Anti-kickback
Amendments, the federal government published regulations that provide
exceptions, or "safe harbors," for certain transactions that will be deemed
not to violate the Anti-kickback Amendments. Among the safe harbors included
in the regulations were provisions relating to the sale of physician
practices, management and personal services agreements and employee
relationships. Additional safe harbors were published in September 1993
offering protections under the Anti- kickback Amendments to eight new
activities, including referrals within group practices consisting of active
investors. Proposed amendments to clarify these safe harbors were published
in July 1994 which, if adopted, would cause substantive retroactive changes
to the 1991 regulations. Although the Company believes that it is not in
violation of the Anti-kickback Amendments, some of its operations do not fit
within any of the existing or proposed safe harbors.

The Company believes that, although it is receiving remuneration under
management services agreements, it is not in a position to make or influence
the referral of patients or services reimbursed under government programs to
the physician groups, and therefore, believes it has not violated the
Anti-kickback Amendments. In certain states, the Company is a separate
provider of Medicare or state health program reimbursed services. To the
extent the Company is deemed by state or federal authorities to be either a
referral source or a separate provider under its management services
agreements and to receive referrals from physicians, the financial
arrangement under these agreements could be subject to scrutiny and
prosecution under the Anti-kickback Amendments. Violation of the
Anti-kickback Amendments is a felony, punishable by fines up to $25,000 per
violation and imprisonment for up to five years. In addition, the Department
of Health and Human Services may impose civil penalties excluding violators
from participation in Medicare or state health programs.

Significant prohibitions against physician referrals were enacted, subject
to certain exemptions, by Congress in the Omnibus Budget Reconciliation Act
of 1993. These prohibitions, commonly known as "Stark II," amended prior
physician self-referral legislation known as "Stark I" by dramatically
enlarging the field of physician-owned or physician-interested entities to
which the referral prohibitions apply. Effective January 1, 1995 and subject
to certain exemptions, Stark II prohibits a physician or a member of his
immediate family from referring Medicare or Medicaid patients to an entity
providing "designated health services" in which the physician has an
ownership or investment interest, or with which the physician has entered
into a compensation arrangement including the physician's own group practice.
The designated health services include the provision of radiology and other
diagnostic services, radiation therapy services, physical and occupational
therapy services, durable medical equipment, parenteral and enteral
nutrients, certain equipment and supplies, prosthetics, orthotics, outpatient
prescription drugs, home health services and inpatient and outpatient
hospital services. The penalties for violating Stark II include a prohibition
on Medicaid and Medicare reimbursement and civil penalties of as much as
$15,000 for each violative referral and $100,000 for participation in a
"circumvention scheme." A physician's ownership of publicly traded securities
of a corporation with equity exceeding $75 million as of the end of its most
recent fiscal year is not deemed to constitute an ownership or investment
interest in that corporation under Stark II. The Company was not be eligible
for this exemption as of its fiscal year ending December 31, 1995. In 1996,
after completion of the initial public offering, the Company changed its
fiscal year end to January 31. The Company believes that it presently
satisfies the Stark II stockholders' equity exception and that its
compensation arrangements satisfy other applicable exceptions in Stark II.

The Company believes that its activities are not in violation of Stark I
or Stark II; however, the Stark legislation is broad and ambiguous.
Interpretative regulations clarifying the provisions of Stark I were issued
on August 14, 1995 and Stark II regulations have yet to be proposed. While
the Company believes it is in compliance with the Stark legislation, future
regulations could require the Company to modify the form of its relationships
with the affiliated physician groups. Moreover, the violation of Stark I or
II by the Company's affiliated physician groups could result in significant
fines and loss of reimbursement which would adversely affect the Company. The
Anti- Kickback and Stark laws prevent the Company from requiring referrals
from affiliated physician groups. Although

54
<PAGE>

some of these physician groups may make referrals to the Company for
services, the Company cannot expect to receive income from the making of such
referrals.

Many states have adopted similar prohibitions against payment intended to
induce referrals of Medicaid and other third party payor patients. The State
of Florida, for instance, enacted a Patient Self-Referral Act in April 1992
that severely restricts patient referrals for certain services, prohibits
mark-ups of certain procedures, requires disclosure of ownership in a
business to which patients are referred and places other regulations on
health care providers. The Company believes it is likely that other states
will adopt similar legislation. Accordingly, expansion of the operations of
the Company to certain jurisdictions may require it to comply with such
jurisdictions' regulations which could lead to structural and organizational
modifications of the Company's form of relationships with physician groups.
Such changes, if any, could have an adverse effect on the Company.

The Company is in the process of adopting a formal compliance program
designed to prevent violations of Stark II and the Anti-kickback Amendments
in both its acquisitions and day to day operations. The Company intends to
hire a full-time compliance officer to implement and monitor the compliance
program.

Laws in all states regulate the business of insurance and the operation of
HMOs. Many states also regulate the establishment and operation of networks
of health care providers. While these laws do not generally apply to the
hiring and contracting of physicians by other health care providers, there
can be no assurance that regulatory authorities of the states in which the
Company operates would not apply these laws to require licensure of the
Company's operations as an insurer, as an HMO or as a provider network. The
Company believes that it is in compliance with these laws in the states in
which it does business, but there can be no assurance that future
interpretations of insurance and health care network laws by regulatory
authorities in these states or in the states into which the Company may
expand will not require licensure or a restructuring of some or all of the
Company's operations.

Reimbursement and Cost Containment

Approximately 40% of the revenue of the Company's affiliated physician
groups is derived from payments made by government sponsored health care
programs (principally, Medicare and Medicaid). As a result, any change in
reimbursement regulations, policies, practices, interpretations or statutes
could adversely affect the operations of the Company. The U.S. Congress has
passed a fiscal year 1996 budget resolution that calls for reductions in the
rate of spending increases over the next seven years of $270 billion in the
Medicare program and $182 billion in the Medicaid program. Through the
Medicare program, the federal government has implemented a resource-based
relative value scale ("RBRVS") payment methodology for physician services.
This methodology went into effect in 1992 and will continue to be implemented
in annual increments through December 31, 1996. RBRVS is a fee schedule that,
except for certain geographical and other adjustments, pays similarly
situated physicians the same amount for the same services. The RBRVS is
adjusted each year and is subject to increases or decreases at the discretion
of Congress. The implementation of RBRVS may result in reductions in payment
rates for procedures provided by physicians under current contract with the
Company.

RBRVS-type payment systems have also been adopted by certain private third
party payors and may become a predominant payment methodology. A broader
implementation of such programs would reduce payments by private third party
payors and could indirectly reduce the Company's operating margins to the
extent that the cost of providing management services related to such
procedures could not be proportionately reduced. To the extent the Company's
costs increase, the Company may not be able to recover such cost increases
from government reimbursement programs. In addition, because of cost
containment measures and market changes in nongovernmental insurance plans,
the Company may not be able to shift cost increases to nongovernmental
payors. The Company expects a reduction from historical levels in per patient
Medicare revenue received by certain of the physician groups with which the
Company contracts; however, the Company does not believe such reductions
would, if implemented, result in a material adverse effect on the Company.

In addition to current governmental regulation, the Clinton Administration
and several members of Congress have proposed legislation for comprehensive
reforms affecting the payment for and availability of health care services.
Aspects of certain of such health care proposals, such as reductions in
Medicare and Medicaid payments, if adopted, could adversely affect the
Company. Other aspects of such proposals, such as universal health insurance
coverage and coverage of certain previously uncovered services, could have a
positive impact on the Company's

55
<PAGE>

business. It is not possible at this time to predict what, if any, reforms
will be adopted by Congress or state legislatures, or when such reforms would
be adopted and implemented. As health care reform progresses and the
regulatory environment accommodates reform, it is likely that changes in
state and federal regulations will necessitate modifications to the Company's
agreements and operations. While the Company believes it will be able to
restructure in accordance with applicable laws and regulations, the Company
cannot assure that such restructuring in all cases will be possible or
profitable.

The Company is a provider of certain medical treatment and diagnostic
services including, but not limited to radiation therapy, infusion therapy,
lithotripsy and home care. Because many of these services receive
governmental reimbursement, they may be subject from time to time to changes
in both the degree of regulation and level of reimbursement. Additionally,
factors such as price competition and managed care could also reduce the
Company's revenues. See "Business--Government Regulation."

Insurance

Health care companies, such as the Company, are subject to medical
malpractice, personal injury and other liability claims which are customary
risks inherent in the operation of health care facilities and provision of
health care services. The Company maintains property insurance equal to the
amount management deems necessary to replace the property, and liability and
professional malpractice insurance policies in the amount of $20,000,000
(annual aggregate) and with such coverages and deductibles which are deemed
appropriate by management, based upon historical claims, industry standards
and the nature and risks of its business. The Company provides medical
malpractice insurance for its employee physicians in the amount of $1,000,000
per claim and $3,000,000 annual aggregate and also requires that non-employee
physicians practicing at its facilities carry medical malpractice insurance
to cover their respective individual professional liabilities. There can be
no assurance that a future claim will not exceed available insurance
coverages or that such coverages will continue to be available for the same
scope of coverages at reasonable premium rates. Any substantial increase in
the cost of such insurance or the unavailability of any such coverages could
have a material adverse effect on the Company's business.

Employees

As of July 31, 1996, the Company employed approximately 1,200 persons,
approximately 700 of whom were full-time employees. The Company believes that
its labor relations are good.

Legal Proceedings

The Company is subject to legal proceedings in the ordinary course of its
business. The Company does not believe that any such legal proceedings will
have a material adverse effect on the Company, although there can be no
assurance to this effect.

A subsidiary of the Company, OTI (formerly Radiation Care, Inc., "RCI") is
subject to the litigation described below which relates to events prior to
the Company's operation of RCI, and the Company has agreed to indemnify and
defend certain defendants in the litigation who were former directors and
officers of RCI subject to certain conditions.

In December 1994, prior to its merger with the Company in March 1995, RCI
entered into a settlement agreement with the federal government arising out
of claims under the fraud-and-abuse provisions of the Medicare law. Under the
settlement agreement, RCI, without admitting that it violated the law,
consented to a civil judgment providing for its payment of $2 million to the
federal government and the entry of an injunction against violations of such
provisions.

56
<PAGE>

against RCI, Thomas Haire, Gerald King, Charles McKay, Abraham Gosman,
Oncology Therapies of America, Inc. ("OTA") and A.M.A. Financial Corporation,
("AMA") alleging that the RCI stockholders should have received greater
consideration for their RCI stock when RCI was merged with the Company.
Plaintiffs allege breaches of fiduciary duty by the former RCI directors, as
well as aiding and abetting of such fiduciary duty breaches by Mr. Gosman,
OTA and AMA. Plaintiffs seek compensatory or rescissionary damages of an
undisclosed amount on behalf of all RCI stockholders, together with an award
of the costs and attorneys' fees associated with the action. No class has
been certified in this litigation. On May 18, 1996, the Company filed an
Answer denying any liability in connection with this litigation. The Company
intends to vigorously defend against this litigation.

On August 4, 1995, 26 former stockholders of RCI filed a Complaint for
Money Damages against Richard D'Amico, Ted Crowley, Thomas Haire, Gerald
King, Charles McKay and Randy Walker (all former RCI officers and directors)
in the Superior Court of Fulton County, in the State of Georgia (Southeastern
Capital Resources, L.L.C. et al. v. Richard D'Amico et al., Civil Action No.
E41225). Three of the plaintiffs have withdrawn from the litigation.
Plaintiffs allege a breach of fiduciary duty by the former RCI directors
Haire, King and McKay, a conspiracy by the RCI officer defendants D'Amico,
Crowley and Walker, and negligence by all defendants. Plaintiffs seek
additional consideration for their shares of RCI common stock in the form of
compensatory and monetary damages in the amount of $5.7 million, plus
punitive damages, interest, costs and attorneys fees. On September 22, 1995,
the defendants filed an Answer denying any liability in connection with this
litigation. On October 23, 1995, the defendants filed a motion to stay the
action pending resolution of the Delaware class action which was heard by the
Court on January 29, 1996 and denied on April 9, 1996. A consent order was
entered by the Court on August 30, 1996 adding four plaintiffs to the action.
The Company is not a party to this litigation and its exposure is limited to
its obligation under its by-laws to indemnify the former officers and
directors of RCI to the fullest extent permitted by Delaware law. The Company
intends to vigorously defend against this litigation.

On March 18, 1996, the Company settled a claim filed by two former
stockholders of RCI (Dennis E. Ellingwood and Gregory W. Cotter v. Oncology
Therapies, Inc. et al., Civil Action No. 341727-E191464). The terms of this
settlement are confidential.

57
<PAGE>

MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information as of September 18, 1996
concerning the directors and executive officers of the Company.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Abraham D. Gosman 67 Chairman of the Board of Directors, President and
Chief Executive Officer
Frederick R. Leathers 38 Chief Financial Officer and Treasurer
William A. Sanger 46 Executive Vice President and Chief Operating Officer
Robert A. Miller 41 Executive Vice President of Acquisitions
Edward E. Goldman, M.D. 51 Executive Vice President of Physician Development
Francis S. Tidikis 49 Executive Vice President of Marketing
Don S. Harvey 38 Vice President of Operations
Donald A. Sands 45 Vice President--Medical Facility Development
Hugh L. Carey 77 Director
Joseph N. Cassese 66 Director
John T. Chay 38 Director
David M. Livingston, 55 Director
M.D.
Bruce A. Rendina 42 Director
Stephen E. Ronai 59 Director
</TABLE>

The following is a biographical summary of the experience of the executive
officers and directors of the Company:

Abraham D. Gosman has served since June 1994 as an executive officer of
the Company and is presently the Chairman of the Board of Directors,
President and Chief Executive Officer of the Company. Previously, he founded
and was the principal owner of The Mediplex Group, Inc. ("Mediplex"), a
diversified health care company, and its predecessor companies for more than
15 years, with the exception of the period from April 1986 to August 1990
when Mediplex was owned by Avon Products, Inc. ("Avon"). He was the Chief
Executive Officer of Mediplex from its inception to September 1988 and
assumed that position again after Mediplex was purchased from Avon in August
1990. In addition, Mr. Gosman has served as Chairman of the Board of Trustees
and Chief Executive Officer of Meditrust, the nation's largest health care
real estate investment trust, since its inception in 1985.

Frederick R. Leathers has served since June 1994 as the Chief Financial
Officer and Treasurer of the Company. Previously, he served as Treasurer,
Chief Financial Officer and Principal Accounting Officer of Mediplex from
October 1991 to June 1994, Corporate Controller from May 1991 to October 1991
and held the position of Assistant Controller from May 1986 to May 1987. He
was Treasurer of A.M.A. Advisory Corp. (the advisor to Meditrust) and
Controller of Meditrust from July 1988 to January 1991. Mr. Leathers was
associated with State Street Bank and Trust Company, Inc. in the mutual funds
division from May 1987 to July 1988.

William A. Sanger has served since September 1994 as the Executive Vice
President and Chief Operating Officer of the Company. Previously, he served
as the President and Chief Executive Officer of JFK Medical Center in
Atlantis, Florida from February 1992 to September 1994 where he developed
integrated delivery networks and implemented a comprehensive physician
acquisition strategy. He served as Executive Vice President and Chief
Operating Officer of Saint Vincent Medical Center, Toledo, Ohio from January
1990 to February 1992.

Robert A. Miller has served since June 1994 as an executive officer of the
Company and is presently Executive Vice President of Acquisitions.
Previously, he served as Senior Vice President/Development Operations of
Mediplex from September 1992 and Vice President from June 1991. Mr. Miller
served as Regional Operations Director for New Medico Associates from January
1991 to October 1991. Previously, Mr. Miller was Vice President of Hospital
Operations of Glenbeigh, Inc., where he was employed from 1979 through 1991.

Edward E. Goldman, M.D. has served since October 1994 as President of a
subsidiary of the Company, since October 1995 as an executive officer of the
Company and is presently Executive Vice President of Physician

58
<PAGE>

Development. Dr. Goldman is a board certified family practice physician and
previously served as Chairman of PAL-MED Health Services from February 1983
to September 1994, a multi-specialty IPA which provides physicians services
and manages health care related services.

Francis S. Tidikis has served since January 1996 as Executive Vice
President of Marketing of the Company. Mr. Tidikis has served as Senior Vice
President of Physician Management Services for Tenet Healthcare Corporation
since March 1995. Mr. Tidikis has been with Tenet Healthcare Corporation and
its predecessor, National Medical Enterprises, since April 1981, serving as
Executive Vice President of the Eastern District from June 1991 to February
1995 and as Vice President of Operations for the Eastern Region Hospital
Group from February 1984 to September 1990. Mr. Tidikis currently serves as a
director of Professional Liability Insurance Company.

Don S. Harvey has served as an operations officer of the Company since
April 1995 and as an executive officer since October 1995 and is presently
Vice President of Operations. He was a consultant to the Company from January
1995 to April 1995. Mr. Harvey served as Executive Vice President and Chief
Operating Officer of JFK Medical Center in Atlantis, Florida from April 1990
to December 1994, where he developed and managed medical related services.

Donald A. Sands has served as the Vice President--Medical Facility
Development since January 1996. He has served since 1995 as Chairman of the
Board and Chief Executive Officer of DASCO. Previously, Mr. Sands served as
President of DASCO from 1985. From 1984 to 1985, he was Director of
Development for Loews Hotels and was Counsel for Westin Hotel Company from
1979 to 1984.

Hugh L. Carey has served as a director of the Company since February 21,
1996. Currently, he is Chairman of the Board of Advisors of Cambridge
Partners, L.L.C. He served as an Executive Vice President of W.R. Grace &
Company from January 1989 to December 1995. He was Governor of the State of
New York from January 1974 to January 1982. He is currently a director of
Triarc Companies, Inc.

Joseph N. Cassese has served as a director of the Company since January
29, 1996. Mr. Cassese was the President of Mediplex from March 1986 to March
1988 and again from August 1990 to December 1991. Mr. Cassese was also a Vice
President of A.M.A. Advisory Corp., the advisor to Meditrust, from April 1988
to August 1990. Mr. Cassese has been retired since December 1991.

John T. Chay has served as a director of the Company since April 15, 1996.
Mr. Chay has served as an executive officer of Nutrichem, Inc. which he
co-founded in November 1993 and has served since June 1991 as Chief Executive
Officer of The HealthLink Group, Inc., a practice management consulting firm
which he also founded.

David M. Livingston, M.D. has served as a director of the Company since
January 29, 1996. Dr. Livingston has been a Director of Dana-Farber Cancer
Institute in Boston, Massachusetts since 1991 and has been employed as a
physician at the Institute since 1973. He currently serves as Chairman of the
Institute's Department of Medicine. He is also the Emil Frei Professor of
Medicine at Harvard Medical School where he has taught since 1973.

Bruce A. Rendina has served as a director of the Company since January 29,
1996. Mr. Rendina has served since 1994 as President of DASCO, which he
co-founded with Mr. Sands. Previously, he served as its Executive Vice
President from 1987 to 1994.

Stephen E. Ronai has served as a director of the Company since January 29,
1996. Mr. Ronai has been a partner in the Connecticut law firm of Murtha,
Cullina, Richter and Pinney since 1984 where he serves as Chairman of the
firm's Health Care Department. He is a member of the American Academy of
Healthcare Attorneys of the American Hospital Association, and from 1989 to
1995 he served as a member of the Board of Directors of the National Health
Lawyers Association.

The Board of Directors is divided into three classes, with staggered
three-year terms. The initial terms of Messrs. Rendina and Ronai will expire
at the Company's 1996 annual meeting; of Mr. Cassese and Dr. Livingston at
the Company's 1997 annual meeting; and of Messrs. Gosman, Carey and Chay at
the Company's 1998 annual meeting. Successors to the directors whose terms
expire at each annual meeting are eligible for election for three- year
terms. A director holds office until the annual meeting for the year in which
his term expires and until his successor is elected and qualified. These
provisions may make it more difficult for holders of the Common Stock to
remove the directors and officers of the Company than if all directors were
elected on an annual basis.

59
<PAGE>

Officers are appointed by and serve at the discretion of the Board of
Directors. The officers, other than Mr. Gosman, will devote substantially all
of their business time to the business and affairs of the Company.

Executive Committee. The members of the Executive Committee of the
Company's Board of Directors are Messrs. Gosman, Rendina and Cassese. The
Executive Committee exercises all the powers of the Board of Directors
between meetings of the Board of Directors, except such powers as are
reserved to the Board of Directors by law.

Audit Committee. The members of the Audit Committee of the Company's Board
of Directors are Messrs. Carey and Ronai, both of whom are independent
directors. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans for and results of the audit, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range
of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls.

Compensation Committee. The members of the Compensation Committee of the
Company's Board of Directors are Messrs. Cassese, Carey and Ronai. The
Compensation Committee establishes a general compensation policy for the
Company and approves increases both in directors' fees and in salaries paid
to officers and senior employees of the Company. The Compensation Committee
administers all of the Company's employee benefit plans. The Compensation
Committee determines, subject to the provisions of the Company's plans, the
directors, officers and employees of the Company eligible to participate in
any of the plans, the extent of such participation and terms and conditions
under which benefits may be vested, received or exercised.

Equity Incentive Committee. The members of the Equity Incentive Committee
of the Company's Board of Directors are Messrs. Cassese and Ronai. The Equity
Incentive Committee determines who shall receive awards under the 1995 Equity
Incentive Plan, from those employees, consultants and directors who are
eligible to participate in the Equity Plan, the type of award to be made, the
number of shares of Common Stock which may be acquired pursuant to the award
and the specific terms and conditions of each award.

Compensation Committee Interlocks and Insider Participation

In 1995, the Company did not have a Compensation Committee or any other
committee of the Board of Directors performing similar functions. Decisions
concerning compensation of executive officers were made by Mr. Gosman, the
Chairman, Chief Executive Officer and President of Company.

Compensation of Directors

Officers who are members of the Board of Directors do not receive
compensation for serving on the Board. Each other member of the Board
receives annual compensation of $15,000 for serving on the Board, plus a fee
of $1,000 for each Board of Directors' meeting attended. In addition, such
directors receive an additional fee of $500 for each committee meeting
attended, except that only one fee will be paid in the event that more than
one such meeting is held on a single day. All directors receive reimbursement
of reasonable expenses incurred in attending Board and committee meetings and
otherwise carrying out their duties. Each non-employee director who was a
member of the Compensation Committee at the time of the closing of the
initial public offering received options to purchase 10,000 shares of Common
Stock upon the closing of the offering at the initial public offering price
pursuant to the Equity Plan. Each director who is a member of the
Compensation Committee on the first business day following each annual
meeting of the shareholders will receive the option to purchase 2,500 shares
of Common Stock. Any of such options granted to a member of the Compensation
Committee under the Equity Plan will be exercisable one year following the
date of grant.

Executive Compensation

The following table sets forth certain information regarding compensation
paid or accrued by the Company during the period June 24, 1994 (inception) to
December 31, 1994 and the year ended December 31, 1995, to the Company's
Chief Executive Officer and to each of the Company's four other most highly
compensated executive officers (the "Named Executive Officers") during 1995.

60
<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Annual
Compensation All Other
Salary Compensation (1)
Name and Principal Position Year ($) ($)
--------------------------- ---- ------------- ----------------
<S> <C> <C> <C>
Abraham D. Gosman 1995 225,000 --
Chairman, President and Chief Executive Officer 1994 116,682
Frederick R. Leathers 1995 229,487 290
Chief Financial Officer and Treasurer 1994 102,057
Robert A. Miller 1995 206,382 102
Executive Vice President of Acquisitions 1994 101,916
Edward E. Goldman, M.D 1995 400,000 --
Executive Vice President of Physician 1994 133,333
Development
William A. Sanger 1995 304,571 174
Executive Vice President and Chief Operating 1994 98,038
Officer
</TABLE>

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

(1) Amounts indicated are for life insurance premiums paid by the Company.

Employment Agreements

The Company has entered into an employment agreement with Dr. Goldman that
provides for an initial three year term automatically renewable for an
initial period of two years and for successive periods of one year
thereafter, unless either party elects not to renew. The base salary for Dr.
Goldman under the agreement is $400,000 per year. In addition, he is entitled
to receive bonuses and benefits, including health insurance, dental
insurance, short and long term disability, life insurance and a car
allowance. The agreement may be terminated by the Company without cause upon
30 days notice (180 days notice after the first anniversary of the agreement)
and with cause (as defined in the agreement) effective immediately upon
notice. Dr. Goldman may terminate the agreement immediately if the Company
fails to fulfill its obligations thereunder or without cause upon 30 days
notice. In the event that Dr. Goldman is terminated without cause, he is
entitled to receive his base salary for the lesser of (i) the remaining term
of the then current employment period or (ii) 12 months following the
effective date of his termination of employment. The agreement contains
restrictive covenants prohibiting Dr. Goldman from competing with the
Company, or soliciting employees of the Company to leave, during his
employment and for a period of two years after termination of the agreement,
other than after a termination by the Company without cause or by Dr. Goldman
for good reason.

The Company has entered into an employment agreement with Mr. Miller that
provides for an initial two year term that is automatically renewable for
successive one year periods, unless either party elects not to renew. The
base salary for Mr. Miller under the agreement is $300,000 per year. In
addition, he is entitled to receive such bonuses and benefits as the Company,
in its sole discretion, may provide to its executive officers. The agreement
may be terminated by the Company without cause upon 15 days notice and with
cause (as defined in the agreement) immediately upon notice. Mr. Miller may
terminate the agreement immediately upon written notice to the Company in the
event of any material breach by the Company of its obligations thereunder. In
the event Mr. Miller is terminated without cause, he is entitled to receive
his base salary for 12 months following the effective date of his termination
of employment. The agreement contains restrictive covenants prohibiting Mr.
Miller from competing with the Company, or soliciting employees of the
Company to leave, during his employment and for a period of twelve months
after termination of the agreement (if Mr. Miller is terminated with cause or
if he chooses not to renew).

The Company has entered into an employment agreement with Mr. Sanger that
provides for an initial three year term that is automatically renewable for
successive one year periods until either party elects not to renew. The base
salary for Mr. Sanger under the agreement is $300,000 per year. In addition,
he is entitled to receive bonuses and benefits, including health insurance,
dental insurance, short and long term disability, life insurance and a car
allowance. The agreement may be terminated by the Company without cause and
with cause (as defined in the

61
<PAGE>

agreement) effective immediately upon written notice. Mr. Sanger may
terminate the agreement upon written notice to the Company, if the Company
fails to pay any sums due or perform substantially all of its duties and
obligations under the agreement. In the event that Mr. Sanger is terminated
without cause, he is entitled to receive his base salary for 12 months
following the effective date of his termination of employment. The agreement
contains restrictive covenants prohibiting Mr. Sanger from competing with the
Company, or soliciting employees of the Company to leave during his term of
the agreement and for a period of twelve months thereafter (if Mr. Sanger is
terminated with cause or if he chooses not to renew the agreement).

1995 Equity Incentive Plan

The Company maintains the 1995 Equity Incentive Plan (the "Equity Plan"),
which provides for the award ("Award") of up to two million shares of Common
Stock in the form of incentive stock options ("ISOs"), non- qualified stock
options ("Non-Qualified Stock Options"), bonus stock, restricted stock,
performance stock units and stock appreciation rights. All employees,
directors and consultants of the Company and any of its subsidiaries are
eligible to participate in the Equity Plan, except directors who are members
of the Equity Incentive Committee (the "Committee"). In addition, certain
directors are eligible for non-discretionary grants under the Equity Plan.

The Equity Plan is administered by the Committee, which determines who
shall receive Awards from those employees and directors who are eligible to
participate in the Equity Plan, the type of Award to be made, the number of
shares of Common Stock which may be acquired pursuant to the Award and the
specific terms and conditions of each Award, including the purchase price,
term, vesting schedule, restrictions on transfer and any other conditions and
limitations applicable to the Awards or their exercise. The purchase price
per share of Common Stock cannot be less than 100% of the fair market value
of the Common Stock on the date of grant with respect to ISOs and not less
than 50% of the fair market value of the Common Stock on the date of grant
with respect to Non-Qualified Options. ISOs cannot be exercisable more than
ten years following the date of grant and Non-Qualified Stock Options cannot
be exercisable more than ten years and one day following the date of grant.
The Committee may at any time accelerate the exercisability of all or any
portion of any option.

Each Award may be made alone, in addition to or in relation to any other
Award. The terms of each Award need not be identical, and the Committee need
not treat participants uniformly. Except as otherwise provided by the Equity
Plan or a particular Award, any determination with respect to an Award may be
made by the Committee at the time of award or at any time thereafter. The
Committee determines whether Awards are settled in whole or in part in cash,
Common Stock, other securities of the Company, Awards or other property. The
Committee may permit a participant to defer all or any portion of a payment
under the Equity Plan, including the crediting of interest on deferred
amounts denominated in Common Stock. Such a deferral may have no effect for
purposes of determining the timing of taxation of payments. In the event of
certain corporate events, including a merger, consolidation, dissolution,
liquidation or the sale of substantially all of the Company's assets, all
Awards become fully exercisable and realizable.

The Committee may amend, modify or terminate any outstanding Award,
including substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, and converting an ISO to
a Non-Qualified Stock Option, if the participant consents to such action, or
if the Committee determines that the action would not materially and
adversely affect the participant. Awards may not be made under the Equity
Plan after November 14, 2005, but outstanding Awards may extend beyond such
date.

The number of shares of Common Stock issuable pursuant to the Equity Plan
may not be changed except by approval of the stockholders. However, in the
event that the Committee determines that any stock dividend, extraordinary
cash dividend, creation of a class of equity securities, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination,
exchange of shares, warrants or rights offering to purchase Common Stock at a
price substantially below fair market value, or other similar transaction
affects the Common Stock such that an adjustment is required to preserve the
benefits intended to be made available under the Equity Plan, the Committee
may adjust equitably the number and kind of shares of stock or securities in
respect of which Awards may be made under the Equity Plan, the number and
kind of shares subject to outstanding Awards, and the award, exercise or
conversion price with respect to any of the foregoing, and if considered
appropriate, the Committee may make provision for a cash payment with respect
to an outstanding Award. In addition, upon the adoption of a plan or
agreement concerning a change in control, sale of substantially all the
assets, or liquidation or dissolution

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<PAGE>

of the Company, all Awards which are not then fully exercisable or realizable
become so. Common Stock subject to Awards which expire or are terminated
prior to exercise or Common Stock which has been forfeited under the Equity
Plan will be available for future Awards under the Equity Plan. Both treasury
shares and authorized but unissued shares may be used to satisfy Awards under
the Equity Plan.

The Equity Plan may be amended from time to time by the Board of Directors
or terminated in its entirety; however, no amendment may be made without
stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirement for
stockholder approval under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor provision.

The Company did not award any options during 1994, however, in connection
with the Formation, upon the closing of the initial public offering, the
Company granted options under the Equity Plan in exchange for outstanding
options to purchase stock of certain Related Companies which outstanding
options, at the time that they were issued by the Related Companies, had an
exercise prices at least equal to the fair market value of common stock of
the Related Companies.

CERTAIN TRANSACTIONS

During 1994 and 1995, the Related Companies and Mr. Gosman completed the
acquisition of various companies and businesses which were transferred to the
Company in connection with the Formation. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Acquisition
Summary" for a description of the Acquisitions.

As of July 31, 1996, the Company had outstanding borrowings from Mr.
Gosman of approximately $77,000, which borrowings were made for working
capital purposes and to fund certain of the Acquisitions. At December 31,
1995 the Company also had a $19.5 million loan from NationsBank, which was
guaranteed by Mr. Gosman. Mr. Gosman did not receive any consideration for
this or any other guarantee he has provided on behalf of the Company. The
$19.5 million loan was repaid from the net proceeds of the initial public
offering. After repayments to Mr. Gosman made from the net proceeds of the
initial public offering totalling $28.7 million, the Company owed Mr. Gosman
approximately $10.8 million, which was repaid from the net proceeds of the
Debt Offering. All amounts loaned to the Company by Mr. Gosman accrue
interest at a floating rate equal to NationsBank's prime rate. The Company
agreed to repay in full the amount owed to Mr. Gosman from the proceeds of
any public offering by the Company of its debt or equity securities; and to
repay Mr. Gosman from the proceeds of any institutional debt financing by the
Company for working capital purposes, except that the amount to be repaid
from such institutional debt financing proceeds would not exceed 25% of the
maximum amount available to be borrowed under the terms of the financing.
Pursuant to such agreement, the $11.7 million the Company owed Mr. Gosman
(including additional amounts borrowed since the closing of the initial
public offering) was repaid from the net proceeds of the Debt Offering.

In connection with the acquisition of OTI in March 1995, Mr. Gosman
guaranteed until the later of the satisfaction of certain financial covenants
or July 31, 1998 the repayment by a subsidiary of the Company of a portion of
the $17.5 million in acquisition financing from FINOVA Capital Corporation
("FINOVA"). Mr. Gosman's liability under the guarantee was limited to no more
than $6.1 million. The Company used the net proceeds of the initial public
offering to repay in full its obligations to FINOVA.

During 1995, in addition to the guarantee discussed above, Mr. Gosman
guaranteed the payment by the Company of indebtedness in the amount of $4.6
million incurred in connection with the acquisition of DASCO, all of which
was repaid during 1996. In addition, Mr. Gosman executed a reimbursement
agreement and provided collateral for a letter of credit to secure other
indebtedness of the Company in the amount of $5.4 million incurred in
connection with the acquisition of Oncology & Radiation Associates, P.A. Upon
the closing of the initial public offering, the Company obtained the release
of Mr. Gosman from these guarantees and from his other obligations with
respect to acquisition indebtedness through the assumption by the Company of
Mr. Gosman's obligation to pay such Acquisition indebtedness and of the
obligation to provide cash collateral for the letter of credit.

The Company occupies office space for its principal offices in West Palm
Beach, Florida under the terms of a lease which the Company assumed from a
company the stockholders and executive officers of which include Messrs.
Gosman, Leathers, Miller and Sanger and Dr. Goldman. The Company estimates
that the total amount of

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lease payments to be made under the assumed lease through the end of the
current lease term will equal approximately $1.8 million.

In connection with the Formation, the following executive officers and
directors of the Company received the indicated number of shares of Common
Stock in exchange for their shares of common stock of the Related Companies:
Mr. Gosman (including shares held for the benefit of his two adult sons),
8,282,305; Mr. Rendina, 916,667; Mr. Chay, 133,333; Mr. Sands, 916,667; Mr.
Leathers, 459,505; Mr. Miller, 459,505; Mr. Sanger, 336,224; and Dr. Goldman,
168,112.

Various persons who upon the closing of the initial public offering and
the Formation became employees and/or officers of the Company were employees
and/or officers of companies the stockholders and executive officers of which
included Mr. Gosman and Mr. Leathers. The services of such employees and/or
officers were provided to the Company at cost prior to the Formation under
the terms of a management agreement.

From time to time, the Company may charter an airplane and flight services
at competitive rates from two companies owned by Mr. Gosman.

DASCO provides development and other services in connection with the
establishment of health parks, medical malls and medical office buildings.
DASCO provides these services to or for the benefit of the owners of the new
facilities, which owners are either corporations or limited partnerships. Mr.
Sands and Mr. Rendina have acquired equity interest in the entities which own
23 of the 26 facilities developed by DASCO. The collective interests of
Messrs. Sands and Rendina range from 17% to 100%. In addition, as of December
31, 1995, Mr. Gosman individually and as trustee for his two adult sons and
Messrs. Leathers, Miller and Sanger and Dr. Goldman have acquired limited
partnership interests ranging from 14% to 36% in the entities which own seven
facilities being developed by the Company through DASCO. The Company (through
DASCO) also is providing construction management, development, marketing and
consulting services to an entity principally owned by Mr. Gosman in
connection with the development by such entity of a medical mall. During the
six months ended July 31, 1996, the Company recorded revenues in the amount
of $1,079,568 related to such services. DASCO has and continues to provide
all of its medical facility development services to affiliated parties on
terms no less favorable to the Company than those provided to unaffiliated
parties.

Meditrust, a publicly traded real estate investment trust with assets in
excess of $1.7 billion dollars of which Mr. Gosman is the Chairman of the
Board and Chief Executive Officer, has provided financing in the aggregate
amount of $150.0 million for the development of 15 facilities developed by
DASCO.

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PRINCIPAL STOCKHOLDERS

The following table sets forth, as of September 19, 1996, certain
information regarding the beneficial ownership of shares of Common Stock by
each person known by the Company to be the beneficial owner of more than 5% of
outstanding Common Stock, by each director and each of the Named Executive
Officers of the Company and by all directors and executive officers as a group.
Except as indicated in the footnotes, all of such shares of Common Stock set
forth in the following table are owned directly, and the indicated person has
sole voting and investment power with respect to all Common Stock shown as
beneficially owned by such person:

<TABLE>
<CAPTION>
Amount of Beneficial
Ownership
------------------------
Shares
Beneficially Percentage
Name Owned Owned
- ---- ----------- ----------
<S> <C> <C>
Abraham D. Gosman (1) 8,192,164 36.9%
Putnam Investments, Inc. (2) 2,322,300 10.4
Frederick R. Leathers 459,505 2.1
William A. Sanger 336,224 1.5
Robert A. Miller (3) 459,655 2.1
Edward E. Goldman, M.D. 168,112 *
Joseph N. Cassese -- *
David M. Livingston, M.D. -- *
Bruce A. Rendina 916,667 4.1
Stephen E. Ronai 4,000 *
Hugh L. Carey -- *
John T. Chay 142,833 *
All directors and executive officers as a group (15
persons) 11,622,344 52.3
</TABLE>

- -------------
* Less than one percent.

(1) Includes 4,000,000 shares held by Mr. Gosman as trustee for the benefit
of his two adult sons. Mr. Gosman's business address is PhyMatrix Corp.,
777 South Flagler Drive, West Palm Beach, FL 33401.

(2) Putnam Investments, Inc. ("PII") and its wholly-owned subsidiary Putnam
Investment Management, Inc. ("PIM") have shared dispositive power with
respect to such shares, including 1,096,700 shares with respect to which
Putnam New Opportunities Fund (the "Fund") has shared voting and
dispositive power. The address of PII, PIM and the Fund is One Post
Office Square, Boston, Massachusetts 02109. The foregoing is based upon
the Schedule 13G dated July 10, 1996 filed by PII, PIM and the Fund.

(3) Includes 150 shares owned by Mr. Miller's minor sons with respect to which
Mr. Miller disclaims beneficial ownership.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 41,000,000 shares
of capital stock, which includes 40,000,000 shares of Common Stock and
1,000,000 shares of preferred stock ("Preferred Stock").

Common Stock

Holders of Common Stock are entitled to one vote for each share held of
record on all matters to be submitted to a vote of the stockholders, and such
holders do not have cumulative voting rights. Subject to preferences that may
be applicable to any outstanding shares of Preferred Stock, holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors of the Company out of
funds legally available therefor. See "Dividend Policy." All outstanding
shares of Common Stock are, and the shares to be sold in the offering when
issued and paid for will be, fully paid and nonassessable and the holders
thereof will have no preferences or conversion, exchange or pre-emptive
rights. In the event of any liquidation, dissolution or winding-up of the
affairs of the Company, holders of Common Stock will be entitled to share
ratably in the assets of the Company remaining after payment or provision for
payment of all of the Company's debts and obligations and liquidation
payments to holders of outstanding shares of Preferred Stock, if any.

Preferred Stock

The Preferred Stock, if issued, would have priority over the Common Stock
with respect to dividends and to other distributions, including the
distribution of assets upon liquidation. The Preferred Stock may be issued in
one or more series without further stockholder authorization, and the Board
of Directors is authorized to fix and determine the terms, limitations and
relative rights and preferences of the Preferred Stock, to establish series
of Preferred Stock and to fix and determine the variations as among series.
The Preferred Stock, if issued, may be subject to repurchase or redemption by
the Company. The Board of Directors, without approval of the holders of the
Common Stock, can issue Preferred Stock with voting and conversion rights
(including multiple voting rights) which could adversely affect the rights of
holders of Common Stock. In addition to having a preference with respect to
dividends or liquidation proceeds, the Preferred Stock, if issued, may be
entitled to the allocation of capital gains from the sale of the Company's
assets. Although the Company has no present plans to issue any shares of
Preferred Stock following the closing of the offering, the issuance of shares
of Preferred Stock, or the issuance of rights to purchase such shares, may
have the effect of delaying, deferring or preventing a change in control of
the Company or an unsolicited acquisition proposal.

Classified Board of Directors

The Charter and By-laws of the Company provide for the Board of Directors
to be divided into three classes of directors, as nearly equal in number as
is reasonably possible, serving staggered terms so that directors' initial
terms will expire either at the 1996, 1997 or 1998 annual meeting of the
stockholders. Starting with the 1996 annual meeting of the stockholders, one
class of directors will be elected each year for a three-year term. See
"Management."

The Company believes that a classified Board of Directors will help to
assure the continuity and stability of the Board of Directors and the
Company's business strategies and policies as determined by the Board of
Directors, since a majority of the directors at any given time will have had
prior experience as directors of the Company. The Company believes that this,
in turn, will permit the Board of Directors to more effectively represent the
interests of its stockholders.

With a classified Board of Directors, at least two annual meetings of
stockholders, instead of one, generally will be required to effect a change
in the majority of the Board of Directors. As a result, a provision relating
to a classified Board of Directors may discourage proxy contests for the
election of directors or purchases of a substantial block of the Common Stock
because such a provision could operate to prevent a rapid change in control
of the Board of Directors. The classification provision also could have the
effect of discouraging a third party from making a tender offer or otherwise
attempting to obtain control of the Company. Under the Certificate of
Incorporation, a director of the Company may be removed only for cause by a
vote of the holders of at least 75% of the outstanding shares of the capital
stock of the Company entitled to vote in the election of directors.

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<PAGE>

Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors

The By-laws establish an advance notice procedure with regard to the
nomination by the stockholders of the Company of candidates for election as
directors (the "Nomination Procedure") and with regard to other matters to be
brought by stockholders before a meeting of stockholders of the Company (the
"Business Procedure").

The Nomination Procedure requires that a stockholder give written notice
to the Secretary of the Company, delivered to or mailed and received at the
principal executive officers of the corporation not less than 60 days nor
more than 90 days prior to the meeting, in proper form, of a planned
nomination for the Board of Directors. Detailed requirements as to the form
and timing of that notice are specified in the By-laws. If the Chairman of
the Board of Directors determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible
for election as a director.

Under the Business Procedure, a stockholder seeking to have any business
conducted at an annual meeting must give written notice to the Secretary of
the Company, delivered to or mailed and received at the principal executive
officers of the corporation not less than 60 days nor more than 90 days prior
to the meeting, in proper form. Detailed requirements as to the form and
timing of that notice are specified in the By-laws. If the Chairman of the
Board of Directors determines that such business was not properly brought
before such meeting in accordance with the Business Procedure, such business
will not be conducted at such meeting.

Although the By-laws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors
or of any other business desired by stockholders to be conducted at an annual
or any other meeting, the By-laws (i) may have the effect of precluding a
nomination for the election of directors or precluding the conduct of
business at a particular annual meeting if the proper procedures are not
followed or (ii) may discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of the Company, even if the conduct of such
solicitation or such attempt might be beneficial to the Company and its
stockholders.

Fair Price Provision for Certain Business Combinations

The Company's Certificate of Incorporation contains a provision which
requires that certain proposed business combinations (the "Business
Combinations") between the Company or any of its subsidiaries, individually,
and an "Interested Stockholder" (as defined below) either must be (i)
approved by the Board of Directors of the Company, provided a majority of
"Continuing Directors" (as defined below) voted in favor of such transaction,
or (ii) for a certain minimum sum, determined by a fixed formula as set forth
in the Company's charter.

An "Interested Stockholder" is defined in the Certificate of Incorporation
as (i) any beneficial owner, either directly or indirectly, of 10% or more of
the voting power of the outstanding voting stock of the Company immediately
prior to a proposed Business Combination, who was not a beneficial owner one
week before the closing of the Company's initial public offering, (ii) an
Affiliate (as defined in the Exchange Act) of the Company who was not an
Affiliate one week before the closing of the Company's initial public
offering, or (iii) an assignee of or a successor in interest to the
beneficial ownership of any shares of capital stock which were within two
years prior thereto beneficially owned by a person under clause (i) hereof,
so long as such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public offering,
within the meaning of the Securities Act, as amended. As a result of the
foregoing, Mr. Gosman and certain other stockholders of the Company prior to
the closing of the Company's initial public offering would not be deemed to
be an Interested Stockholders and would, therefore, not be subject to this
provision.

A "Continuing Director" is either (i) a director who is not an Affiliate
or Associate (as defined in the Exchange Act) of an Interested Stockholder
and who was a director of the Company prior to that time when the Interested
Stockholder became an Interested Stockholder, or (ii) a director who is so
designated by a majority of the Continuing Directors then serving on the
Company's Board of Directors.

The Company believes that this provision will ensure that in the event of
a proposal of a certain business combination with an interested party, the
stockholders of the Company will not be coerced into selling their shares or
will receive a fair price in consideration therefor. This provision could
make certain business combinations with particular parties more difficult and
could discourage an Interested Stockholder from contemplating or attempting a
Business Combination with the Company.

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<PAGE>

Other Provisions

Special Meetings of the Stockholders of the Company. The Company' By-laws
provide that a special meeting of the stockholders of the Company may be
called only by the Chairman of the Board of Directors or by order of the
Board of Directors. This provision prevents stockholders from calling a
special meeting of stockholders and potentially limits the stockholders'
ability to offer proposals to meetings of stockholders, if no special
meetings are otherwise called by the Chairman or the Board or Board of
Directors.

Amendment of the By-laws. The Company's Certificate of Incorporation
provides that the By-laws only may be amended only by a vote of the directors
or by a rate of at least 75% of the outstanding shares of the Company's stock
entitled to vote in the election of directors.

No Action by Written Consent. The Company's Certificate of Incorporation
does not permit the Company's stockholders to act by written consent. As a
result, any action to be taken by the Company's stockholders must be taken at
a duly called meeting of the stockholders.

Delaware Takeover Statute

The Company is subject to Section 203 of the DGCL which, with certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any "interested stockholder" for a period
of three years following the date that such stockholder became an interested
stockholder, unless: (i) prior to such date, the Board of Directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and officers
and (b) by employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer, or (iii) on or after such
date, the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66-2/3% of the outstanding voting stock which is not owned
by the interested stockholder. An "interested stockholder" is defined as any
person that is (a) the owner of 15% or more of the outstanding voting stock
of the corporation or (b) an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to the
date on which it is sought to be determined whether such person is an
interested stockholder.

PLAN OF DISTRIBUTION

This Prospectus related to 5,000,000 shares of Common Stock of the Company
that may be offered and issued by the Company from time to time in
connection with acquisitions of other businesses or properties by the Company.

The Company intends to concentrate its acquisitions in areas related to the
current business of the Company. If the opportunity arises, however, the
Company may attempt to make acquisitions that are either complementary to its
present operations or which it considers advantageous even though they may be
dissimilar to its present activities. The consideration for any such acquisition
may consist of shares of Common Stock, cash, notes or other evidences of debt,
assumptions of liabilities or a combination thereof, as determined from time to
time by negotiations between the Company and the owners or controlling persons
of businesses or properties to be acquired.

The shares covered by this Prospectus may be issued in exchange for shares
of capital stock, partnership interests or other assets representing an
interest, direct or indirect, in other companies or other entities, in exchange
for assets used in or related to the business of such companies or entities, or
otherwise pursuant to the agreements providing for such acquisitions. The terms
of such acquisitions and of the issuance of shares of Common Stock under
acquisition agreements will generally be determined by direct negotiations with
the owners or controlling persons of the businesses or properties to be acquired
or, in the case of entities that are more widely held, through exchange offers
to stockholders or documents soliciting the approval of statutory mergers,
consolidations or sales of assets. It is anticipated that the shares of Common
Stock issued in any such acquisition will be valued at a price reasonably
related to the market value of the Common Stock either at the time of agreement
on the terms of an acquisition or at or about the time of delivery of the
shares.

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<PAGE>

be paid from time to time in connection with specific acquisitions, and
such fees may be paid through the issuance of shares of Common Stock covered by
this Prospectus. Any person receiving such a fee may be deemed to be an
underwriter within the meaning of the Securities Act.

VALIDITY OF COMMON STOCK

Certain legal matters in connection with the shares of Common Stock being
offered hereby will be passed upon by Nutter, McClennen & Fish, LLP, Boston,
Massachusetts, counsel to the Company.

EXPERTS

The combined financial statements of PhyMatrix Corp. for the year ended
December 31, 1995 and for the period from June 24, 1994 (inception) through
December 31, 1994, included in this Prospectus and appearing elsewhere in
this Registration Statement have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as indicated in their report with respect thereto,
and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.

The financial statements of DASCO Development Corporation and Affiliate as
of September 30, 1995 and for the period from January 1, 1995 to September
30, 1995, included in this Prospectus and appearing elsewhere in this
Registration Statement have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as indicated in their report with respect thereto,
and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.

The financial statements of DASCO Development Corporation and Affiliate
for the years ended December 31, 1994, 1993 and 1992, included in this
Prospectus and appearing elsewhere in this Registration Statement, have been
audited by Bober, Markey & Company, independent accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.

The financial statements of Radiation Care, Inc. and Subsidiaries for the
year ended December 31, 1994, the nine months ended December 31, 1993 and the
year ended March 31, 1993, included in this Prospectus and appearing
elsewhere in this Registration Statement, have been audited by Coopers &
Lybrand L.L.P., independent accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing.

The financial statements of Aegis Health Systems, Inc. for the years ended
December 31, 1994, 1993 and 1992, included in this Prospectus and appearing
elsewhere in this Registration Statement, have been audited by Coopers &
Lybrand L.L.P., independent accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing.

The financial statements of Oncology & Radiation Associates, P.A. as of
December 31, 1993 and 1994 and September 12, 1995, and for the period from
inception (September 1, 1992) to December 31, 1992, the years ended December
31, 1993 and 1994 and the period from January 1, 1995 to September 12, 1995,
included in this Prospectus and appearing elsewhere in this Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.

The financial statements of Osler Medical, Inc. as of September 14, 1995
and for the period from January 1, 1995 through September 14, 1995, included
in this Prospectus and appearing elsewhere in this Registration Statement,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing in giving said report.

The financial statements of Osler Medical (a Partnership) for the years
ended December 31, 1994 and 1993, included in this Prospectus and appearing
elsewhere in this Registration Statement, have been audited by Hoyman, Dobson
& Company, P.A., independent accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing.

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<PAGE>

The financial statements of Georgia Oncology-Hematology Clinic, P.C. and
Subsidiary for the year ended December 31, 1994 included in this Prospectus
and appearing elsewhere in this Registration Statement, have been audited by
Babush, Neiman, Kornman & Johnson, independent accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.

The financial statements of Oncology-Hematology Associates, P.A. and
Oncology-Hematology Infusion Therapy, Inc. for the year ended December 31,
1994 and the financial statements of Oncology-Hematology Associates, P.A. for
the year ended December 31, 1993, included in this Prospectus and appearing
elsewhere in this Registration Statement, have been audited by Weil, Akman,
Baylin & Coleman, P.A., independent accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.

The financial statements of Cancer Specialists of Georgia, P.C. as of July
31, 1995 and for the period from November 1, 1994 to July 31, 1995, included
in this Prospectus and appearing elsewhere in this Registration Statement
have been audited by Coopers & Lybrand LLP, independent accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing.

The financial statements of Mobile Lithotripter of Indiana Partners for
the years ended September 30, 1995, 1994 and the period February 12, 1993
(date of inception) to September 30, 1993, included in this Prospectus and
appearing elsewhere in this Registration Statement, have been audited by
Katz, Sapper & Miller, LLP, independent accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.

The financial statements of UroMed Technologies, Inc. for the period
January 1 to September 28, 1994 and the years ended December 31, 1993 and
1992, included in this Prospectus and appearing elsewhere in this
Registration Statement, have been audited by Roy Cline, CPA, PA, independent
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.

The financial statements of Nutrichem, Inc. for the period January 1 to
November 17, 1994 and the ten months ended December 31, 1993, included in
this Prospectus and appearing elsewhere in this Registration Statement, have
been audited by Regan, Russell, Schickner & Shah, P.A., independent
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.

The financial statements of First Choice Home Care, Inc. and First Choice
Health Care Services of Ft. Lauderdale, Inc. for the period January 1 to
November 22, 1994 and the year ended December 31, 1993, included in this
Prospectus and appearing elsewhere in this Registration Statement, have been
audited by Patrick & Associates, P.A., independent accountants, as indicated
in their reports with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in accounting and auditing.

The financial statements of Whittle, Varnell and Bedoya, P.A. as of
December 31, 1993 and 1994 and for the years ended December 31, 1993 and
1994, included in this Prospectus and appearing elsewhere in this
Registration Statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing giving said report.

The financial statements of Pinnacle Associates, Inc. as of December 31,
1994 and 1993 and the year ended December 31, 1994 and the period from
October 21, 1993 (inception) to December 31, 1993, included in this
Prospectus and appearing elsewhere in this Registration Statement, have been
audited by Coopers & Lybrand L.L.P., independent accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.

The financial statements of Atlanta Gastroenterology Associates, P.C. as
of January 31, 1996 and 1995 and for the years ended January 31, 1996 and
1995, included in this Prospectus and appearing elsewhere in this
Registration Statement, have been audited by Frazier & Deeter, LLC,
independent auditors, as indicated in their report with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing.

70
<PAGE>

The financial statements of Physicians Choice Management, LLC as of
December 31, 1995 and for the period August 11, 1995 (inception) to December
31, 1995 included in this Prospectus and appearing elsewhere in this
Registration Statement, have been audited by Friedberg, Smith & Co., P.C.,
independent auditors, as indicated in their report with respect thereto, and
are included herein in alliance upon the authority of said firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-4 (together
with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act covering the shares of Common Stock.
This Prospectus does not contain all the information set forth in the
Registration Statement, and the exhibits and schedules thereto. For further
information, with respect to the Company and the Common Stock, reference is
made to the Registration Statement, and the exhibits and schedules thereto,
which can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. The Commission maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that submit electronic filings to the Commission. Statements made
in this Prospectus as to the contents of any contract or other document
referred to are not necessarily complete, and reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files periodic reports and other
information with the Commission. For further information with respect to the
Company, reference is hereby made to such reports and other information which
can be inspected and copied at the public reference facilities maintained by
the Commission referenced above.

The Company's Common Stock is listed for trading on Nasdaq under the
trading symbol "PHMX." Reports, proxy statements and other information about
the Company also may be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.

<PAGE>

PHYMATRIX CORP.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
--------

<S> <C>
PHYMATRIX CORP

Balance Sheets--July 31, 1996 (unaudited) January 31, 1996 (unaudited)
and December 31, 1995 ................................................ F-6

Statements of Operations (unaudited)--three and six months ended
July 31, 1996, one month ended January 31, 1996 and three and six
months ended June 30, 1995 ........................................... F-7

Statements of Cash Flows (unaudited)--six months ended July 31, 1996,
one month ended January 31, 1996 and six months ended June 30, 1995 .. F-8

Notes to Financial Statements (unaudited) .............................. F-9

PHYMATRIX CORP.

Report of Coopers & Lybrand L.L.P. Independent Accountants ............. F-14

Combined Balance Sheets as of December 31, 1995 and 1994 ............... F-15

Combined Statements of Operations for the year ended December 31, 1995
and the period June 24, 1994 (inception) to December 31, 1994 ........ F-16

Combined Statements of Changes in Shareholders' Equity for the year
ended December 31, 1995 and the period June 24, 1994 (inception) to
December 31, 1994 .................................................... F-17

Combined Statements of Cash Flows for the year ended December 31, 1995
and the period June 24, 1994 (inception) to December 31, 1994 ........ F-18

Notes to Combined Financial Statements ................................. F-19

Acquisitions

DASCO DEVELOPMENT CORPORATION AND AFFILIATE

Report of Coopers & Lybrand L.L.P., Independent Accountants ............ F-36

Combined Balance Sheet as of September 30, 1995 ........................ F-37

Combined Statement of Income and Retained Earnings for the nine month
period ended September 30, 1995 ...................................... F-38

Combined Statement of Cash Flows for the nine month period ended
September 30, 1995 ................................................... F-39

Notes to Combined Financial Statements ................................. F-40

DASCO DEVELOPMENT CORPORATION AND AFFILIATE

Report of Bober, Markey & Company, Independent Accountants ............. F-43

Combined Balance Sheets as of December 31, 1994, 1993 and 1992 ......... F-44

Combined Statements of Income and Retained Earnings for the years ended
December 31, 1994, 1993 and 1992 ..................................... F-45

Combined Statements of Cash Flows for the years ended December 31, 1994,
1993 and 1992 ........................................................ F-46

Notes to Combined Financial Statements ................................. F-47

RADIATION CARE, INC. AND SUBSIDIARIES

Report of Coopers & Lybrand L.L.P. Independent Accountants ............. F-50

Consolidated Balance Sheets as of December 31, 1994 and 1993 ........... F-51

Consolidated Statements of Operations for the year ended December 31,
1994, the nine months ended December 31, 1993 and the year ended March
31, 1993 ............................................................. F-52

Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1994, the nine months ended December 31, 1993, and the
year ended March 31, 1993 ............................................ F-53

Consolidated Statements of Cash Flows for the year ended December 31,
1994, the nine months ended December 31, 1993 and the year ended
March 31, 1993 ....................................................... F-54

Notes to Consolidated Financial Statements ............................. F-55

AEGIS HEALTH SYSTEMS, INC.

Report of Coopers & Lybrand L.L.P. Independent Accountants ............. F-66

Balance Sheets as of March 31, 1995 (unaudited) and December 31, 1994
and 1993 ............................................................. F-67

F-1

<PAGE>

PHYMATRIX CORP.
INDEX TO FINANCIAL STATEMENTS--(Continued)

Statements of Operations for the three months ended March 31, 1995 and
1994 (unaudited) and the years ended December 31, 1994, 1993 and 1992 F-68

Statements of Cash Flows for the three months ended March 31, 1995 and
1994 (unaudited) and the years ended December 31, 1994, 1993 and 1992 F-69

Notes to Financial Statements .......................................... F-70

ONCOLOGY & RADIATION ASSOCIATES, P.A.

Report of Arthur Andersen LLP, Independent Accountants ................. F-73

Balance Sheets as of December 31, 1993 and 1994 and September 12, 1995 . F-74

Statements of Operations for the period September 1, 1992 (inception) to
December 31, 1992 and for the years ended December 31, 1993 and 1994
and for the period January 1, 1995 to September 12, 1995 ............. F-75

Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1993 and 1994, and for the period January 1, 1995 to
September 12, 1995 ................................................... F-76

Statements of Cash Flows for the period September 1, 1992 (inception) to
December 31, 1992 and for the years ended December 31, 1993 and 1994
and for the period January 1, 1995 to September 12, 1995 ............. F-77

Notes to Financial Statements .......................................... F-78

OSLER MEDICAL, INC.

Report of Arthur Andersen LLP, Independent Accountants ................. F-81

Balance Sheet as of September 14, 1995 ................................. F-82

Statement of Operations and Retained Earnings for the period from
January 1, 1995 to September 14, 1995 ................................ F-83

Statement of Cash Flows for the period from January 1, 1995 to
September 14, 1995 ................................................... F-84

Notes to Financial Statements .......................................... F-85

OSLER MEDICAL

Report of Hoyman, Dobson & Company, P.A., Independent Public Accountants F-89

Balance Sheets as of December 31, 1994 and 1993 ........................ F-90

Statements of Income and Partners' Capital for the years ended
December 31, 1994 and 1993 ........................................... F-91

Statements of Cash Flows for the years ended December 31, 1994 and 1993 F-92

Notes to Financial Statements .......................................... F-93

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C.

Balance Sheet as of April 14, 1995 (unaudited) ......................... F-100

Statement of Operations and Retained Earnings for the period January 1,
1995--April 14, 1995 (unaudited) ..................................... F-101

Statement of Cash Flows for the period January 1, 1995--April 14, 1995
(unaudited) .......................................................... F-102

GEORGIA ONCOLOGY--HEMATOLOGY CLINIC, P.C. AND SUBSIDIARY

Report of Babush, Neiman, Kornman & Johnson, Independent Accountants ... F-103

Consolidated Balance Sheet as of December 31, 1994 ..................... F-104

Consolidated Statement of Operations and Retained Earnings for the year
ended December 31,1994 ............................................... F-105

Consolidated Statement of Cash Flows for the year ended December 31,
1994 ................................................................. F-106

Notes to Consolidated Financial Statements ............................. F-107

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND ONCOLOGY-HEMATOLOGY INFUSION
THERAPY, INC.

Combined Balance Sheet as of July 25, 1995 (unaudited) ................. F-111

Combined Statement of Operations and Retained Earnings for the period
January 1, 1995 through July 25, 1995 (unaudited) .................... F-112

F-2

<PAGE>

PHYMATRIX CORP.
INDEX TO FINANCIAL STATEMENTS--(Continued)

Combined Statement of Cash Flows for the period January 1, 1995 through
July 25, 1995 (unaudited) ............................................ F-113

ONCOLOGY--HEMATOLOGY ASSOCIATES, P.A. AND ONCOLOGY--HEMATOLOGY INFUSION
THERAPY, INC.

Report of Weil, Akman, Baylin & Coleman, P.A., Independent Accountants . F-114

Combined Balance Sheets as of December 31, 1994 and 1995 ............... F-115

Combined Statements of Operations and Retained Earnings for the year
ended December 31, 1994 and 1993 (Oncology-Hematology Associates,
P.A.) for the period March 7, 1994 (Date of inception) through
December 31, 1994 (Oncology-Hematology Infusion Therapy, Inc.) ....... F-116

Combined Statements of Cash Flows for the year ended December 31, 1994
and 1993 (Oncology-Hematology Associates, P.A.) for the period March
7, 1994 (Date of inception) through December 31, 1994
(Oncology-Hematology Infusion Therapy, Inc.) ......................... F-117

Notes to the Financial Statements ...................................... F-118

CANCER SPECIALISTS OF GEORGIA, P.C.

Report of Coopers & Lybrand L.L.P., Independent Accountants ............ F-123

Balance Sheet as of July 31, 1995 ...................................... F-124

Statement of Operations and Retained Earnings (Accumulated Deficit) for
the nine month period ended July 31, 1995 ............................ F-125

Statement of Cash Flows for the nine month period ended July 31, 1995 .. F-126

Notes to Financial Statements .......................................... F-127

MOBILE LITHOTRIPTER OF INDIANA PARTNERS

Report of Katz, Sapper & Miller, LLP, Independent Accountants .......... F-131

Balance Sheets as of September 30, 1995 and 1994 ....................... F-132

Statements of Income for the years ended September 30, 1995 and 1994 and
the period from February 12, 1993 (date of formation) to September 30,
1993 ................................................................. F-133

Statements of Partners' Capital for the years ended September 30, 1995
and 1994 and the period from February 12, 1993 (date of formation) to
September 30, 1993 ................................................... F-134

Statements of Cash Flows for the years ended September 30, 1995 and 1994
and the period from February 12, 1993 (date of formation) to
September 30, 1995 ................................................... F-135

Notes to Financial Statements .......................................... F-136

UROMED TECHNOLOGIES, INC.

Report of Roy Cline, CPA, PA, Independent Accountants .................. F-139

Balance Sheets as of September 28, 1994 and December 31, 1993 and 1992 . F-140

Statement of Income and Retained Earnings for the period ended
September 28, 1994 and the years ended December 31, 1993 and 1992 .... F-141

Statement of Cash Flows for the period ended September 28, 1994 and the
years ended December 31, 1993 and 1992 ............................... F-142

Notes to Financial Statements .......................................... F-143

NUTRICHEM, INC.

Report of Regan, Russell, Schickner & Shah, P.A., Independent
Accountants .......................................................... F-147

Balance Sheets as of November 17, 1994 and December 31, 1993 ........... F-148

Statements of Income for the period ended November 17, 1994 and the year
ended December 31, 1993 .............................................. F-149

Statements of Retained Earnings for the period ended November 17, 1994
and the year ended December 31, 1993 ................................. F-150

Statements of Cash Flows for the period ended November 17, 1994 and the
year ended December 31, 1993 ......................................... F-151

F-3
<PAGE>

PHYMATRIX CORP.
INDEX TO FINANCIAL STATEMENTS--(Continued)

Notes to Financial Statements .......................................... F-153

FIRST CHOICE HOME CARE, INC.

Report of Patrick & Associates, PA, Independent Accountants ............ F-155

Balance Sheets as of December 31, 1993 and November 22, 1994 ........... F-156

Statements of Income and Retained Earnings for the year ending December
31, 1993 and interim period ending November 22, 1994 ................. F-157

Statements of Cash Flows for the year ending December 31, 1993 and
interim period ending November 22, 1994 .............................. F-158

Notes to Financial Statements .......................................... F-159

FIRST CHOICE HEALTH CARE OF FT. LAUDERDALE, INC.

Report of Patrick & Associates, PA, Independent Accountants ............ F-161

Balance Sheets as of December 31, 1993 and November 22, 1994 ........... F-162

Statements of Income and Retained Earnings for the year ended December
31, 1993 and interim period ending November 22, 1994 ................. F-163

Statements of Cash Flows for the year ended December 31, 1993 and
interim period ending November 22, 1994 .............................. F-164

Notes to Financial Statements .......................................... F-165

WHITTLE, VARNELL AND BEDOYA, P.A.

Report of Arthur Andersen LLP, Independent Accountants ................. F-167

Balance Sheets as of December 31, 1993 and 1994 and September 30, 1995
(unaudited) .......................................................... F-168

Statements of Operations and Retained Earnings for the years ended
December 31, 1993 and 1994 and the nine month periods ended September
30, 1994 and 1995 (unaudited) ........................................ F-169

Statements of Cash Flows for the years ended December 31, 1993 and 1994
and the nine month periods ended September 30, 1994 and 1995
(unaudited) .......................................................... F-170

Notes to Financial Statements .......................................... F-171

PINNACLE ASSOCIATES, INC.

Report of Coopers & Lybrand L.L.P., Independent Accountants ............ F-176

Consolidated Balance Sheets as of September 30, 1995 (unaudited),
December 31, 1994 and December 31, 1993 .............................. F-177

Consolidated Statements of Operations for the period January 1, 1995 to
September 30, 1995 (unaudited), the year ended December 31, 1994 and
the period October 21, 1993 (inception) to December 31, 1993 ......... F-178

Consolidated Statements of Stockholders' Deficit for the period
January 1, 1995 to September 30, 1995 (unaudited), the year ended
December 31, 1994 and the period October 21, 1993 (inception) to
December 31, 1993 .................................................... F-179

Consolidated Statements of Cash Flows for the period January 1, 1995 to
September 30, 1995 (unaudited), the year ended December 31, 1994 and
the period October 21, 1993 (inception) to December 31, 1993 ......... F-180

Notes to Consolidated Financial Statements ............................. F-181

ATLANTA GASTROENTEROLOGY ASSOCIATES, P.C.

Independent Auditors' Report ........................................... F-184

Financial Statements:

Balance Sheets as of January 31, 1996 and 1995 ........................ F-185

Statements of Operations and Retained Earnings for the years ended
January 31, 1996 and 1995 ............................................ F-186

Statements of Cash Flows for the years ended
January 31, 1996 and 1995 ............................................ F-187

Notes to Financial Statements ......................................... F-188

F-4
<PAGE>

PHYMATRIX CORP.
INDEX TO FINANCIAL STATEMENTS--(Continued)

PHYSICIAN'S CHOICE MANAGEMENT, LLC

Independent Auditors' Report ........................................... F-191

Financial Statements:

Balance Sheet as of December 31, 1995 ................................. F-192

Statement of Operations and Members' Equity for the period from
August 11, 1995 to December 31, 1995 ................................. F-193

Statement of Cash Flows for the period from
August 11, 1995 to December 31, 1995 ................................. F-194

Notes to Financial Statements ......................................... F-195
</TABLE>

F-5
<PAGE>

PHYMATRIX CORP.
BALANCE SHEET

<TABLE>
<CAPTION>
Consolidated Consolidated Combined
July 31, January 31, December 31,
1996 1996 1995
------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .......................................... $ 111,666,194 $ 46,113,619 $ 3,596,913
Receivables:
Accounts receivable, net .......................................... 29,433,626 21,562,477 20,710,846
Other receivables ................................................. 229,282 678,411 569,923
Notes receivable .................................................. -- -- 516,000
Prepaid expenses and other current assets .......................... 3,587,884 1,202,399 1,276,535
------------- ------------- -------------
Total current assets ............................................. 144,916,986 69,556,906 26,670,217
Property, plant and equipment, net ................................. 40,011,263 38,719,086 39,359,328
Notes receivable ................................................... 350,000 100,000 170,400
Goodwill, net ...................................................... 47,913,972 44,979,865 31,931,453
Management service agreements, net ................................. 19,107,669 15,816,042 16,376,636
Investment in affiliates ........................................... 3,237,531 3,256,783 12,925,129
Other assets (including restricted cash) ........................... 9,083,769 7,578,791 4,753,710
------------- ------------- -------------
Total assets ...................................................... $ 264,621,190 $ 180,007,473 $ 132,186,873
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt and capital leases ......................... $ 2,649,963 $ 2,552,306 $ 26,662,510
Current portion of related party debt .............................. 130,000 4,740,588 4,740,588
Due to shareholder--current ........................................ 76,528 5,376,000 --
Accounts payable ................................................... 5,630,748 5,333,791 5,353,210
Accrued compensation ............................................... 884,033 1,151,268 1,124,316
Accrued liabilities ................................................ 3,979,954 6,194,108 9,367,532
Accrued interest--shareholder ...................................... -- -- 1,708,174
------------- ------------- -------------
Total current liabilities ........................................ 13,351,226 25,348,061 48,956,330
Due to shareholder, less current portion ........................... -- 10,147,287 36,690,180
Long-term debt and capital leases, less current
portion ............................................................. 13,646,202 13,653,437 28,847,923
Convertible subordinated debentures ................................ 100,000,000 -- --
Other long term liabilities ........................................ 3,066,951 2,314,544 2,511,122
Minority interest .................................................. 1,743,402 1,335,167 2,502,970
------------- ------------- -------------
Total liabilities ................................................ 131,807,781 52,798,496 119,508,525
Commitments and contingencies
Shareholders' equity:
Common Stock, par value $.01; 40,000,000 shares
authorized; 21,864,202 shares issued and
outstanding at July 31, 1996 ..................................... 218,642 215,300 --
Additional paid in capital ......................................... 140,317,327 140,491,557 25,000,000
Retained earnings (deficit) ........................................ (7,722,560) (13,497,880) (12,321,652)
------------- ------------- -------------
Total shareholders' equity ....................................... 132,813,409 127,208,977 12,678,348
------------- ------------- -------------
Total liabilities and shareholders' equity .......................... $ 264,621,190 $ 180,007,473 $ 132,186,873
============= ============= =============
</TABLE>

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

F-6
<PAGE>

PHYMATRIX CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Consolidated Combined Consolidated Consolidated Combined
Three Three One Six Six
Months Months Month Months Months
Ended Ended Ended Ended Ended
July 31, June 30, January 31, July 31, June 30,
1996 1995 1996 1996 1995
----------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net revenue from services ... $ 21,055,244 $ 13,315,206 $ 4,636,127 $ 41,107,522 $ 19,984,306
Net revenue from management
service agreements ........ 19,368,739 -- 6,079,109 36,523,555 --
------------ ------------ ------------ ------------ ------------
Total revenue ............ 40,423,983 13,315,206 10,715,236 77,631,077 19,984,306
------------ ------------ ------------ ------------ ------------
Operating costs and
administrative expenses:
Cost of affiliated physician
management services ...... 8,879,136 -- 2,796,623 17,412,247 --
Salaries, wages and benefits 12,172,957 7,692,060 3,636,973 23,832,872 12,202,195
Professional fees .......... 1,102,847 661,241 287,095 2,004,445 1,108,577
Supplies ................... 6,097,539 2,170,157 1,916,013 11,580,443 2,771,636
Utilities .................. 593,915 307,446 175,653 1,178,520 443,100
Depreciation and
amortization .............. 1,672,977 1,055,410 535,300 3,265,688 1,393,467
Rent ....................... 1,734,748 1,071,320 565,106 3,440,823 1,397,716
Earn out payment ........... -- -- -- -- 1,111,111
Provision for bad debts .... 740,529 220,790 256,989 1,320,777 255,411
Other ...................... 2,593,179 1,225,450 799,460 4,901,858 2,269,207
------------ ------------ ------------ ------------ ------------
Total operating costs and
administrative expenses 35,587,827 14,403,874 10,969,212 68,937,673 22,952,420
------------ ------------ ------------ ------------ ------------
Interest expense, net ....... 399,421 475,336 551,607 440,412 762,816
Interest expense, shareholder 140,886 314,241 259,888 369,366 346,842
Minority interest ........... 24,193 186,787 81,135 58,234 292,064
Income from investment in
affiliates ................ (127,051) (219,204) 29,622 (268,998) (219,204)
------------ ------------ ------------ ------------ ------------
Income (loss) before
provision for income taxes 4,398,707 (1,845,828) (1,176,228) 8,094,390 (4,150,632)
Income tax expense .......... 1,627,856 -- -- 3,031,881 --
------------ ------------ ------------ ------------ ------------
Net income (loss) ........... $ 2,770,851 $ (1,845,828) $ (1,176,228) $ 5,062,509 $ (4,150,632)
============ ============ ============ ============ ============
Net income (loss) per
weighted average share .... $ 0.13 $ (0.08) $ 0.23
------------ ------------ ------------
Weighted average number of
shares outstanding ........ 21,845,841 14,204,305 21,689,631
============ ============ ============
</TABLE>

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

F-7
<PAGE>

PHYMATRIX CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
Consolidated Consolidated Combined
Six Months One Month Six Months
Ended Ended Ended
July 31, January 31, June 30,
1996 1996 1995
----------- --------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) ................................ $ 5,062,509 $ (1,176,228) $ (4,150,632)
Noncash items included in net income (loss):
Depreciation and amortization ................... 3,265,688 535,300 1,393,467
Other ........................................... 19,252 430,334 --
Changes in receivables .......................... (6,493,010) (739,635) 465,332
Changes in accounts payable and accrued
liabilities ....................................... (1,012,392) (796,011) 1,489,758
Changes in other assets ......................... (1,879,705) (19,072) (479,393)
----------- --------------- -------------
Net cash used by operating activities .......... (1,037,658) (1,765,312) (1,281,468)
----------- --------------- -------------
Cash flows from investing activities
Capital expenditures ............................. (1,684,607) (184,460) (929,512)
Sale of assets ................................... -- 24,794 --
Notes receivable ................................. (250,000) 686,400 (1,029,600)
Other assets ..................................... (84,285) -- --
Acquisitions, net of cash acquired ............... (6,980,003) 54,252 (29,562,838)
----------- --------------- -------------
Net cash used by investing activities .......... (8,998,895) 580,986 (31,521,950)
----------- --------------- -------------
Cash flows from financing activities
Capital contributions ............................ -- -- 12,036,287
Advances from (repayment to) shareholder ......... (15,446,759) (23,123,170) 23,079,169
Proceeds from issuance of common stock ........... 205,000 114,563,221 --
Proceeds from issuance of convertible subordinated
debentures ...................................... 97,102,738 -- --
Release of cash collateral ....................... 1,537,282 1,000,000 --
Cash collateralizing notes payable ............... -- (5,403,337) --
Offering costs ................................... (2,211,765) -- --
Other assets ..................................... (131,250) -- --
Repayment of debt ................................ (5,466,118) (43,335,682) (1,937,035)
----------- --------------- -------------
Net cash provided by financing activities ...... 75,589,128 43,701,032 33,178,421
----------- --------------- -------------
Increase in cash and cash equivalents ............. 65,552,575 42,516,706 375,003
Cash and cash equivalents, beginning of period .... 46,113,619 3,596,913 677,245
----------- --------------- -------------
Cash and cash equivalents, end of period .......... $111,666,194 $ 46,113,619 $ 1,052,248
----------- --------------- -------------
Supplemental disclosure of cash flow information
Cash paid during period for:
Interest ........................................ $ 1,479,014 $ 2,876,636 $ 812,837
=========== =============== =============
Taxes ........................................... $ 2,716,928 $ -- $ --
=========== =============== =============
</TABLE>

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

F-8
<PAGE>

PHYMATRIX CORP.
NOTES TO FINANCIAL STATEMENTS
Three Months and Six Months Ended July 31, 1996, One Month Ended January 31,
1996
and Three Months and Six Months Ended June 30, 1995
(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

The accompanying unaudited interim financial statements include the
accounts of PhyMatrix Corp. ("the Company") and the combination of business
entities which had been operated under common control. These interim
financial statements have been prepared in accordance with generally accepted
accounting principles and the requirements of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. It
is management's opinion that the accompanying interim financial statements
reflect all adjustments (which are normal and recurring) necessary for a fair
presentation of the results for the interim periods. These interim financial
statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Special Report on Form
10-K for the year ended December 31, 1995. Operating results for the three
months and six months ended July 31, 1996 are not necessarily indicative of
results that may be expected for the year. In January 1996, the Company
changed its fiscal year end from December 31 to January 31 and financial
statements as of and for the one month period ended January 31, 1996 are
included herein.

The Company filed a Registration Statement on Form S-1 with the Securities
and Exchange Commission in connection with an initial public offering ("IPO")
which became effective January 23, 1996. In connection with the IPO, the
Company issued 8,222,500 shares of Common Stock. Net proceeds to the Company
were $111,302,643, which was net of underwriting discounts, commissions and
other expenses. The Company used approximately $71,500,000 from the net
proceeds of the IPO to repay certain indebtedness and obligations that arose
from certain acquisitions. The remaining net proceeds have and will continue
to be used for general corporate purposes, including future acquisitions and
working capital.

During June 1996, the Company raised $100 million through the sale of its
63/4% Convertible Subordinated Debentures ( the "Debentures") to certain
institutional investors and non-U.S. investors. The Debentures will be
convertible into shares of the Company's Common Stock and are due in 2003.
Net proceeds to the Company from the Debentures, after deduction of the
initial purchasers' discounts, commissions and other expenses, were
$97,102,738. The Company used approximately $10,752,000 from the net proceeds
of the Debenture offering to repay advances from the principal shareholder.
During July 1996, the Company filed a Registration Statement on form S-1 with
the Securities and Exchange Commission to register the resale of the
Debentures by the holders thereof.

During July 1996, the Company also filed a Registration Statement on Form
S-4 with the Securities and Exchange Commission with respect to the
registration of an aggregate of up to 5,000,000 shares of Common Stock which
may be issued by the Company from time to time in connection with various
acquisitions that it may make.

2. ACQUISITIONS

During April 1996, the Company purchased a 50% interest in Central Georgia
Medical Management, LLC, a newly formed management services organization
("MSO") that provides management services to an independent physician
association ("IPA") composed of 45 physicians based in Georgia. The Company
acquired this interest in exchange for a payment of $550,000 to existing
shareholders and a capital contribution of $700,000 to the Company. The
Company's balance sheet at July 31, 1996 includes the 50% interest not owned
by the Company as minority interest. The owners of the other 50% interest in
the MSO have a put option to the Company to purchase their interests. This
put option vests over a four year period. The price to the Company to
purchase these interests equals 40% of the MSO's net operating income as of
the most recent fiscal year multiplied by the price earnings ratio of the
Company. The minimum price earnings ratio used in such calculation will be 4
and the maximum 10.

During April 1996, the Company purchased the assets of and entered into an
employment agreement with one physician in Florida. The total purchase price,
which was paid in cash, for these assets was $1,632,569. The purchase

F-9
<PAGE>

PHYMATRIX CORP.
NOTES TO FINANCIAL STATEMENTS--(Continued)

2. ACQUISITIONS (Continued)

price was allocated to these assets at their fair market value including
goodwill of $1,582,849. The resulting intangible is being amortized over 20
years.

During May 1996, the Company purchased the stock of Atlanta
Gastroenterology Associates, P.C. pursuant to a tax free merger and entered
into a 40-year management agreement with the medical practice in exchange for
324,252 shares of Common Stock of the Company having a value of approximately
$6,100,000. The transaction has been accounted for using the
pooling-of-interests method of accounting. Pursuant to the management
agreement, the Company will receive a base management fee, an incentive
management fee and a percentage of all net ancillary service income.

During May 1996, the Company amended its existing management agreement
with Oncology Care Associates and extended the term of the agreement to 20
years. Simultaneously, the Company expanded the Oncology Care Associates
practice by adding three oncologists the practices of whom the Company
acquired for $500,000. $200,000 of such purchase price was paid in cash and
$300,000 was paid in the form of a convertible note due in May 1997. The
Company has the option to make such $300,000 payment at its discretion in
either cash or Common Stock of the Company with such number of shares to be
based upon the average price of the stock during the five business days
preceding the due date. The purchase price has been allocated to the assets
at their fair market value, including management service agreements of
approximately $500,000. The Company will receive an annual base management
fee and an incentive management fee. The resulting intangible is being
amortized over 20 years.

During May and June, 1996, the Company entered into agreements to purchase
the assets of and enter into 20-year management agreements with three
physician practices consisting of four physicians. All of these acquisitions
have since been consummated, except that one of the acquisitions closed in
escrow pending the satisfaction of certain conditions. These practices are
located in South Florida, Bethesda, Maryland and Washington, D.C. The total
purchase price for the assets of these practices was $1,654,064. Of this
amount $703,110 was paid in cash and $950,954 of such purchase price is
payable in Common Stock of the Company to be issued during May and June 1997.
The number of shares of Common Stock of the Company to be issued is based
upon the average price of the stock during the five business days prior to
the issuance. The value of the Common Stock to be issued has been recorded in
other long term liabilities at July 31, 1996. The purchase price has been
allocated to the assets at their fair market value, including management
service agreements of approximately $1,189,419. The Company will receive an
annual base management fee and an incentive management fee under each
agreement. The resulting intangible is being amortized over 20 years.

During July 1996, the Company purchased the assets of and entered into a
20 year management agreement with three urologists in Atlanta, Georgia. The
purchase price for these assets was $705,189. Of such purchase price $425,189
was paid in cash and $280,000 is payable during July 1997 in Common Stock of
the Company with such number of shares to be based upon the average price of
the stock during the five business days prior to the issuance. The value of
the Common Stock to be issued has been recorded in other long term
liabilities at July 31, 1996. The purchase price has been allocated to these
assets at their fair market value, including management service agreements of
approximately $350,000. The Company will receive an annual base management
fee and an incentive management fee. The resulting intangible is being
amortized over 20 years.

During July 1996, the Company purchased the assets of and entered into
employment agreements with two physicians in Florida. The total purchase
price for these assets was $1,495,207. Of this amount, $436,807 was paid

F-10
<PAGE>

PHYMATRIX CORP.
NOTES TO FINANCIAL STATEMENTS--(Continued)

2. ACQUISITIONS (Continued)

in cash and $1,058,400 is payable during July 1997 in Common Stock of the
Company with such number of shares to be based upon the value of the stock
during the five business days prior to the issuance. The value of the Common
Stock to be issued has been recorded in other long term liabilities at July
31, 1996. The purchase price has been allocated to these assets at their fair
market value including goodwill of $1,193,562. The resulting intangible is
being amortized over 20 years.

During the six months ended July 31, 1996 and June 30, 1995, the Company
acquired the assets and assumed certain liabilities of physician practices,
medical support service companies and management service organizations. The
transactions had the following non-cash impact on the balance sheets:

July 31, June 30,
1996 1995
---------- -------------
Current assets ............. $ 1,742,127 $ 6,186,180
Property, plant and
equipment ................ 851,418 28,702,801
Intangibles ................ 7,228,386 24,968,354
Other noncurrent assets .... -- 2,180,662
Current liabilities ........ (1,476,665) (4,435,642)
Debt ....................... (302,452) (27,879,988)
Noncurrent liabilities ..... (350,000) (159,529)
Equity ..................... (712,811) --

3. LONG TERM DEBT

During January 1996, the Company used approximately $71,500,000 from the
proceeds of the IPO, to repay the following indebtedness and obligations of
the Company that arose from certain acquisitions: (i) a promissory note to
Aegis Health Systems, Inc. in the amount of $3,796,503 (including interest);
(ii) a contingent note to the former shareholders of Nutrichem, Inc., net of
a tax loan receivable due from the shareholders, in the amount of $3,854,595
(including interest); (iii) a note payable to a financing institution in
connection with the purchase of Oncology Therapies, Inc. in the amount of
$15,585,023 (including interest); (iv) a note payable to NationsBank of
Florida, N.A. in the amount of $19,586,531 (including interest); and (v) a
partial payment of $28,676,743 on the note payable to Abraham D. Gosman, the
Company's President, Chief Executive Officer, Chairman and principal
stockholder.

During the six months ended July 31, 1996, the Company repaid (i)
$4,610,588 of related party indebtedness to the former shareholders of DASCO
Development Corporation and (ii) $15,446,759 on the note payable to Mr.
Gosman.

During May 1996, the Company received a commitment from PNC Bank, National
Association, for a $30 million revolving credit facility and anticipates
closing on this financing during September 1996.

During June 1996, the Company issued $100,000,000 of the Debentures which
are due in 2003 and bear interest at the rate of 63/4% per annum. The
Debentures are convertible into Common Stock of the Company at any time after
August 20, 1996 at a conversion price of $28.20 per share. The Debentures are
not redeemable by the Company prior to June 18, 1999. Offering costs of
approximately $2,897,262 have been deferred and are being amortized over the
life of the Debentures.

F-11
<PAGE>

PHYMATRIX CORP.
NOTES TO FINANCIAL STATEMENTS--(Continued)

4. RELATED PARTY TRANSACTIONS

During the six months ended July 31, 1996, the Company contracted with an
entity principally owned by the Company's Chairman of the Board, President
and Chief Executive Officer to provide construction management, development,
marketing and consulting services for a medical mall being constructed by
such entity. During the six months ended July 31, 1996 the Company recorded
revenues in the amount of $1,079,568 related to such services.

5. NET INCOME PER SHARE

Net income per common share is based upon the weighted average number of
common shares outstanding during the period. For the three and six months
ended July 31, 1996, the weighted average number of common shares outstanding
were 21,845,841 and 21,689,631, respectively. When dilutive, stock options
(less the number of treasury shares assumed to be purchased from the
proceeds) are included in the calculation of the weighted average number of
common shares outstanding. For the three and six months ended July 31, 1996,
conversion of the 63/4% Convertible Subordinated Debentures issued in June
1996, is not assumed because the effect is anti-dilutive.

6. SUBSEQUENT EVENTS

During August 1996, the Company purchased the assets of and entered into a
40 year management agreement with eight physicians in Florida. The purchase
price for these assets was $3,350,000. Of such purchase price, $1,430,000 was
paid in cash and $1,920,000 is payable during August 1997 in Common Stock of
the Company with such number of shares to be purchased based upon the average
price of the stock during the five business days prior to the issuance. The
purchase price will be allocated to these assets at their fair market value,
including management service agreements of approximately $2,400,000. The
Company will receive an annual base management fee and an incentive
management fee. The resulting intangible will be amortized over 40 years.

During August 1996, the Company purchased the assets of and entered into a
40 year management agreement with four physicians in Georgia. The purchase
price for these assets was $1,445,278. Of such purchase price, $752,478 was
paid in cash and $692,800 is payable during August 1997 in Common Stock of
the Company with such number of shares to be purchased based upon the average
price of the stock during the five business days prior to the issuance. The
purchase price will be allocated to these assets at their fair market value,
including management service agreements of approximately $1,057,631. The
Company will receive an annual base management fee and an incentive
management fee. The resulting intangible will be amortized over 40 years.

During August 1996, the Company purchased the assets of and entered into a
40 year management agreement with 10 physicians in Florida. The purchase
price for these assets was $2,935,139. Of such purchase price, $695,139 was
paid in cash and $2,240,000 is payable during August 1997 in Common Stock of
the Company with such number of shares to be purchased based upon the average
price of the stock during the five business days prior to the issuance. The
purchase price will be allocated to these assets at their fair market value,
including management service agreements of approximately $2,800,000. The
Company will receive an annual base management fee and an incentive
management fee. The resulting intangible will be amortized over 40 years.

During August 1996, the Company loaned $10 million to an unrelated
healthcare entity. The principal and interest are due in one installment on
August 15, 1997. Interest on the loan will accrue at the rate of prime plus
2%.

F-12
<PAGE>

PHYMATRIX CORP.
NOTES TO FINANCIAL STATEMENTS--(Continued)

6. SUBSEQUENT EVENTS (Continued)

During August 1996, the Company sold the assets of and assigned the
obligations related to its radiation therapy center in Nashville, Tennessee
to a third party for a purchase price of $1,500,000. The Company's estimated
investment in such assets was approximately $1,225,000 and the Company will
record a gain of approximately $275,000 related to such sale during the third
quarter.

During September 1996, the Company acquired the remaining 56.25% ownership
interest in Physicians Choice Management, LLC, a management services
organization ("MSO") that provides management services to an independent
physician association ("IPA") composed of over 330 physicians in Connecticut.
The Company had acquired a 43.75% ownership interest in December 1995. The
Company acquired the remaining interests in exchange for a payment of $1,000,000
in cash plus 363,442 shares of Common Stock of the Company. The Company has also
agreed to loan the selling shareholders $2.8 million in the event that they
incur a tax liability related to the sale.

F-13
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders of PhyMatrix Corp. (formerly known as Continuum Care
Corporation):

We have audited the accompanying combined balance sheets of PhyMatrix
Corp. (formerly known as Continuum Care Corporation) as of December 31, 1995
and December 31, 1994 and the related combined statements of operations,
changes in shareholders' equity and cash flows for the year ended December
31, 1995 and the period from June 24 (inception) to December 31, 1994. 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 audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of PhyMatrix Corp.
(formerly known as Continuum Care Corporation) as of December 31, 1995 and
December 31, 1994 and the combined results of its operations and its cash
flows for the year ended December 31, 1995 and the period from June 24
(inception) to December 31, 1994 in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
March 27, 1996

F-14
<PAGE>

PHYMATRIX CORP.
COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
Pro Forma
December 31, December 31, December 31,
1995 1995 1994
-------------- -------------- -------------
(Unaudited)
(Note 20)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ............................. $ 43,322,227 $ 3,596,913 $ 677,245
Receivables
Accounts receivable, net of allowance for doubtful
accounts of $7,819,577 and $962,641 at December 31,
1995 and 1994, respectively ......................... 20,710,846 20,710,846 3,778,467
Other receivables .................................... 1,210,414 569,923 --
Notes receivable (Note 4) ............................ -- 516,000 --
Prepaid expenses and other current assets ............. 1,289,227 1,276,535 393,126
------------- ------------- ------------
Total current assets ............................... 66,532,714 26,670,217 4,848,838
Property, plant and equipment, net (Note 5) ............ 39,429,918 39,359,328 1,686,624
Notes receivable (Note 4) .............................. -- 170,400 --
Goodwill, net (Note 6) ................................. 44,439,219 31,931,453 6,210,679
Management service agreements, net (Note 7) ............ 16,376,636 16,376,636 --
Investment in affiliates (Note 8) ...................... 3,387,820 12,925,129 2,661,511
Other assets (including restricted cash) ............... 7,035,497 4,753,710 --
------------- ------------- ------------
Total assets ....................................... $ 177,201,804 $ 132,186,873 $ 15,407,652
============= ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt and capital leases (Note 10) .. $ 2,962,636 $ 26,662,510 $ 457,250
Current portion of related party debt (Note 10) ....... 4,740,588 4,740,588 --
Accounts payable ...................................... 5,398,411 5,353,210 693,171
Accrued compensation .................................. 1,194,424 1,124,316 205,288
Accrued liabilities (Note 9) .......................... 4,238,994 9,367,532 902,900
Accrued interest -- shareholder (Note 13) ............. -- 1,708,174 --
------------- ------------- ------------
Total current liabilities .......................... 18,535,053 48,956,330 2,258,609
Due to shareholder (Note 3 and 13) ..................... 10,751,764 36,690,180 --
Long-term debt and capital leases, less current
maturities (Note 10) .................................. 13,942,113 28,847,923 911,534
Other long term liabilities (Note 9) ................... 3,710,045 2,511,122 --
Minority interest ...................................... 1,305,758 2,502,970 570,533
------------- ------------- ------------
Total liabilities .................................. 48,244,733 119,508,525 3,740,676
Commitments and contingencies (Note 12)
Shareholders' equity
Additional paid in capital ............................ 141,485,681 25,000,000 12,963,713
Retained earnings (deficit) ........................... (12,528,610) (12,321,652) (1,296,737)
------------- ------------- ------------
Total shareholders' equity ......................... 128,957,071 12,678,348 11,666,976
------------- ------------- ------------
Total liabilities and shareholders' equity ............. $ 177,201,804 $ 132,186,873 $ 15,407,652
============= ============= ============
</TABLE>

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

F-15
<PAGE>

PHYMATRIX CORP.
COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Period From
June 24
(inception)
Year Ended to
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Net revenue from services .............................. $ 48,360,716 $ 2,446,821
Net revenue from management service agreements ......... 22,372,566 --
------------ ------------
Total revenue ...................................... 70,733,282 2,446,821
------------ ------------
Operating costs and administrative expenses
Cost of affiliated physician management services ...... 9,655,973 --
Salaries, wages and benefits .......................... 29,708,554 1,207,750
Salaries, wages and benefits -- related party (Note 13) 2,267,891 934,200
Professional fees ..................................... 2,571,459 58,665
Professional fees -- related party (Note 13) .......... 273,941 253,995
Supplies .............................................. 11,864,514 404,911
Utilities ............................................. 1,307,564 77,416
Depreciation and amortization ......................... 3,862,519 107,387
Rent .................................................. 4,043,465 56,244
Rent -- related party (Note 13) ....................... 459,732 192,242
Earn out payment (Note 3) ............................. 1,271,000 --
Provision for closure loss (Note 3) ................... 2,500,000 --
Provision for bad debts ............................... 744,111 --
Other ................................................. 5,409,676 53,665
Other -- related party (Note 13) ...................... 728,116 249,316
------------ ------------
Total operating costs and administrative expenses .. 76,668,515 3,595,791
Interest expense, net .................................. 3,144,027 95,069
Interest expense -- shareholder (Note 13) .............. 1,708,174 --
Minority interest ...................................... 806,637 52,698
Income from investment in affiliates ................... (569,156) --
------------ ------------
Loss (Note 2) .......................................... $(11,024,915) $ (1,296,737)
============ ============
Loss per pro forma share ............................... $ (0.98) $ (0.12)
============ ============
Number of shares used in loss per pro forma share ...... 11,207,450 11,207,450
============ ============

</TABLE>

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

F-16
<PAGE>

PHYMATRIX CORP.
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended December 31, 1995
and the period June 24 (inception) to December 31, 1994

<TABLE>
<CAPTION>
Retained
Additional Earnings
Paid-In (Accumulated
Capital Deficit) Total
----------- ------------ ------------
<S> <C> <C> <C>
Balances -- June 24, 1994 ...................... -- -- --
Capital contribution ........................... $12,963,713 -- $ 12,963,713
Loss for the period June 24, 1994 (inception) to
December 31, 1994 ............................. -- ($ 1,296,737) (1,296,737)
----------- ------------ ------------
Balances -- December 31, 1994 .................. 12,963,713 (1,296,737) 11,666,976
Capital contribution ........................... 12,036,287 -- 12,036,287
Loss for the year ended December 31, 1995 ...... -- (11,024,915) (11,024,915)
----------- ------------ ------------
Balances -- December 31, 1995 .................. $25,000,000 $(12,321,652) $ 12,678,348
=========== ============ ============
</TABLE>

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

F-17
<PAGE>

PHYMATRIX CORP.
COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Period From
June 24
(inception)
Year Ended to
December 31, December 31,
1995 1994
------------ -------------
<S> <C> <C>
Cash flows from operating activities
Loss ................................................ $(11,024,915) $ (1,296,737)
Noncash items included in net loss:
Depreciation and amortization ...................... 3,862,519 107,387
Writedown of assets ................................ 1,554,607 --
Other .............................................. 140,151 --
Changes in receivables .............................. (5,419,998) (389,442)
Changes in accounts payable and accrued liabilities . 8,221,039 242,612
Changes in other assets ............................. (1,425,016) 2,473
------------- ------------
Net cash used by operating activities ............ (4,091,613) (1,333,707)
------------- ------------
Cash flows from investing activities
Capital expenditures ................................ (1,167,230) (107,348)
Notes receivable .................................... (1,029,600) --
Repayments on notes receivable ...................... 343,200 --
Purchase of investments in affiliates ............... (9,790,588) (2,661,511)
Other assets ........................................ (20,287) --
Acquisitions, net of cash acquired (Note 17) ........ (44,365,741) (8,183,902)
------------- ------------
Net cash used by investing activities ............ (56,030,246) (10,952,761)
------------- ------------
Cash flows from financing activities
Capital contributions ............................... 12,036,287 12,963,713
Advances of funds from shareholder .................. 36,690,180 --
Offering costs ...................................... (1,030,632) --
Proceeds from issuance of debt ...................... 19,143,127 --
Repayment of debt ................................... (3,797,435) --
------------- ------------
Net cash provided by financing activities ........ 63,041,527 12,963,713
------------- ------------
Increase in cash and cash equivalents ................ 2,919,668 677,245
Cash and cash equivalents, beginning of period ....... 677,245 --
------------- ------------
Cash and cash equivalents, end of period ............. $ 3,596,913 $ 677,245
------------- ------------
Supplemental disclosure of cash flow information
Cash paid during period for:
Interest ........................................... $ 2,754,082 $ --
============ ============

</TABLE>

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

F-18
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION

PhyMatrix Corp. (the "Company"), formerly known as Continuum Care
Corporation, was formed to create a health care company which consummated an
Initial Public Offering (the "offering") during January 1996 (see Note 19)
and simultaneously exchanged shares of its common stock for all of the
outstanding common stock of several business entities (the "IPO entities")
which have been operated under common control by Mr. Gosman and for DASCO
Development Corporation and Affiliate (collectively, "DASCO"), by Messrs.
Gosman, Rendina and Sands, (collectively Principal Shareholders of the
Company) since their respective dates of acquisition (see Note 3). The IPO
entities are as follows:

DASCO Development Corporation and Affiliate
CCC-Infusion, Inc.
Nutrichem, Inc.
First Choice Health Care Services of Ft. Lauderdale, Inc.
First Choice Home Care, Inc.
First Choice Health Care Services, Inc.
CCC-Indiana Lithotripsy, Inc.
Lithotripsy America, Inc.
CCC National Lithotripsy, Inc.
CCC-Lithotripsy, Inc.
Oncology Therapies of America, Inc.
Phychoice, Inc.

Each of the acquisitions of the business entities, except where noted in
Note 3, was accounted for under the purchase method of accounting and was
recorded at the price paid by Mr. Gosman when he purchased the entities from
a third party. The audited combined financial statements for the period June
24, 1994 (inception) through December 31, 1994 and the year ended December
31, 1995 have been prepared to reflect the combination of these business
entities which have operated since their purchase date under common control.

These combined financial statements have been prepared to reflect the
combination of business entities which have been operated under common
control. Because certain of these entities operated under common control are
nontaxpaying (i.e., primarily S Corporations which results in taxes being the
responsibility of the respective owners), the financial statements have been
presented on a pretax basis, as further described in Note 2.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Estimates Used in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used when accounting for the collectibility of receivables and third
party settlements, depreciation and amortization, taxes and contingencies.

Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid instruments with
original maturities at the time of purchase of three months or less.

Revenue Recognition
Net revenue from services is reported at the estimated realizable amounts
from patients, third-party payors and others for services rendered. Revenue
under certain third-party payor agreements is subject to audit and
retroactive adjustments. Provisions for estimated third-party payor
settlements and adjustments are estimated in

F-19
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

the period the related services are rendered and adjusted in future periods
as final settlements are determined. The provision and related allowance are
adjusted periodically, based upon an evaluation of historical collection
experience with specific payors for particular services, anticipated
reimbursement levels with specific payors for new services, industry
reimbursement trends, and other relevant factors.

Net revenues from management service agreements include the contractual
fees earned (which equal the net revenue generated by the physician
practices) under its management services agreements with physicians. Under
the agreements, the Company is contractually responsible and at risk for the
operating costs of the medical groups. The costs include the reimbursement of
all medical practice operating costs and the fixed and variable contractual
management fees (which are reflected as cost of affiliated physician
management services) as defined and stipulated in the agreements.

Accounts receivable, net at December 31, 1995 equaled $20,710,846 which
was 29.3% of total revenue of $70,733,282 for the year ending December 31,
1995. During the year ended December 31, 1995 the Company acquired several
businesses (see Note 3). The historical results of operations do not include
the revenues from such acquisitions prior to their purchase by the Company.
These result in accounts receivable equaling 29.3% of total revenues for the
year ended December 31, 1995. On an annualized basis, the accounts receivable
balance at December 31, 1995 would represent a much smaller percentage of
revenues and is not considered to be unusual for these types of businesses.

Third Party Reimbursement
For the year ended December 31, 1995 and for the period from June 24, 1994
(inception) to December 31, 1994, approximately 40% and 34%, respectively, of
the Company's net revenue was primarily from the participation of the
Company's home health care entities and physician practices in Medicare
programs. Medicare compensates the Company on a "cost reimbursement" basis
for home health care, meaning Medicare covers all reasonable costs incurred
in providing home health care. Medicare compensates the Company for physician
services based on predetermined fee schedules. In addition to extensive
existing governmental health care regulation, there are numerous initiatives
at the federal and state levels for comprehensive reforms affecting the
payment for and availability of health care services. Legislative changes to
federal or state reimbursement systems could adversely and retroactively
affect recorded revenues.

Property and Equipment
Additions are recorded at cost and depreciation is recorded principally by
use of the straight-line method of depreciation for buildings, improvements
and equipment over their useful lives. Upon disposition, the cost and related
accumulated depreciation are removed from the accounts and any gain or loss
is included in income. Maintenance and repairs are charged to expense as
incurred. Major renewals or improvements are capitalized. Assets recorded
under capital leases are amortized over their estimated useful lives for the
lease terms, as appropriate.

Income Taxes
Certain of the entities to be purchased by the Company are S Corporations
or partnerships; accordingly, income tax liabilities are the responsibility
of the respective owners or partners. Provisions for income taxes and
deferred assets and liabilities of the taxable entities have not been
reflected in these combined financial statements since there is no taxable
income on a combined basis.

Goodwill
Goodwill relates to the excess of cost over the value of net assets of the
businesses acquired. Amortization is calculated on a straight line basis over
periods ranging from ten to forty years. The overall business strategy of the
Company includes the acquisition and integration of independent physician
practices and medical support

F-20
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

services. The Company will also utilize its medical facility development
services to further promote affiliations and acquisitions. The Company
believes that this strategy creates synergies, achieves operating
efficiencies and responds to the cost containment objectives of payors, all
of which will provide benefits for the foreseeable future. The Company has
initiated the implementation of this strategy through the acquisition of
DASCO which provides medical facility development services, the acquisition
of OTI (as defined below) which provides radiation therapy and diagnostic
imaging services, the acquisition of oncology practices and medical support
service companies (such as Nutrichem) and the affiliation with oncologists.
Periodically management assesses, based on undiscounted cash flows, if there
has been a permanent impairment in the carrying value of its goodwill and, if
so, the amount of any such impairment by comparing anticipated discounted
future operating income from acquired businesses with the carrying value of
the related goodwill. In performing this analysis, management considers such
factors as current results, trends and future prospects, in addition to other
economic factors.

The Company is required to implement Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" in 1996. As the Company currently
continually evaluates the realizability of its long-lived assets, including
goodwill and intangibles, adoption of the statement is not anticipated to
have a material effect on the Company's financial statements at the date of
adoption.

Management Service Agreements
Management service agreements consist of the costs of purchasing the
rights to manage medical oncology and physician groups. These costs are
amortized over the initial noncancelable terms of the related management
service agreements ranging from 10 to 20 years. Under the long-term
agreements, the medical groups have agreed to provide medical services on an
exclusive basis only through facilities managed by the Company. The
agreements are noncancelable except for performance defaults. In the event a
medical group breaches the agreement, or if the Company terminates with
cause, the medical group is required to purchase all related assets,
including the unamortized portion of any intangible assets, including
management service agreement, at the then net book value.

Investments
The equity method of accounting is used for investments when there exists
a noncontrolling ownership interest in another company that is greater than
20%. Under the equity method of accounting, original investments are recorded
at cost and adjusted by the Company's share of earnings or losses of such
companies, net of distributions.

3. ACQUISITIONS

The following table sets forth the acquisitions made by the Company as of
December 31, 1995, with the respective purchase dates, purchase prices, and
amounts allocated to intangibles:

F-21
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

3. ACQUISITIONS (Continued)

Amounts Allocated
to Intangibles
-----------------------
Management
Date Purchase Service
Business Acquired Purchased Price Goodwill Contracts
------------------------------------- ------------- ----------- --------- ----------
(bullet) First Choice Health Care
Services, Inc. ..............
(bullet) Mobile Lithotripter of
Indiana Partners ........... December 1994 $ 2,663,000 $ -- $--
(bullet) Radiation Care, Inc. and
Subsidiaries ............... March 1995 41,470,207 8,418,160 --
(bullet) Aegis Health Systems, Inc. . April 1995 7,162,375 6,227,375 --
(bullet) Phylab ..................... October 1995 130,653 111,813 --
(bullet) Pinnacle ................... November 1995 --(B) 382,139 --
Managed physician practices:
(bullet) Georgia Oncology-Hematology
Clinic, P.C. ............... April 1995 2,099,353 -- 645,448
(bullet) Oncology-Hematology
Associates P.A. and
Oncology-Hematology
Infusion Therapy, Inc. ... July 1995 1,541,523 -- 312,740
(bullet) Cancer Specialists of
Georgia, Inc. .............. August 1995 5,735,571 -- 2,373,508
(bullet) Oncology & Radiation
Associates, P.A. ........... September 1995 10,784,648 -- 9,579,424
(bullet) Osler Medical .............. September 1995 5,792,160 -- 3,373,025
(bullet) West Shore Urology ......... October 1995 550,859 -- --
(bullet) Whittle, Varnell and Bedoya,
P.A. ....................... November 1995 909,084 -- 212,937
(bullet) Oncology Care Associates ... November 1995 486,947 -- 1,894
(bullet) Symington .................. December 1995 102,106 -- 10,006
(bullet) Venkat Mani ................ December 1995 401,372 -- 98,782
Medical facility development:
(bullet) DASCO Development
Corporation and Affiliate
(50% interest) ............. May 1995 9,610,588(C) -- --
Management Services Organization:
(bullet) Physicians Choice
Management, LLC ............ December 1995 3,850,000 2,975,000 --
</TABLE>

- -------------
(A) Includes Drs. Bansal, Mistry, Dandiya, Canasi, Alpert, Hunter, Jaffer,
Cano, Herman, Barza and Novoa.

(B) Entire purchase price is contingent and is based on earnings with a
maximum purchase price of $5.2 million.

Physician Practice Acquisitions
During the year ended December 31, 1995, the Company purchased the assets
of Drs. Bansal, Mistry, Dandiya, Canasi, Alpert, Hunter, Jaffer, Cano,
Herman, Barza and Novoa and in conjunction with those purchases entered into
employment agreements with 14 physicians in Florida. The total purchase price
for these assets was $3,700,783. The purchase price was allocated to these
assets at their fair market value, including goodwill of $2,595,178. The
resulting goodwill is being amortized over twenty years.

During July 1995, the Company purchased the assets of and entered into a
15-year management agreement with Oncology-Hematology Associates, P.A. and
Oncology-Hematology Infusion Therapy, Inc. a medical oncology practice in
Baltimore, Maryland with three medical oncologists. The purchase price for
these assets was approximately $1,541,523 in cash. An affiliate of the
Company guarantees the performance of the Company's obligations under the
management agreement. For its management services, the Company will receive
41.6% of the net revenues of the practice less the salaries and benefits of
medical personnel whose services are billed incident to the practice of
medicine and which are employed by the practice. The Company has guaranteed
that the minimum amount that will be retained by the practice for each of the
first eight years will be $1,627,029 and for each of years

F-22
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

3. ACQUISITIONS (Continued)

nine and ten will be $1,301,619. The purchase price was allocated to the
assets at their fair market value, including management service agreements of
approximately $312,740. The resulting intangible is being amortized over
fifteen years.

During August 1995, the Company purchased the assets of Cancer Specialists
of Georgia, Inc. a medical oncology practice with 11 oncologists in Atlanta,
Georgia. The purchase price for these assets was approximately $5,735,571 in
cash. In addition, during April 1995, the Company purchased the assets of and
entered into a ten-year management agreement with Georgia Oncology-Hematology
Clinic, P.C. a medical oncology practice with eight oncologists in Atlanta,
Georgia. The purchase price for these assets was approximately $2,099,353 in
cash. During August 1995, these two medical oncology practices consolidated
and formed a new entity, Georgia Cancer Specialists, Inc. The Company entered
into a new ten-year management agreement with the consolidated practice
during August 1995. For its services under this management agreement, the
Company receives 41.5% of the net practice revenues less the cost of
pharmaceutical and/or ancillary products. In each of the second through fifth
years of the term of this agreement, the fee payable to the Company is
decreased by 1%. The Company also purchased for $180,000 a 46% interest in I
Systems, Inc., a company affiliated with one of the practices which is
engaged in the business of claims processing and related services. The
purchase of this 46% interest is being accounted for by the equity method.
The Company has the option to purchase up to an additional 30% interest in
the affiliated Company for $33,333 in cash for each additional one percent of
ownership interest purchased. The Company and the affiliated company entered
into a three-year service agreement pursuant to which certain billing and
collection services will be provided to the Company. The purchase price of
the above acquisitions was allocated to the assets at their fair market
value, including management service agreements of $3,018,956. The resulting
intangible is being amortized over ten years.

During September 1995, the Company purchased the assets of and entered
into a 20-year management agreement with Osler Medical, Inc., a 22 physician
multi-specialty group practice in Melbourne, Florida. The purchase price for
these assets was approximately $4,301,888 plus the assumption of debt of
$1,490,272. The Company also entered into a 20-year capital lease for the
main offices of the practice with a total obligation of $6,283,483. An
affiliate of the Company has provided a guarantee of such payments under the
lease. During the first five years of the management agreement, the Company
will receive a management fee equal to 45% of the annual net revenues of the
practice. Thereafter, the management fee increases to 47% of annual net
revenues. The management fee percentage for net revenues of the initial
physician group will be reduced based upon a set formula to a minimum of 31%
based upon the achievement of certain predetermined benchmarks. The
management agreement also provides that, during the period from January 1,
1996 through December 31, 2005, to the extent annual net revenues of the
practice are less than $10,838,952, the Company's management fee is reduced
up to a maximum reduction of $1,500,000 per year. The Company has agreed to
expend up to $1,500,000 per year for each of the first three years of the
management agreement to assist in the expansion activities of the practice.
The Company also has agreed that on the earlier of the second anniversary of
the Company's acquisition of the practice or 120 days after the offering, it
will acquire certain copyright and trademark interests for a purchase price
equal to the lesser of $887,000 or the fair market value thereof. The
purchase price for the practice's assets acquired to date was allocated to
such assets at their fair market value, including management service
agreements of $3,373,025. The resulting intangible is being amortized over
twenty years.

F-23
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

3. ACQUISITIONS (Continued)

base management fee is $2,100,000 per year, subject to adjustment to an
amount not less than $1,350,000 during the first five years of the agreement
and not less than $700,000 thereafter. The variable management fee is equal
to 35.5% of certain revenues, subject to increase in certain circumstances.
The purchase price for the practice's assets was allocated to the assets at
their fair market value, including management service agreements of
$9,579,424. The resulting intangible is being amortized over twenty years.

During the fourth quarter of 1995, the Company entered into management
service agreements with West Shore Urology; Whittle, Varnell and Bedoya,
P.A.; Oncology Care Associates; Venkat Mani; and Symington consisting of 14
physicians including two oncologists. The total purchase price for these
assets was $2,450,368 in cash. The Company also entered into a 15-year
capital lease with a total obligation of $1,569,171. The purchase price was
allocated to assets at their fair market value, including management service
agreements of $323,619. The resulting intangible is being amortized over ten
to twenty years.

Medical Support Service Companies Acquisitions
During September 1994, an 80% owned subsidiary of the Company purchased
substantially all of the assets of Uromed Technologies, Inc., a provider of
lithotripsy services in Florida, for a Base Purchase Price of $2,564,137 plus
the assumption of capital lease obligations of $1,097,614. The Final Purchase
Price equals the Base Purchase Price plus the amount by which Stockholders'
Equity exceeded $450,000 on the Closing Date. A Final Purchase Price payment
of $283,000 was accrued at December 31, 1994 and paid during May 1995. The
former shareholders of Uromed will also receive an earnings contingency
payment of $274,000 which has been accrued at December 31, 1995. The
acquisition was accounted for under the purchase method of accounting. The
purchase price was allocated to assets at their fair market value including
goodwill of $2,375,914. The resulting intangible is being amortized over
twenty years. The Company intends to acquire the outstanding 20% interest in
the subsidiary.

During November 1994, the Company purchased 80% of the stock of Nutrichem,
Inc. ("Nutrichem"), an infusion therapy company doing business in Maryland,
Virginia and the District of Columbia, for $3,528,704 in cash and a
contingent note in the amount of $6,666,667, subject to adjustments. During
the year ended December 31, 1995, the Company made payments on the contingent
note of $2,657,732 (including interest of $435,510). Subsequent to the
offering, the contingent note (which had an outstanding principal balance of
$4,444,444 at December 31, 1995) was paid from the net proceeds of the
offering. A charge of $1,271,000 related to this contingent note has been
recorded during the year ended December 31, 1995. The remaining $5,395,667
has been allocated to goodwill at December 31, 1995 and will be amortized
prospectively. The purchase price was allocated to assets at the fair market
value including total goodwill of $7,007,833. The resulting intangible is
being amortized over forty years. Subsequent to the offering, the Company
acquired the outstanding 20% interest in Nutrichem in exchange for 266,666
shares of Common Stock.

F-24
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

3. ACQUISITIONS (Continued)

centers. OTI's centers are located in Alabama, California, Florida, Georgia,
North Carolina, South Carolina, Tennessee and Virginia. The total purchase
price for the stock (not including transaction costs and 26,800 shares
subject to appraisal rights) was approximately $41,470,207. The purchase
price was paid by a combination of cash on hand, loans from Mr. Gosman and
net proceeds from long term debt financing of approximately $17,278,000. The
long term debt financing was paid in full during January 1996 with the
proceeds of the offering. The Company has established a plan to close five of
OTI's radiation therapy centers and has accrued approximately $3,134,028
primarily as a reserve for the estimated amount of the remaining lease
obligation. Of this amount $2,188,635 was recorded as an adjustment to the
purchase price and $945,393 was recorded as a charge in the fourth quarter of
1995. In addition, the Company also recorded a charge during the fourth
quarter of 1995 of $1,554,607, which represents the writedown of assets to
their estimated fair market value. The purchase price paid in connection with
the OTI merger was allocated to assets at their fair market value, including
goodwill of $8,418,160. The resulting intangible is being amortized over
forty years.

During April 1995, the Company purchased from Aegis Health Systems, Inc.
("Aegis") for $7,162,375 all of the assets used in its lithotripsy services
business. The purchase price consisted of approximately $3,591,967 in cash
and $3,570,408 in a promissory note. The outstanding principal balance and
any unpaid interest became due and payable upon the closing of the offering
and was paid in full during January 1996. The obligations, evidenced by the
promissory note, were secured by $1,000,000 which was in escrow and included
in other assets at December 31, 1995. The acquisition was accounted for under
the purchase method of accounting. The purchase price was allocated to assets
at their fair market value including goodwill of $6,227,375. The resulting
intangible is being amortized over twenty years.

During November 1995 the Company acquired by merger Pinnacle Associates,
Inc. ("Pinnacle"), an Atlanta, Georgia infusion therapy services company. In
connection with the Pinnacle merger there is a $5,200,000 maximum payment
that may be required to be paid that is based on earnings and will be made in
the form of shares of Common Stock of the Company valued as of the earnings
measurement date. At December 31, 1995 the contingent payment has not been
earned. The contingent consideration represents the full purchase price. On
the merger date, the liabilities assumed exceeded the fair market value of
the assets acquired by approximately $382,139 and such amount was recorded as
goodwill and is being amortized over forty years.

Management Services Organization
During December 1995, the Company obtained a 43.75% interest in Physicians
Choice Management, LLC, a newly formed management services organization
("MSO") that provides management services to an independent physician
association ("IPA") composed of over 275 physicians based in Connecticut. The
Company acquired this interest in exchange for a payment of $1.0 million to
existing shareholders, a payment of an additional $500,000 to existing
shareholders during the next six months (which has been included in accrued
liabilities at December 31, 1995), a capital contribution of $1.5 million to
the Company and a commitment to make an additional $500,000 capital
contribution during the next six months. The balance sheet includes the
56.25% interest not owned by the Company as minority interest. The Company
also has an option, which expires in May 1998, to increase its ownership in
the MSO to 50% for an additional investment of $2.0 million, of which $1.0
million would represent an additional capital contribution to the MSO and
$1.0 million would represent the purchase of additional units currently owned
by the IPA. The Company has paid a nonrefundable amount of $350,000 for such
option. In addition, the owners of the other 50% interest in the MSO have a
put option to the Company to purchase their interests. This put option vests
over a four year period. The price to the Company to purchase these interests
shall equal 40% of the MSO's net operating income as of the most recent
fiscal quarter multiplied by the price earnings ratio of the Company. In
addition, upon the IPO the Company granted options to purchase 300,000 shares
of Common Stock to certain MSO employees in conjunction with their employment
agreements. These options vest over a two year period with the exercise price
equaling the fair market value of the Company's stock on the date such shares
become exercisable.

F-25
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

3. ACQUISITIONS (Continued)

Medical Facility Development Acquisitions
On May 31, 1995, Mr. Gosman purchased for $9.6 million a 50% ownership
interest in DASCO, a medical facility development services company providing
such services to related and unrelated third parties in connection with the
development of medical malls, health parks and medical office buildings. The
purchase price consisted of $5.0 million in cash and $4.6 million in notes,
which are guaranteed by Mr. Gosman. Upon the closing of the offering, Messrs.
Gosman, Sands and Rendina, the Company's principal promoters, and certain
management and founder stockholders exchanged their ownership interests in
DASCO for shares of Common Stock equal to a total of $55 million or 3,666,667
shares. The Company believes that its medical facility development services
and project finance strategy are a significant component of the Company's
overall business strategy. The historical book value of Messrs. Sands and
Rendina's interest in DASCO is $22,735. The initial 50% purchase price was
and will be allocated to assets at their fair market value, primarily
goodwill of $9.6 million with the exchange recorded at historical value. At
December 31, 1995 DASCO is being accounted for using the equity method (see
Note 8).

4. NOTES RECEIVABLE

During April 1995, the Company funded a tax loan in the amount of
$1,029,600 to the former Shareholders of Nutrichem. The tax loan was
required, pursuant to the terms of the Purchase Agreement, to convert the
books from the cash basis to the accrual basis prior to the closing. The loan
bears interest at 7.75% per annum and payments are due in six installments at
$172,000 per installment on May 1 and October 1, 1995 and April 1 and October
1 of each year thereafter until October 1, 1997. The tax loan was paid in
full during January 1996.

5. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
Estimated
Useful Life December 31,
------------------------
(Years) 1995 1994
------------- ---------- ----------
<S> <C> <C> <C>
Building ................................. 15 - 20 $ 7,852,653 $ --
Furniture and fixtures ................... 5 - 7 5,312,385 154,999
Equipment ................................ 7 - 10 21,789,876 1,583,574
Automobiles .............................. 3 - 5 50,058 --
Computer software ........................ 5 950,346 14,699
Leasehold improvements ................... 4 - 20 6,045,393 3,592
----------- ----------
Property and equipment, gross ............ 42,000,711 1,756,864
Less accumulated depreciation ............ (2,641,383) (70,240)
----------- ----------
Property and equipment, net .............. $39,359,328 $1,686,624
============ ==========
</TABLE>

Depreciation expense was $2,761,008 and $70,240, respectively, for the
year ended December 31, 1995 and the period June 24, 1994 (inception) to
December 31, 1994.

Included in property and equipment at December 31, 1995 and 1994 are
assets under capital leases of $9,483,145 and $1,250,875, respectively, with
accumulated depreciation of $842,879 and $46,459, respectively.

F-26
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

6. GOODWILL

Amounts reflected in Goodwill, prior to any amortization, by amortization
period are as follows:

Amortization Period Goodwill
- ------------------------------------------------------- ------------
20 years ......................................... $17,346,388
40 years ......................................... 15,425,993

Accumulated amortization of goodwill was $840,928 and $37,147 at December
31, 1995 and 1994, respectively.

7. MANAGEMENT SERVICE AGREEMENTS

Amounts reflected in Management Service Agreements, prior to any
amortization, by amortization period (which equals the term of such
management service agreements) are as follows:

Management
Service
Amortization Period Agreements
- ------------------------------------------------------- -----------
10 years ......................................... $ 3,018,956
15 years ......................................... 312,740
20 years ......................................... 13,299,682

Accumulated amortization of management service agreements was $254,741 at
December 31, 1995.

8. INVESTMENT IN AFFILIATES

On December 31, 1994, the Company purchased a 36.8% interest in Mobile
Lithotripter of Indiana Partners, for $2,663,000. During May, 1995, Mr.
Gosman purchased a 50% interest in DASCO, a medical facility development
services company, for $9,610,000 (See Note 3 -- Medical Facility Development
Acquisitions). During August 1995, the Company purchased a 46% interest in I
Systems, Inc., for $180,000. I Systems, Inc. is engaged in the business of
claims processing and related services. These investments are being accounted
for using the equity method at December 31, 1995. Upon the completion of the
offering, the remaining 50% interest in DASCO was purchased and DASCO will be
consolidated prospectively.

9. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

December 31,
---------------------
1995 1994
---------- --------
Accrued closure costs .................... $ 570,000 $ --
Accrued rent ............................. 799,551 --
Accrued property taxes ................... 119,134 --
Accrued professional fees ................ 445,250 --
Accrued offering costs ................... 885,770 --
Accrued interest ......................... 738,317 95,548
Accrued bonus payments ................... 4,718,564 707,820
Other .................................... 1,090,946 99,532
---------- --------
Total accrued liabilities ............ $9,367,532 $902,900
========== ========

The accrued closure costs are for the closure of five radiation therapy
centers acquired when the Company purchased OTI (see Note 3). Closure costs
in the amount of $3,134,028 were accrued at December 31, 1995, $2,564,028 of
this amount is classified as a long term liability.

F-27
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

10. LONG-TERM DEBT, NOTES PAYABLE AND CAPITAL LEASES

Long-term debt, notes payable and capital leases consist of the following:

<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
------------ ----------
<S> <C> <C>
Note payable due to four individuals payable in eight equal semi-
annual installments of $28,125, including interest at 8%
through November 1998. ....................................... $ 140,625 $ 225,000
Related party note payable due to three individuals payable on
demand including interest at 10%. One of the notes for $30,000
is collateralized by the cash and accounts receivable of
Pinnacle ...................................................... 130,000 --
Note payable to a bank interest payable monthly at the prime rate
plus 2% (10.50% at December 31, 1995) with a maturity date of
April 1996. .................................................. 201,422 --
Line of credit note payable to a bank, due and payable on demand,
interest at the prime rate (8.50% at December 31, 1995). ..... 400,000 --
Note payable to a bank, collateralized by the assets of a multi-
specialty group practice, payable in monthly installments of
$14,027, including interest at 7.50% and a final payment in
February 1999. ............................................... 472,181 --
Note payable to a bank, collateralized by the assets of a multi-
specialty group practice, payable in monthly installments of
$20,608, at 8.75% and a final payment in August 2000. ........ 918,779 --
Note payable in two equal installments in April 1996 and 1997 (or
earlier upon a reorganization which includes an initial public
offering), including interest at 8%. ......................... 3,567,408 --
Related party notes payable to the shareholders of DASCO, payable
in May 1996, including interest at 6.37%. .................... 4,610,588 --
Note payable to the former shareholders of a medical oncology
practice in South Florida, payable in ten equal semi-annual
installments of $682,867, which includes interest at 9%. The
note payable is collateralized by an irrevocable letter of
credit, the collateral for which has been provided by Mr.
Gosman. ....................................................... 5,403,337 --
Note payable to a financing institution with a maturity date of
March 2000, a final payment of $2,187,500, and an interest
rate at the prime rate plus 3% (11.50% at December 31, 1995). 15,743,466 --
Note payable to NationsBank, with a maturity date of June 1996
and an interest rate at the prime rate plus .375% (8.875% at
December 31, 1995). This note payable was personally
guaranteed by Mr. Gosman. .................................... 19,500,000 --
Note payable to Mr. Gosman with a maturity date of January 1998
and an interest rate at the prime rate (8.50% at December 31,
1995). ....................................................... 36,690,180 --
Capital lease obligations with maturity dates through September
2015 and interest rates ranging from 8.75% to 12%. ........... 9,163,215 1,143,784
------------ ----------
96,941,201 1,368,784

F-28
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

10. LONG-TERM DEBT, NOTES PAYABLE AND CAPITAL LEASES (Continued)

December 31,
-------------------------
1995 1994
------------ ----------
Less current portion of capital leases .......................... (756,767) (401,000)
Less current portion of debt .................................... (25,905,743) (56,250)
Less current portion of related party debt ...................... (4,740,588) --
------------ ----------
Long term debt and capital leases ............................... $ 65,538,103 $ 911,534
============ ==========
</TABLE>

The following is a schedule of future minimum principal payments of the
Company's long-term debt and the present value of the minimum lease
commitments:

<TABLE>
<CAPTION>
Capital
Debt Leases
------------ ------------
<S> <C> <C>
Through December 31, 1996 ........................... $ 30,646,331 $ 1,719,007
Through December 31, 1997 ........................... 6,186,372 1,274,938
Through December 31, 1998 ........................... 4,774,757 1,275,690
Through December 31, 1999 ........................... 5,050,847 1,045,125
Through December 31, 2000 ........................... 4,429,508 1,004,484
Thereafter .......................................... -- 14,027,514
------------ ------------
Total ............................................... 51,087,815 20,346,758
Less amounts representing interest and executory
costs ............................................. -- (11,183,551)
------------ ------------
Present value of minimum lease payments ............. -- 9,163,207
Less current portion ................................ (30,646,331) (756,767)
------------ ------------
Long term portion ................................... $ 20,441,484 $ 8,406,439
============ ============
</TABLE>

During the year ended December 31, 1995, the Company purchased, for
$915,000, two mobile lithotripters that had previously been leased by the
Company.

11. LEASE COMMITMENTS

The Company leases various office space and certain equipment pursuant to
operating lease agreements.

Future minimum lease commitments consisted of the following at
December 31:

1996 ................. $ 6,780,500
1997 ................. 6,428,506
1998 ................. 5,434,231
1999 ................. 4,931,465
2000 ................. 3,404,819
Thereafter ........... 16,398,213
-----------
$43,377,734
===========

12. COMMITMENTS AND CONTINGENCIES

The Company is subject to legal proceedings in the ordinary course of its
business and includes the litigation related to OTI as mentioned below. While
the Company cannot estimate the ultimate settlements, if any, it does not
believe that any such legal proceedings, including those related to OTI, will
have a material adverse effect on the Company, its liquidity, financial
position or results of operations, although there can be no assurance to this
effect.

F-29
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

12. COMMITMENTS AND CONTINGENCIES (Continued)

The Company has entered into employment agreements with certain of its
employees, which include, among other terms, noncompetition provisions and
salary and benefits continuation.

The Company has also entered into contingent payment arrangements pursuant
to several acquisitions (see Note 3).

The Company has committed to expend up to $1,500,000 per year for each of
three years to assist in the expansion activities of a 22-physician
multi-specialty group practice it entered into a management agreement with in
September 1995. In addition, the Company has agreed to acquire certain
copyright and trademark interests of the practice (see Note 3).

A subsidiary of the Company, OTI, (formerly Radiation Care, Inc., "RCI")
is subject to the litigation described below which related to events prior to
the Company's operation of RCI, and the Company has agreed to indemnify and
defend certain defendants in the litigation who were former directors and
officers of RCI subject to certain conditions.

In December, 1994, prior to its merger with the Company in March 1995, RCI
entered into a settlement agreement with the federal government arising out
of claims under the fraud-and-abuse provisions of the Medicare law. Under the
settlement agreement, RCI, without admitting that it violated the law,
consented to a civil judgment providing for its payment of $2 million and the
entry of an injunction against violations of such provisions.

On February 16, 1995, six former RCI shareholders filed a consolidated
amended Class Action Complaint in Delaware Chancery Court (In Re Radiation
Care, Inc. Shareholders Litigation, Consolidated C.A. No. 13805) against RCI,
Thomas Haire, Gerald King, Charles McKay, Abraham Gosman, Oncology Therapies
of America, Inc. and A.M.A. Financial Corp., alleging that the RCI
shareholders should have been paid more for their RCI stock when RCI was
acquired by the Company. Plaintiffs allege breaches of fiduciary duty by the
former RCI directors, as well as aiding and abetting of said fiduciary duty
breaches by Mr. Gosman, Oncology Therapies of America, Inc. and A.M.A.
Financial Corp. Plaintiffs seek compensatory or rescissionary damages of an
undisclosed amount of behalf of all RCI shareholders, together with an award
of the costs and attorneys' fees associated with the action. No class has
been certified in this litigation and, in early 1995, plaintiffs' counsel
granted an indefinite extension within which for the defendants to answer or
otherwise respond to the Complaint and to plaintiffs' document requests.
Plaintiffs have taken no discovery and there has been virtually no activity
in the litigation since plaintiffs' filing of the consolidated amended class
action complaint. On April 6, 1996, plaintiffs' counsel contacted the Company
for additional document requests and a response to their requests. The
Company has not yet answered the complaint and no other proceedings have
taken place. The Company intends to vigorously defend against the plaintiffs'
requests.

On August 4, 1995, 26 former shareholders of RCI filed a Complaint for
Money Damages against Richard D'Amico, Ted Crowley, Thomas Haire, Gerald
King, Charles McKay and Randy Walker (all former RCI officers and directors)
in the Superior Court of Fulton County, in the State of Georgia (Southeastern
Capital Resources, L.L.C. et al v. Richard D'Amico et al, Civil Action No.
E41225). The Company (OTI) has agreed to assume the defense and indemnify the
defendants subject to certain conditions set forth in an agreement with the
defendants. The Complaint contains five counts--breach of fiduciary duty
counts against former RCI directors Haire, King and McKay, a "conspiracy"
Count against the RCI officer defendants D'Amico, Crowley, and Walker, and a
negligence count against all defendants. Paintiffs seek additional
consideration for their shares of RCI stock in the form of compensatory and
monetary damages. The Company has agreed to assume, subject to certain
conditions, the defense of the individual defendants in this litigation. An
Answer or other response is currently due September 22, 1995. The defendants
will be filing an answer denying any liability in connection with this
matter. On October 23, 1995, the defendants filed a motion to stay the action
pending resolution of the Delaware class action which was heard

F-30
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

12. COMMITMENTS AND CONTINGENCIES (Continued)

by the court on January 29, 1996. On April 9, 1996, Company counsel learned
that the court has denied the motion and that a written decision reflecting
the court's decision would be forthcoming. Plaintiffs have filed a motion
with a proposed amended complaint adding four plaintiffs to the action, upon
which the court has not yet acted. The Company is not a party to this
litigation and its exposure in this litigation is limited to OTI's obligation
under its by-laws to indemnify the former officers and directors of RCI to
the fullest extent permitted by Delaware law. The Company intends to
vigorously defend the plaintiffs' demands.

13. RELATED PARTY

For the year ended December 31, 1995 and the period June 24, 1994
(inception) to December 31, 1994, Continuum Care of Massachusetts, Inc.,
whose principal shareholder is Mr. Gosman, provided management services to
the Company. Fees for these services in the amount of $3,729,680 and
$1,629,753, respectively, have been included in the financial statements and
consist of the following:

December 31,
------------------------
1995 1994
---------- ----------
Salaries, wages and benefits ................ $2,267,891 $ 934,200
Professional fees ........................... 273,941 253,955
Rent ........................................ 459,732 192,242
Other ....................................... 728,116 249,316
---------- ----------
$3,729,680 $1,629,753
========== ==========

Included in other expenses are expenses incurred in connection with the
use of an airplane which is owned by Mr. Gosman. Such fees are based on the
discretion of Continuum Care of Massachusetts, Inc.. and may not be
indicative of what they would have been if the Company had performed these
services internally or had contracted for such services with unaffiliated
entities. Included in rent is rent expense of approximately $415,000 and
$156,000 for the year ended December 31, 1995 and the period June 24, 1994
(inception) to December 31, 1994, respectively, for the Company's principal
office space in West Palm Beach, Florida. The lessee of the office space is
Continuum Care of Massachusetts, Inc.. The current lease term expires
December 31, 1999. The Company assumed the lease from Continuum Care of
Massachusetts, Inc. upon the consummation of the offering.

In connection with the purchase of Nutrichem during November 1994, the
Company is required to make contingent note payments in the amount of
$4,444,444 which has been accrued at December 31, 1995. Payments on the
contingent note are based on attaining certain earnings thresholds. The
$4,444,444 which has been accrued represents the maximum remaining amount
that can be earned because the earnings threshold upon which the payment is
based was reached during 1995. The contingent note is personally guaranteed
by Mr. Gosman. The contingent note was paid in full during January 1996 with
the proceeds from the offering.

During March 1995, the Company incurred a $17,500,000 note payable to a
financing institution in connection with the purchase of OTI, Mr. Gosman
personally guaranteed a portion of the $17,500,000. Mr. Gosman's liability
under the guarantee was limited to no more than $6,125,000. The note was paid
in full during January 1996 with the proceeds from the offering.

During May 1995, Mr. Gosman incurred $4,610,588 of debt payable, which has
been included in these financial statements, to the shareholders of DASCO in
connection with the purchase of 50% of the outstanding stock of DASCO. The
notes bear interest at 6.37% per annum with a maturity of May 1996.

F-31
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

13. RELATED PARTY (Continued)

facilities, which owners are either corporations or limited partnerships. Mr.
Sands and Mr. Rendina have acquired equity interest, as of December 31, 1995,
in the owners of 19 of the 20 facilities developed by DASCO and interests
ranging from 6% to 100% collectively for Mr. Sands and Mr. Rendina. In
addition, as of December 31, 1995, Mr. Gosman individually and as trustee for
his two adult sons and certain executive officers have acquired limited
partnership interests ranging from 23% to 47% in the owners of three
facilities being developed by the Company through DASCO.

Meditrust, a publicly traded real estate investment trust with assets in
excess of $1.7 billion of which Mr. Gosman is the Chairman of the Board and
Chief Executive Officer, has provided construction financing to customers of
DASCO in the aggregate amount of $59,897,000 for nine facilities developed by
DASCO, and at December 31, 1995 was providing financing to customers of DASCO
in the aggregate amount of $6,750,000 for one facility under development by
the Company through DASCO.

At December 31, 1995, the Company had borrowed $36,690,180 from Mr.
Gosman. Interest on such outstanding indebtedness at the prime rate of
interest during the year ended December 31, 1995 was $1,708,174. During
January 1996, the Company repaid Mr. Gosman $28,676,743 of such advances with
the proceeds of the offering.

During July 1995, the Company purchased the assets of and entered into a
15-year management agreement with a medical oncology practice with three
medical oncologists. An affiliate of the Company, Continuum Care of
Massachusetts, Inc., guarantees the performance of the Company's obligations
under the management agreement.

During August 1995, the Company purchased a 46% interest in a company
engaged in the business of claims processing and related services. This
entity provides certain billing and collection services to one of the medical
oncology practices owned by the Company.

During September 1995, the Company provided a letter of credit in the
amount of $5,403,337 to a seller in connection with entering into a
management agreement and purchasing the assets of a medical oncology
practice. Prior to the completion of the offering, the collateral for the
letter of credit was provided by Mr. Gosman.

During September 1995, the Company refinanced $19,500,000 of an amount
owed to Mr. Gosman with NationsBank. The $19,500,000 amount refinanced with
NationsBank and outstanding at December 31, 1995 is personally guaranteed by
Mr. Gosman. The $19,500,000 was paid in full during January 1996 with the
proceeds of the offering.

During November 1995, the Company assumed $180,000 of notes payable to
four former shareholders of Pinnacle when the Company merged with Pinnacle.
One of these notes for $50,000 was repaid during December 1995. The remaining
notes bear interest at 10% and are payable upon demand.

14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The methods and assumptions used to estimate the fair value of each class
of financial instruments, for which it is practicable to estimate that value,
and the estimated fair values of the financial instruments are as follows:

Cash and Cash Equivalents
The carrying amount approximates fair value because of the short effective
maturity of these instruments.

Long-term Debt
The fair value of the Company's long-term debt and capital leases is
estimated based on the current rates offered to the Company for debt of the
same remaining maturities. The carrying amount and fair value of long-term
debt and capital leases, including current maturities and related party debt,
at December 31, 1995 and December 31, 1994 is $96,941,201 and $1,368,784,
respectively.

F-32
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

15. EMPLOYEE BENEFIT PLAN

On January 1, 1995, the Company began sponsoring a 401(k) plan, covering
substantially all of its employees. Contributions under the 401(k) plan equal
50% of the participants' contributions up to a maximum of $400 per
participant per year.

16. INCOME TAXES

At December 31, 1995, the Company had available net operating loss
carryforwards of approximately $30,949,000 for federal income tax purposes,
which expire beginning in 2007 related to OTI. As a result of the purchase,
OTI underwent an ownership change as defined in Section 382 of the Internal
Revenue Code of 1986, as amended. This ownership change substantially limits
the ability of the Company to utilize $29,284,000 of its net operating loss
carryforwards in future years. No benefit has been provided for these loss
carryforwards based on uncertainty as to ultimate realizations. There were no
deferred taxes at December 31, 1995 since the various entities that comprised
the Company were either S Corporations or partnerships.

Components of deferred income taxes at December 31, 1995 are as follows:

December 31,
1995
-----------
Deferred income tax assets:
Net operating loss carryforwards ............... $12,070,000
Start-up costs ................................. 37,800
Allowance for doubtful accounts ................ 284,000
Other .......................................... 689,000
-----------
13,080,800
-----------
Deferred income tax liabilities:
Property and depreciation .................... (3,807,000)
-----------
Deferred income taxes ........................... 9,273,800
Valuation allowance ............................. (9,273,800)
-----------
Net deferred income taxes ....................... $ --
===========

FAS 109 specifies that deferred tax assets are to be reduced by a
valuation allowance if it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Substantially all of this
allowance relates to deferred tax assets and liabilities existing at the date
of each acquisition.

17. SUPPLEMENTAL CASH FLOW INFORMATION

During the year ended December 31, 1995 and the period from June 24, 1994
to December 31, 1994 the Company acquired the assets and assumed certain
liabilities of the entities described in Note 3. The transactions had the
following non-cash impact on the balance sheets:

F-33
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

17. SUPPLEMENTAL CASH FLOW INFORMATION (Continued)

December 31,
---------------------------
1995 1994
------------ -----------
Current assets ............................ $ 12,463,007 $ 3,784,624
Property, plant and equipment ............. 40,817,404 1,603,347
Intangibles ............................... 43,155,934 6,247,825
Other noncurrent assets ................... 2,197,691 --
Current liabilities ....................... (8,174,988) (1,611,446)
Debt ...................................... (43,179,672) (1,322,614)
Noncurrent liabilities .................... (2,913,635) (517,834)

18. STOCK OPTION PLAN

The Company has adopted a stock option plan for issuance of common stock
to key employees and directors of the Company. Under this plan, the exercise
provision and price of the options will be established on an individual basis
generally with the exercise price of the options being not less than the
market price of the underlying stock at the date of grant. The Company issued
options simultaneously with the completion of the offering to purchase
approximately 1,071,333 shares at the fair market value at the date of grant.
The options generally will become exercisable beginning in the first year
after grant in 20% - 33% increments per year and expire 10 years after the
date of grant. In addition, the Company will grant options to purchase
137,500 shares of common stock of the Company (68,750 shares at $3.00 per
share and 68,750 shares at $5.00 per share) in exchange for outstanding
options to purchase stock of the IPO entities which were granted during 1995
at no less than the fair market value at the time of grant. Options to
purchase 26,250 shares at $3.00 per share and 26,250 shares at $5.00 per
share have vested at December 31, 1995. The remaining options will become
exercisable in 25% - 33% increments per year and expire 10 years after the
date of grant.

19. SUBSEQUENT EVENTS

The Company filed a Registration Statement on Form S-1 with the Securities
and Exchange Commission in connection with the initial public offering which
became effective January 23, 1996. Pursuant to such offering, the Company
issued 8,222,500 shares of Common Stock. Net proceeds to the Company from the
stock issue, after deduction of underwriters' commissions and offering
expenses, were $112,485,681.

During January 1996, the Company used approximately $71,500,000, from the
proceeds of the offering, to repay the following indebtedness and obligations
of the Company that arose from certain acquisitions: (i) a promissory note to
Aegis in the amount of $3,796,503 (including interest); (ii) a contingent
note to the shareholders of Nutrichem, net of a tax loan receivable due from
the shareholders, in the amount of $3,854,595 (including interest); (iii) a
note payable to a financing institution in connection with the purchase of
OTI in the amount of $15,585,023 (including interest); (iv) a note payable to
NationsBank in the amount of $19,586,531 (including interest); and (v) a
partial payment of $28,676,743 on the note payable to Mr. Gosman.

After the completion of the offering, the Company changed its fiscal year
end from December 31 to January 31.

20. PRO FORMA RESULTS (UNAUDITED)

The unaudited pro forma combined balance sheet at December 31, 1995 has
been prepared assuming the issuance of 8,222,500 shares of Common Stock and
the application of the net proceeds therefrom, including the repayment of
indebtedness (see Note 19) and the reclassification of initial public
offering costs included in other

F-34
<PAGE>

PHYMATRIX CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

20. PRO FORMA RESULTS (UNAUDITED) (Continued)

assets to additional paid in capital as if the offering had occurred on
December 31, 1995. The unaudited pro forma combined balance sheet at December
31, 1995 also assumes the acquisition, simultaneous with the offering, of the
remaining 50% ownership interest in DASCO and the remaining 20% ownership
interest in Nutrichem.

The accompanying financial statements include the results of operations
derived from the entities purchased by the Company. The following unaudited
pro forma information presents the results of operations of the Company for
the years ended December 31, 1995 and 1994 as if the acquisition of the
entities purchased to date had been consummated on January 1, 1995 and
January 1, 1994. Such unaudited pro forma information is based on the
historical financial information of the entities that have been purchased and
does not include operational or other changes which might have been effected
pursuant to the Company's management.

The unaudited pro forma information presented below is for illustrative
informational purposes only and is not necessarily indicative of results
which would have been achieved or results which may be achieved in the future
(in thousands except per share amounts):

Pro Forma
-----------------------------
December 31, December 31,
1995 1994
------------ ------------
(unaudited) (unaudited)
Revenue ...................... $125,342 $107,438
Loss ......................... (11,871) (22,555)
Loss per share (1) ........... $ (0.89) $ (1.62)
========= ========

- -------------
(1) Pro forma loss per share has been calculated based on 13,307,450 shares
outstanding.

F-35
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

The Stockholders
DASCO Development Corporation and Affiliate
West Palm Beach, Florida

We have audited the accompanying combined balance sheet of DASCO
Development Corporation and Affiliate as of September 30, 1995, and the
related combined statements of income and retained earnings and cash flows
for the nine month period 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 audit.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of DASCO Development
Corporation and Affiliate as of September 30, 1995, and the results of their
operations and their cash flows for the nine month period then ended in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Miami, Florida
November 6, 1995

F-36
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE

COMBINED BALANCE SHEET
September 30, 1995

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................................ $ 59,771
Accounts receivable from related parties ......................................... 180,292
Advances on development projects ................................................. 434,353
Other current assets ............................................................. 3,086
--------
Total current assets ......................................................... 677,502
Property and equipment, net ...................................................... 39,708
--------
Total assets ................................................................. $717,210
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................. $ 57,449
Accrued liabilities .............................................................. 175,429
Accrued distributions ............................................................ 319,056
Unearned revenues ................................................................ 119,806
--------
Total current liabilities .................................................... 671,740
--------
Commitments
Stockholders' equity:
Common stock:
Dasco: $.01 par value, 100,000 shares authorized; 2,000 issued and outstanding .. 20
Dasco West: no par value, 400,000 shares authorized; 200,000 issued and
outstanding .................................................................... 200
Additional paid in capital ....................................................... 280
Retained earnings ................................................................ 44,970
--------
Total stockholders' equity ................................................... 45,470
--------
Total liabilities and stockholders' equity ................................... $717,210
========
</TABLE>

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

F-37
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE

COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
For the nine month period ended September 30, 1995

Revenues ................................................ $2,566,142
----------
Expenses:
Salaries, benefits and payroll taxes .................. 1,737,021
Occupancy ............................................. 118,992
Other general and administrative ...................... 320,332
----------
Total expenses ..................................... 2,176,345
----------
Income from operations ................................. 389,797
----------
Other income (expense):
Interest income ....................................... 9,658
Interest expense ...................................... (12,442)
----------
Other income (expense) ............................. (2,784)
----------
Net income ............................................. 387,013
Distributions .......................................... (319,056)
Retained earnings, beginning of period ................. (22,987)
----------
Retained earnings, end of period ....................... $ 44,970
==========
Net income per common share ............................ $ 1.92
==========
Weighted average shares outstanding .................... 202,000
==========

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

F-38
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE

COMBINED STATEMENT OF CASH FLOWS
for the nine month period ended September 30, 1995

<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income .................................................................... $ 387,013
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ................................................................. 9,715
Changes in operating assets and liabilities:
Accounts receivable from related parties .................................... (79,118)
Advances on development projects ............................................ (434,353)
Other current assets ........................................................ (3,086)
Accounts payable ............................................................ 48,198
Accrued liabilities ......................................................... 128,347
Due from shareholder ........................................................ 12,700
Unearned revenues ........................................................... 19,806
---------
Net cash provided by operating activities ................................. 89,222
---------
Cash flows from investing activities:
Purchases of property and equipment ........................................... (22,839)
---------
Net cash used in investing activities ..................................... (22,839)
---------
Cash flows from financing activities:
Advances under line of credit ................................................. 297,000
Repayments under line of credit ............................................... (297,000)
Proceeds from loans from stockholders ......................................... 215,638
Repayments on loans from stockholders ......................................... (380,221)
Distributions to stockholders ................................................. (124,789)
---------
Net cash used in financing activities ..................................... (289,372)
---------
Net decrease in cash and cash equivalents ..................................... (222,989)
Cash and cash equivalents, beginning of period ................................ 282,760
---------
Cash and cash equivalents, end of period ...................................... $ 59,771
=========
Supplemental disclosures:
Interest paid ................................................................ $ 12,442
=========
Noncash financing activities:
During the nine month period ended September 30, 1995, distributions of $319,056 were
declared and accrued.

</TABLE>

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

F-39
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE
Notes to Combined Financial Statements

1. Summary of Significant Accounting Policies:

Nature of Operations

DASCO Development Corporation and Affiliate (the "Company") is engaged in
the development, construction, management, marketing and leasing of
outpatient healthcare and medical office facilities throughout the United
States. The Company's headquarters are located in West Palm Beach, Florida
and it has regional offices in La Jolla, California, Plymouth Meeting,
Pennsylvania, and Las Vegas, Nevada.

Principles of Combined Financial Statements

The accompanying combined financial statements include the accounts of
DASCO Development Corporation and DASCO Development West, Inc. as they are
under common control.

Significant intercompany transactions and balances have been eliminated in
the combined financial statements.

Revenue Recognition

Generally, revenues are recognized at the time services are performed
except for development fees which are recognized in accordance with the
related development agreement which generally calls for achievement of
milestones such as receipt of building permit and percentage completion of
building shell.

Income Taxes

The Company has elected to be taxed under the provisions of the Internal
Revenue Code Section 1361. Under those provisions, the Company does not pay
federal or state corporate income taxes on its taxable income. Instead, the
stockholders are liable for individual income taxes on their proportionate
share of the Company's taxable income. Accordingly, no provision for federal
income taxes is reflected in the accompanying combined financial statements.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with maturities of three months or
less when purchased to be cash equivalents.

Advances on Development Projects

Advances on development projects relate to direct costs incurred in
connection with development transactions in progress. Such costs are
reimbursed from the owner of the project at the time of closing of the
project loan. If the project is not ultimately consummated, the capitalized
costs are charged to income at the time it is determined that the project is
not feasible.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided for
using accelerated methods over estimated useful lives of the assets, which
are generally five years. When assets are retired or otherwise disposed, the
cost and related accumulated depreciation are removed from the accounts, and
any resulting gain or loss is reflected in income for the period. The cost of
maintenance and repairs is charged to operations as incurred, significant
renewals and betterments are capitalized.

Unearned Revenue

Unearned revenue, which relates to marketing fees received in advance of
execution of the related lease agreement, is recognized at the time the
related lease agreement is executed with the applicable tenant.

F-40
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE
Notes to Combined Financial Statements (Continued)

2. Property and Equipment:

Property and equipment at September 30, 1995, is comprised of:

Office equipment ........................... $ 62,463
Less: accumulated depreciation ............. (22,755)
--------
Property and equipment, net ................ $ 39,708
========

Depreciation expense for the nine month period ended September 30, 1995,
was $9,715.

3. Line of Credit:

The Company has entered into a $1,500,000 line of credit with a financial
institution which is used to fund working capital needs. The line matures on
August 31, 1996, and bears interest at the 30 day commercial paper rate plus
2.9% (8.7% at September 30, 1995). The line of credit is collateralized by
assets of the Company and is guaranteed by the Company's stockholders. No
amounts were outstanding under the line of credit at September 30, 1995.

4. Commitments:

Leases

The Company leases commercial property and equipment under noncancelable
operating lease arrangements expiring between 1996 and 2005.

Future minimum rental payments under the operating leases at September 30,
1995, are as follows:

1996 ..................... $ 135,000
1997 ..................... 122,000
1998 ..................... 127,000
1999 ..................... 133,000
2000 ..................... 138,000
Thereafter ............... 680,000
----------
Total .................... $1,335,000
==========

Rental expense amounted to approximately $112,000 during the nine months
ended September 30, 1995.

Employment Agreements

The Company has entered into various employment agreements with key
employees. These agreements generally are for a one year period and are
automatically renewed. Amounts to be paid under these agreements during the
next twelve months are approximately $443,000.

5. Related Party Transactions:

The properties developed by the Company are owned by partnerships that are
owned in part by the Company's stockholders individually. The Company's
stockholders individually also own the stock of the corporations which serve
as the managing general partners of these partnerships.

Revenues during the nine month period ended September 30, 1995, were
generated principally from related parties.

The Company is a party to a noncancelable lease for its premises which is
owned in part by the Company's stockholders. Under the terms of this lease,
the Company is obligated to pay $113,522 during the year ended

F-41
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

5. Related Party Transactions: (Continued)

September 30, 1996. The lease includes scheduled base rent increases over the
term of the lease. The total amount of the base rent payments is being
charged to expense on the straight-line method over the term of the lease. In
addition to the base rent payment, the Company pays a monthly allocation of
the buildings' operating expenses. Included in accrued liabilities at
September 30, 1995, is approximately $18,900 related to the excess of rent
expense over cash payments since inception of the lease. Future minimum lease
payments due under this lease are reflected in Note 4.

Rent expense under this lease during the nine month period ended
September 30, 1995, was approximately $92,000.

6. Disclosures About Fair Value of Financial Instruments:

Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of
Financial Instruments", which requires disclosure of fair value information
about financial instruments. The carrying amounts reported in the balance
sheet for cash and cash equivalents and short term borrowing approximate fair
value due to the short term nature of these instruments.

7. Change in Shareholder:

On May 31, 1995, 50% of the outstanding common stock of the Company was
purchased by a private investor. This individual is also the Chairman of the
Board of Directors of the lending institution which has provided financing
for certain of the projects developed by the Company. There was no change in
the outstanding stock or capitalization of the Company as a result of this
transaction.

The private investor and the other two owners of the Company have agreed
to contribute the stock of the Company to Continuum Care Corporation
(Continuum), in support of their initial public offering, in exchange for
common stock of Continuum.

F-42
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Stockholders
Dasco Development Corporation and Affiliate
West Palm Beach, Florida

We have audited the accompanying combined balance sheets of Dasco
Development Corporation and Affiliate as of December 31, 1994, 1993 and 1992,
and the related combined statements of income and retained earnings 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 audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dasco Development
Corporation and Affiliate as of December 31, 1994, 1993 and 1992, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

BOBER, MARKEY & COMPANY
July 31, 1995

F-43
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE

COMBINED BALANCE SHEETS
December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
--------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ............... $ 282,760 $ 69,929 $ 26,603
Related party accounts receivable ....... 101,174 54,076 76,466
Advances on development projects ........ -- 642,433 284,929
Due from shareholders ................... 12,700 500 9,800
Related party notes receivable .......... -- 911,460 910,911
--------- ----------- -----------
Total current assets ................ 396,634 1,678,398 1,308,709
Net property, plant and equipment ........ 26,584 6,360 8,999
--------- ----------- -----------
Total assets ............................. $ 423,218 $ 1,684,758 $ 1,317,708
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit .......................... $ -- $ 299,000 $ --
Accounts payable ........................ 9,251 102,350 7,716
Accrued and withheld payroll and taxes .. 39,182 19,669 11,350
Accrued state income taxes .............. 7,900 -- --
Accrued distributions ................... 124,789 -- --
Deposits ................................ -- -- 6,435
Related party demand notes payable ...... 164,583 1,704,341 1,544,050
--------- ----------- -----------
Total current liabilities ........... 345,705 2,125,360 1,569,551
Unearned revenues ........................ 100,000 2,629 --
Stockholders' equity
Common stock ............................ 500 500 300
Retained earnings ....................... (22,987) (443,731) (252,143)
--------- ----------- -----------
Total stockholders' equity .......... (22,487) (443,231) (251,843)
--------- ----------- -----------
Total Liabilities and stockholders' equity $ 423,218 $ 1,684,758 $ 1,317,708
========= =========== ===========
</TABLE>

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

F-44
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE

COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the years ended December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
---------- --------- ----------
<S> <C> <C> <C>
Revenues $ 4,371,000 $ 931,535 $ 918,589
Expenses Salaries, benefits and payroll taxes 1,611,861 904,381 535,108
Occupancy .................................. 101,125 77,158 69,740
Other general and administrative ........... 374,394 73,706 155,619
---------- --------- ----------
Total expenses .......................... 2,087,380 1,055,245 760,467
---------- --------- ----------
Income (loss) from operations ............... 2,283,620 (123,710) 158,122
Other (expenses) income
Interest income ............................ 95,880 64,076 52,011
Interest expense ........................... (120,736) (131,954) (101,758)
---------- --------- ----------
Total other (expenses) income ........... (24,856) (67,878) (49,747)
---------- --------- ----------
Net income (loss) ........................... 2,258,764 (191,588) 108,375
Distributions ............................... (1,838,020) -- --
Beginning retained earnings ................. (443,731) (252,143) (360,518)
---------- --------- ----------
Ending retained earnings .................... $ (22,987) $ (443,731) $(252,143)
========== ========= ==========
</TABLE>

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

F-45
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE

COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
----------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) ...................................... $ 2,258,764 $(191,588) $ 108,375
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation .......................................... 5,914 2,639 3,235
(Increase) decrease in due from shareholders .......... (12,200) 9,300 (8,540)
(Increase) decrease in accounts receivable ............ (47,098) 22,390 (76,466)
(Increase) decrease in advances on development projects 642,433 (357,504) (217,420)
Increase (decrease) in accounts payable ............... (93,099) 94,634 754
Increase in accrued and withheld payroll and taxes .... 19,513 8,319 3,015
Increase in accrued state income taxes ................ 7,900 -- --
Increase in accrued distributions ..................... 124,789 -- --
Increase (decrease) in deposits ....................... -- (6,435) 6,435
Increase in unearned revenues ......................... 97,371 2,629 --
----------- --------- ---------
Net cash provided (used) by operating activities ... 3,004,287 (415,616) (180,612)
Cash flows from investing activities
Proceeds from repayment of related party notes
receivable ........................................... 911,460 -- --
Investment in related party notes receivable .......... -- (549) (422,286)
Equipment additions ................................... (26,138) -- (2,337)
----------- --------- ---------
Net cash provided (used) by investing activities .. 885,322 (549) (424,623)
Cash flows from financing activities
Net repayments on line of credit ...................... (299,000) 299,000 (218,640)
Net borrowings on loans payable ....................... (1,539,758) 160,291 760,542
Issuance of capital stock ............................. -- 200 --
Distributions paid .................................... (1,838,020) -- --
----------- --------- ---------
Net cash provided (used) by financing activities .. (3,676,778) 459,491 541,902
----------- --------- ---------
Net increase (decrease) in cash and cash equivalents ... 212,831 43,326 (63,333)
Cash and cash equivalents--beginning of year ........... 69,929 26,603 89,936
----------- --------- ---------
Cash and cash equivalents--end of year ................. $ 282,760 $ 69,929 $ 26,603
=========== ========= =========
Supplemental disclosures
Interest paid ......................................... $ 120,741 $ 131,954 $ 105,431
</TABLE>

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

F-46
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

DASCO Development Corporation and Affiliate (the "Company") is engaged in
the development, construction, management, marketing and leasing of
outpatient healthcare and medical office facilities throughout the United
States. The Company's headquarters are located in West Palm Beach, Florida
and has regional offices in La Jolla, California, opened in February 24,
1993, Plymouth Meeting, Pennsylvania, opened June 1, 1995 and Las Vegas,
Nevada, opened July 1, 1995.

Principles of Combination

The accompanying combined financial statements include the accounts of
DASCO Development Corporation and DASCO Development West, Inc., as they are
under common control. DASCO Development West, Inc. commenced operations on
March 1, 1993.

Significant intercompany transactions and balances have been eliminated in
the combined financial statements.

Revenue Recognition

Income Taxes

The Company has elected S Corporation status under the Internal Revenue
Code. All income and expense items of the Company are to be recognized in the
tax returns of the stockholders. Accordingly, no provision for federal income
taxes is reflected in the accompanying combined financial statements.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. At December 31, 1994, the entire
balance was comprised of cash equivalents including treasury notes,
government obligations, and high grade corporate securities.

Advances on Development Projects

Property and Equipment

Office equipment and leasehold improvements are being depreciated using
accelerated methods over estimated useful lives, which are generally five
years. When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts, and any resulting
gain or loss is reflected in income for the period. The cost of maintenance
and repairs is charged to operations as incurred; significant renewals and
betterments are capitalized.

Unearned Revenue

F-47
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Fair Value of Financial Instruments

In December 1991, the FASB issued SFAS No. 107, Disclosures About Fair
Value of Financial Instruments, which requires certain disclosures about fair
value of certain financial instruments such as notes payable and notes
receivable. The statement applies to the Company's financial statements for
the year ending December 31, 1995. The impact of the statement on the
Company's financial statement disclosures is not determinable.

2. RELATED PARTY NOTES RECEIVABLE

Notes receivable as of December 31, 1994, 1993 and 1992, consist of demand
notes receivable from related parties with interest rates ranging from seven
to eleven percent.

3. PROPERTY AND EQUIPMENT

The major classes are:

December 31,
-------------------------------
1994 1993 1992
-------- ------- -------
Office equipment ........... $ 33,624 $13,486 $13,486
Construction in progress ... 6,000 -- --
-------- ------- -------
39,624 13,486 13,486
Accumulated depreciation ... (13,040) (7,126) (4,487)
-------- ------- -------
$ 26,584 $ 6,360 $ 8,999
======== ======= =======

4. RELATED PARTY NOTES PAYABLE

Notes payable at December 31, 1994, 1993 and 1992 consist of demand
unsecured notes payable to related parties with interest rates ranging from
seven to ten percent.

5. LINE OF CREDIT

The Company has an unsecured $300,000 line of credit available in which
there was no balance as of December 31, 1994, $299,000 balance as of December
31,1993, and no balance as of December 31, 1992. The interest rate on the
line was prime plus one percent. This line of credit expired in 1994.

6. LEASE COMMITMENTS

The Company leases commercial property and equipment under operating
leases.

Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of December 31, 1994 for each of the
next five years and in the aggregate are:

1995 ..................................... $ 110,960
1996 ..................................... 117,052
1997 ..................................... 119,405
1998 ..................................... 124,687
1999 ..................................... 129,148
Subsequent to 1999 ....................... 725,710
----------
Total minimum future lease payments .. $1,326,962
==========

F-48
<PAGE>

DASCO DEVELOPMENT CORPORATION AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

7. RELATED PARTY TRANSACTIONS

Revenues in 1994, 1993 and 1992 were generated principally from related
parties.

Paramount Real Estate Services, Inc., a property management firm
controlled by the Company's shareholders, provides management services on a
fee basis for properties developed by the Company. In addition, included in
revenues for 1994, 1993 and 1992 is $44,931, $52,691 and $1,275,
respectively, from Paramount Real Estate Services, Inc.

The Company leases office space from entities which are owned in part by
the Company's stockholders. The Company paid rents in the amount of $93,106
for 1994, $71,010 for 1993, and $64,373 for 1992 under these lease
arrangements which expire in 2004. The Company is obligated to pay $107,010
for 1995 with annual increases equal to 5% of the base rent amount for each
year until lease expiration.

8. STOCKHOLDERS' EQUITY

Combined common stock including paid-in capital of $280 of DASCO
Development Corporation consists of the following:

DASCO Development Corporation
$.01 stated value, authorized 20,000 shares; 2,000 issued and
outstanding at December 31, 1994, 1993, and 1992 ...................... $300
DASCO Development West, Inc.
No par value, authorized 400,000 shares; 200,000 issued and outstanding
at December 31, 1994 and 1993 ......................................... $200

The Board of Directors declared a distribution of $124,789 during December
1994 for payment in early 1995. This amount is reflected as accrued
distributions at December 31, 1994.

9. SUBSEQUENT EVENT

The Company opened new regional offices in Plymouth Meeting, Pennsylvania
on June 1, 1995 and Las Vegas, Nevada on July 1, 1995.

F-49
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

The Shareholders of Radiation Care, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Radiation
Care, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity and cash flows
for the year ended December 31, 1994, the nine month period ended December
31, 1993 and the year ended March 31, 1993. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Radiation
Care, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and cash flows for the year ended
December 31, 1994, the nine month period ended December 31, 1993 and the year
ended March 31, 1993 in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
October 5, 1995

F-50
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1994 and 1993

<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ........................................ $ 9,947,849 $ 2,801,139
Investments in marketable securities (Note 3) .................... 207,107 14,902,078
Patient accounts receivable, less allowance for doubtful accounts
of $418,152 and $466,838 at December 31, 1994 and 1993,
respectively .................................................... 3,215,894 3,926,859
Current portion of receivable from affiliate (Note 4) ............ 596,023 508,103
Note receivable .................................................. 375,000
Accrued interest receivable ...................................... 50,940 104,232
Other current assets ............................................. 299,848 420,788
------------ -----------
Total current assets ......................................... 14,317,661 23,038,199
Investment in affiliate (Note 4) .................................. 1,000,000 5,044,747
Receivable from affiliate, exclusive of current portion (Note 4) .. 762,615 1,358,636
Investments in managed centers (Note 5) ........................... 1,010,360
Property and equipment, net (Notes 6 and 7) ....................... 30,068,244 39,304,478
Goodwill and other intangible assets, net of accumulated
amortization of $991,523 and $1,019,115 at December 31, 1994 and
1993, respectively (Notes 6 and 14) ............................ 7,998,609 12,606,022
Deposits and other assets ......................................... 1,122,450 1,426,021
------------ -----------
Total assets ................................................. $ 55,269,579 $ 83,78,463
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt (Note 8) ....................... $ 737,832 $ 2,653,033
Current portion of capital lease obligations (Note 13) ........... 952,989 924,802
Accounts payable ................................................. 2,446,261 2,597,918
Accrued expenses ................................................. 1,423,828 790,486
Income taxes payable ............................................. 58,000 41,371
------------ -----------
Total current liabilities .................................... 5,618,910 7,007,610
Long-term debt, exclusive of current portion (Note 8) ............. 833,659 9,450,997
Capital lease obligations, exclusive of current portion (Note 13) . 1,252,498 2,215,756
------------ -----------
Total liabilities ............................................ 7,705,067 18,674,363
------------ -----------
Commitments and contingencies (Notes 12 and 13)
Stockholders' equity (Notes 8, 9, and 11):
Preferred stock, $.01 par value, shares authorized 6,000,000 and
1,000,000 shares at December 31, 1994 and 1993 respectively:
none outstanding
Common stock, $.01 par value, 00,000 shares authorized;
18,052,167 shares issued and outstanding ....................... 180,522 180,522
Additional paid-in capital ....................................... 73,215,363 73,441,200
Accumulated deficit .............................................. (22,087,035) (4,312,107)
Unrealized losses on investments in marketable securities ........ (20,294)
------------ -----------
51,288,556 69,309,615
Less treasury stock at cost, 1,644,305 and 1,852,478 shares at
December 31, 1994 and 1993, respectively ........................ (3,724,044) (4,195,515)
------------ -----------
Stockholders' equity--net .................................... 47,564,512 65,114,100
------------ -----------
$ 55,269,579 $83,788,463
============ ===========
</TABLE>

See notes to consolidated financial statements.

F-51
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December Year Ended
December 31, 31, March 31,
1994 1993 1993
------------ ------------ ------------
<S> <C> <C> <C>
Patient revenues, net ............................... $ 25,785,560 $ 22,330,113 $ 27,797,837
Cost of revenues .................................... 18,856,207 14,909,266 17,208,305
------------ ------------ ------------
Gross profit ........................................ 6,929,353 7,420,847 10,589,532
Operating expenses
Selling, general and administrative
Related party--rent (Note 12) ...................... 266,050 232,391 308,141
Other .............................................. 10,733,999 8,250,443 10,120,322
Provision for doubtful accounts ..................... 936,019 876,923 1,362,835
Amortization of intangibles ......................... 530,490 439,772 497,672
Provision for closing a center (Note 6) ............. 400,000 731,502
Provision for write-down of assets (Note 6) ......... 5,587,563
Provision for settlement of legal matters (Note 13) . 2,000,000
------------ ------------ ------------
Total operating expenses ........................ 20,454,121 10,531,031 12,288,970
------------ ------------ ------------
Loss from operations ................................ (13,524,768) (3,110,184) (1,699,438)
------------ ------------ ------------
Other income (expense)
Interest income ..................................... 975,450 1,017,539 2,038,022
Interest income--related party (Note 4) ............. 256,926 239,858 299,175
Interest expense .................................... (1,021,569) (1,251,306) (1,728,553)
Loss on sale of investments in marketable securities (554,889)
Equity in income (loss) of affiliate (Note 4) ....... (72,580) (102,863) 72,246
Provision for loss on sale of investment in affiliate
(Note 4) .......................................... (3,989,764)
Gains (losses) on investments in managed centers, net
(Note 5) .......................................... 394,739 (261,475)
Rental income--related party (Note 4) ............... 188,644 141,482 151,957
Other ............................................... 28,257 59,713 34,190
------------ ------------ ------------
Other income (expense)--net ........................ (3,794,786) (157,052) 867,037
------------ ------------ ------------
Loss before income taxes and extraordinary item ..... (17,319,554) (3,267,236) (832,401)
Provision for income taxes--current ................. 22,264 50,004 120,750
------------ ------------ ------------
Loss before extraordinary item ...................... $(17,341,818) $ (3,317,240) $ (953,151)
Extraordinary item--loss on early extinguishment of
debt (Note 8) ...................................... (433,110)
------------ ------------ ------------
Net loss ............................................ $(17,774,928) $ (3,317,240) $ (953,151)
============ ============ ============
</TABLE>

See notes to consolidated financial statements.

F-52
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1994, the nine months ended December 31, 1993
and the year ended March 31, 1993

<TABLE>
<CAPTION>
Unrealized
Losses
on
Investments
Common Stock Additional in Total
--------------------- Paid-in Accumulated Marketable Treasury Stockholders'
Shares Amount Capital Deficit Securities Stock Equity
---------- -------- ----------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance March 31,
1992 ............ 15,649,957 $156,500 $60,880,484 $ (41,716) $60,995,268
Issuance of common
stock for
acquisitions
(Note 14) ....... 2,143,210 21,432 12,670,082 12,691,514
Issuance of
warrants
(Note 9) ........ 133,233 133,233
Exercise of
warrants (Note 9) 180,000 1,800 1,800
Exercise of stock
options ......... 79,000 790 79,737 $ 3,473 84,000
Purchase of common
stock
(Note 9) ........ (1,475,973) (1,475,973)
Issuance of
treasury stock to
401(k) Savings
Plan (Note 11) .. (917) 32,541 31,624
Net loss ......... (953,151) (953,151)
---------- -------- ----------- ------------ -------- ----------- -----------
Balance March 31,
1993 ............ 18,052,167 180,522 73,762,619 (994,867) (1,439,959) 71,508,315
Exercise of stock
options ......... (323,029) 466,379 143,350
Purchase of common
stock
(Note 9) ........ (3,469,566) (3,469,566)
Issuance of
treasury stock to
401(k) Savings
Plan (Note 11) .. 1,610 247,631 249,241
Net loss ......... (3,317,240) (3,317,240)
---------- -------- ----------- ------------ -------- ----------- -----------
Balance December
31, 1993 ........ 18,052,167 180,522 73,441,200 (4,312,107) (4,195,515) 65,114,100
Exercise of stock
options ......... (53,754) 96,254 42,500
Issuance of
treasury stock to
401(k) Savings
Plan (Note 11) .. (172,083) 375,217 203,134
Unrealized losses
on investments in
marketable
securities ...... $(20,294) (20,294)
Net loss ......... (17,774,928) (17,774,928)
---------- -------- ----------- ------------ -------- ----------- -----------
Balance December
31, 1994 ........ 18,052,167 $180,522 $73,215,363 $(22,087,035) $(20,294) $(3,724,044) $47,564,512
========== ======== =========== ============ ======== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-53
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Nine Months
Year Ended Ended Year Ended
December 31, December 31, March 31,
1994 1993 1993
------------ ------------ --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss ................................................. $(17,774,928) $ (3,317,240) $ (953,151)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization .......................... 6,188,767 4,730,757 5,378,251
Provision for doubtful accounts ........................ 936,019 876,923 1,362,835
Provision for closing a center--noncash items .......... 400,000 666,975
Loss on sale of property and equipment ................. 272,483
Equity in (earnings) loss of affiliate ................. 72,580 102,863 (72,246)
Provision for loss on sale of investment in affiliate .. 3,989,764
Provision for write-down of assets ..................... 5,587,563
Losses on sale of investments in marketable securities . 554,889
(Gain) loss on investments in managed centers .......... (394,739) 261,475
Issuance of stock to 401(k) Savings Plan ............... 203,134 249,241 31,624
Extraordinary item--loss on extinguishment of debt ..... 433,110
Other noncash expenses ................................. 48,374 54,421 68,862
Change in assets and liabilities, net of effect of
acquisitions:
Patient accounts receivable ............................ (225,054) 19,679 (2,486,785)
Receivable from affiliate .............................. 508,101 331,255 293,886
Accrued interest receivable ............................ 53,292 64,989 30,290
Other current assets ................................... 120,940 783,710 (718,183)
Accounts payable and accrued expenses .................. 81,685 (1,040,228) 1,057,589
Income taxes payable ................................... 16,629 18,206 8,700
------------ ------------ --------------
Cash provided by operating activities ................. 800,126 3,803,026 4,274,155
------------ ------------ --------------
INVESTING ACTIVITIES:
Purchases of investments ................................ (6,648,837) (5,034,829) (30,902,953)
Sales of investments .................................... 14,129,871 6,280,485 4,672,182
Maturities of investments ............................... 6,638,754 12,006,914 12,627,900
Additions to property and equipment, net ................ (751,746) (5,772,347) (14,436,434)
Proceeds from the sale of property and equipment ........ 2,658,072 -- 162,218
Distributions from affiliate ............................ -- 110,500 58,500
Note receivable ......................................... 375,000 (375,000) --
Deposits and other assets ............................... 285,974 (316,131) (638,437)
Investments in managed centers .......................... -- (1,271,835) --
Disposition of investments in managed centers ........... 1,405,099 -- --
Cash payments for acquisitions, net of cash acquired .... -- -- (2,606,195)
------------ ------------ --------------
Cash provided by (used in) investing activities ......... 18,092,187 5,627,757 (31,063,219)
------------ ------------ --------------
FINANCING ACTIVITIES:
Proceeds from issuance of treasury stock ................ 42,500 143,350 85,800
Payments on long-term debt .............................. (10,853,032) (6,349,033) (1,087,979)
Payments on capital lease obligations ................... (935,071) (670,743) (979,100)
Proceeds from issuance of long-term debt ................ -- -- 1,800,000
Payments of stock offering costs ........................ -- -- (164,678)
Payments of debt issue costs ............................ -- -- (30,165)
Treasury stock acquired ................................. -- (3,469,566) (1,475,973)
------------ ------------ --------------
Cash used in financing activities ....................... (11,745,603) (10,345,992) (1,852,095)
------------ ------------ --------------
Increase (decrease) in cash and cash equivalents ......... 7,146,710 (915,209) (28,641,159)
Cash and cash equivalents, beginning of period ........... 2,801,139 3,716,348 32,357,507
------------ ------------ --------------
Cash and cash equivalents, end of period ................. $ 9,947,849 $ 2,801,139 $ 3,716,348
============ ============ ==============
Supplemental disclosures of cash flow information:
Interest paid (net of amount capitalized) ............... $ 1,004,143 $ 1,204,621 $ 1,602,952
============ ============ ==============
Income taxes paid ....................................... $ 5,635 $ 31,798 $ 112,050
============ ============ ==============
Capital lease obligations ............................... $ -- $ -- $ 1,906,599
============ ============ ==============
Issuance of common stock and liabilities assumed in
connection with acquisitions (Note 14)...................
</TABLE>

Supplemental disclosures of noncash investing and financing activities:

Included in accounts payable at December 31, 1993 and March 31, 1993 are
amounts related to the purchase of property and equipment totaling $724,964
and $2,604,019, respectively.

See notes to consolidated financial statements.

F-54
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1994, the nine months ended December 31, 1993
and the year ended March 31, 1993

1. ORGANIZATION & MERGER WITH ONCOLOGY THERAPIES, INC.

Radiation Care, Inc. ("RCI") and its wholly owned subsidiaries
(collectively the "Company") provide outpatient radiation therapy and
diagnostic imaging services. The Company was incorporated in November 1990
and began treating patients in June 1991. The Company owns and operates
seventeen radiation therapy centers and three diagnostic imaging centers, and
owns a 65% interest in a fourth diagnostic imaging center (sold January 31,
1995--see Note 4).

On November 21, 1994, the Company entered into an agreement to merge with
Oncology Therapies, Inc. in a transaction in which the Company's stockholders
will receive $2.625 in cash for each outstanding share of the Company's
common stock. The merger was completed on March 21, 1995. The Company
incurred approximately $2,500,000 of expenses, of which $1,424,393 were
charged to 1994 operations, associated with structuring and completing the
merger. This amount includes financial advisor fees, legal and accounting
fees, certain liability insurance premiums, severance payments, and expenses
for printing, mailing, and processing related to consummation of the merger.
The Company had change-in-control agreements with its senior officers. The
merger constitutes a change in control pursuant to such agreements. Total
payments that resulted from such agreements approximated $345,000.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year. Effective December 31, 1993, the Company adopted a fiscal year
ending on December 31. Accordingly, the resulting transition period, which
ended December 31, 1993, covers a nine month period.

Principles of Consolidation. The consolidated financial statements include
the accounts of RCI and its wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents. For the purposes of the statement of cash flows,
the Company considers all highly liquid instruments purchased with original
maturities of three months or less to be cash equivalents.

Investments. The equity method of accounting is used for investments when the
Company has a noncontrolling ownership interest in another company that is
greater than 20%. Under the equity method of accounting, original investments
are recorded at cost and adjusted by the Company's share of undistributed
earnings or losses of such companies and the amortization of underlying
intangibles.

Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The Statement addresses the accounting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. The Company has classified its investments in
marketable securities as available-for-sale securities which, under the
Statement, are reported at fair value with unrealized gains and losses
excluded from earnings and reported as a separate component of stockholders'
equity. There was no cumulative effect of this change in accounting
principle. Gains or losses on the sale of investments in marketable
securities are determined by specific identification of the cost of the
securities sold.

Provision for Doubtful Accounts. The Company records a provision for doubtful
accounts for the portion of unrecognized revenues which it estimates may not
be ultimately collected. The provision includes any contractual adjustments
in excess of those estimated at the time revenue is recognized and other
differences between recorded revenues and collections from third-party payors
and patients. The provision and related allowance are adjusted periodically,
based upon the Company's evaluation of historical collection experience with
specific payors for particular services, anticipated reimbursement levels
with specific payors for new services for which the Company may not have had
significant historical collection experience, industry reimbursement trends,
and other relevant factors.

F-55
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Property and Equipment. Property and equipment is stated at cost. The cost
and related accumulated depreciation of property and equipment sold or
otherwise disposed are eliminated from the accounts and the resulting gains
or losses are reflected in income. Depreciation is generally computed using
the straight-line method over the estimated useful life of an asset. Assets
recorded under capital leases are amortized over their estimated useful lives
or the lease terms, as appropriate.

Goodwill. The excess of the purchase price over the fair value of the net
assets acquired in business combinations accounted for by the purchase method
is amortized on a straight-line basis over a 25-year period. The Company
periodically assesses the recoverability of goodwill, when there are
indications of potential goodwill impairment based on estimates of
undiscounted future cash flows from operations for the applicable business
acquired. The amount of impairment is calculated by comparing anticipated
discounted future income from acquired businesses with the carrying value of
the related goodwill. In performing this analysis, management considers such
factors as current results, trends and future prospects, in addition to other
economic factors (see Note 6).

Organization Costs. Organization costs are being amortized on a
straight-line basis over a five-year period.

Income Taxes. Deferred income taxes are determined based on the difference
between financial statement and tax bases of assets and liabilities using
enacted rates in effect for the year in which the differences are expected to
reverse. To the extent management is uncertain that deferred tax assets will
be realized, a valuation allowance is established.

Debt Issue Costs. Debt issue costs are deferred and are being amortized
using the interest method over the term of the related debt.

Revenue Recognition. Patient revenues are recognized net of contractual
adjustments and represent the estimated net realizable amounts from
third-party payors and patients for services rendered.

Charity Care. The Company has a policy of providing charity care to
patients who are unable to pay for the Company's services. Since the Company
does not expect payments from such patients, estimated charges for charity
care are not included in patient revenues.

Reclassifications. Certain reclassifications have been made to the prior
years' financial statements to conform to the presentation in the
December 31, 1994 financial statements.

3. INVESTMENTS IN MARKETABLE SECURITIES

The market value of investments in marketable securities was $207,107 and
$14,929,560 at December 31, 1994 and 1993, respectively. At December 31, 1993
gross unrealized gains and losses on investments in marketable securities
were $89,046 and $61,564, respectively.

4. INVESTMENT IN AFFILIATE AND RECEIVABLE FROM AFFILIATE

The Company has a 65% limited partnership interest in ParkView Imaging
Center, L.P. ("PVIC"). This noncontrolling limited partnership interest is
accounted for using the equity method of accounting. The difference between
the Company's recorded investment balance and the Company's proportionate
share of the underlying

F-56
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

equity in the net assets of PVIC at December 31, 1994 was $427,564.
Summarized financial data of PVIC as of December 31, 1994 and 1993 and for
the year ended December 31, 1994 and the nine months ended December 31, 1993
follows:

December 31,
------------------------
1994 1993
---------- ----------
Balance Sheet Data:
Total current assets ..................... $ 888,060 $ 620,214
Property and equipment, net .............. 1,754,865 2,017,116
Other assets ............................. 12,353 19,323
---------- ----------
Total assets .......................... $2,655,278 $2,656,653
========== ===========
Total current liabilities ................ $ 836,223 $ 650,976
Total long-term liabilities .............. 965,456 1,428,051
Total partners' capital .................. 853,599 577,626
---------- ----------
Total liabilities and partners' capital $2,655,278 $2,656,653
========== ===========
Income Statement Data:
Patient revenues, net .................... $2,140,946 $1,720,667
Cost of revenues and expenses ............ 1,853,132 1,638,258
---------- ----------
Net income ............................ $ 287,814 $ 82,409
========== ==========

The Company leased equipment to PVIC under a noncancellable long-term
lease accounted for by the Company as a direct financing lease. The Company
recognized interest income of $256,926, $239,858 and $299,175 related to the
leasing facility for the year ended December 31, 1994, the nine months ended
December 31, 1993 and the year ended March 31, 1993, respectively.
Additionally, the Company leased certain office space to PVIC. Such lease is
accounted for as an operating lease and the Company recognized $188,644,
$141,482 and $151,957 of rental income for the year ended December 31, 1994,
the nine months ended December 31, 1993 and the year ended March 31, 1993,
respectively. Future minimum lease payments due from PVIC together with the
present value of future minimum lease payments under the equipment leases
from affiliate are as follows:

Direct
Year Ended December 31, Financing Operating
- ------------------------------------------------- ---------- ---------
1995 .......................................... $ 761,484 $188,634
1996 .......................................... 761,484 188,634
1997 .......................................... 63,458
---------- ---------
Total ......................................... 1,586,426 $377,268
========
Less amounts representing interest and
executory costs ............................... (227,788)
----------
Present value of minimum receipts ............. 1,358,638
Less current portion .......................... (596,023)
----------
Receivable from affiliate, long-term portion .. $ 762,615
==========

In November 1994, the Company agreed to sell Community Clinicians Leasing,
L.P. ("CCL") which included its investment in PVIC to The Columbia HCA Health
System for $1,250,000. In December 1994, the agreement was revised and the
sales price was reduced by $250,000 to $1,000,000. The Columbia HCA Health
System was the general partner of PVIC and owned the remaining 35% interest
in PVIC. During the year ended December 31, 1994, the Company provided for an
anticipated loss on sale of its investment in affiliate of $3,989,764 as a
result of this agreement. This amount represents the difference between the
Company's recorded investment balance and the agreed-upon sales price of CCL.
The transaction was completed on January 31, 1995.

F-57
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. INVESTMENTS IN MANAGED CENTERS

The Company entered into agreements in 1993 to manage three radiation
therapy centers, one that had begun operations and two that were under
development. The centers were independently owned. These agreements had a
four-year term during which the Company was to manage the operations of the
centers for a fee based on a percentage of collected revenues. In addition,
the Company entered into agreements that provided the Company with the option
to purchase each of the centers, based on an agreed pricing computation, for
a period of two years beginning eighteen months after the projected opening
date of each center. Consideration for the purchases could be in cash or
common stock of the Company to be negotiated at the time of the purchase. The
Company paid $100,000 per center as consideration for the purchase options.
The Company loaned the centers amounts for working capital requirements,
provided certain temporary financing for building improvements, and provided
certain financing for the acquisition of real estate. The loans for working
capital requirements and the loans for the acquisition of real estate were
expected to be repaid from future operating cash flows of the centers. The
loans for building improvements were expected to be repaid through permanent
financing at the completion of construction. As of December 31, 1993, the
Company had advanced a total of $1,271,835 under these loan agreements at an
interest rate of 7%.

Due to the nature of the Company's relationship with the managed centers,
including the loan arrangements and the options to purchase the centers, the
amounts loaned to the centers were accounted for similar to equity method
investments. As a result of this accounting treatment, the Company was
required to record any start-up losses, and subsequent operating income to
the extent of previously recognized losses, of the managed centers as gains
or losses on the investments in managed centers in the period in which the
income or losses of the centers is recognized. During the year ended December
31, 1994 and the nine months ended December 31, 1993, the Company recognized
losses on investments in managed centers of $367,283 and $261,475,
respectively. The cumulative amount of any potential losses on the
investments was limited to the amount invested in each center. The Company
did not guarantee any debt of the managed centers and was not at risk beyond
its investment balance. See Note 7 regarding machinery and equipment sold to
centers under development which the Company manages.

In April 1994, the Company and the owners of the managed centers agreed to
terminate the management agreements and the purchase option agreements. All
loans to the managed centers and accrued interest were repaid to the Company.
The consideration paid for the purchase options also was refunded. In
addition, the Company received agreed-upon management fees for two of the
centers that had begun operations. Accordingly, the Company reversed all
previously recorded losses on investments in managed centers in April 1994.
During the year ended December 31, 1994, the Company recognized a gain on
investments in managed centers totaling $762,022, which included the reversal
of previously recorded losses, interest income on the loans to the managed
centers, and management fees. Subsequent to termination of the management
agreements, there are no outstanding amounts due from or to the managed
centers and the Company has no further obligations with regard to the
financing or management of the operations of the managed centers.

6. PROVISION FOR WRITE-DOWN OF ASSETS

During the year ended December 31, 1994, the Company incurred a charge of
$5,587,563 which includes a provision for write-off of unamortized goodwill
at one of the Company's diagnostic imaging centers of $3,915,932 and the
write-down of property and equipment at two of the Company's radiation
therapy centers of $1,671,631. The provision for write-off of goodwill and
write-down of property and equipment was a result of management's continuing
assessment of the recoverability of assets based on estimates of future
undiscounted cash flows from operations of the applicable businesses. During
the year ended December 31, 1994, such assessment considered the impending
merger with Oncology Therapies, Inc. discussed in Note 1, the impending
effects of contingencies discussed in Note 13, continuing operating losses at
the individual centers and management's determination that the operating
losses were likely to continue for the foreseeable future. Such assessment
considered the effects of the above events on all the Company's long-lived
assets on a center-by-center basis. Prior to 1994, the Company

F-58
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

did not believe the likelihood of adverse effects on the Company, as a result
of Omnibus Budget Reconciliation Act of 1993 ("OBRA 1993"), were probable.
Management's assessment of the likelihood of adverse effects associated with
OBRA 1993 became probable during 1994 as a result of management concluding
that the Company would be unable to meet the public company exemption under
OBRA 1993. It was in light of such events that management estimated and
recognized asset impairments during 1994. The write-down of property and
equipment included medical equipment and leasehold improvements at centers
located in Rockville, Maryland and Falls Church, Virginia. In addition, the
Company recorded a charge of $400,000 related to costs associated with the
probable closing of one of the radiation therapy centers. The amount of the
provision is primarily for estimated lease termination costs.

In September 1993, the Company made the decision to close its radiation
therapy center in Columbia, South Carolina. The center, which had been
operating for two years, had not treated a sufficient volume of patients to
attain profitability, and management determined that it was not likely to
become profitable in the foreseeable future. Losses were minimized by
transferring equipment and miscellaneous furnishings and supplies to new
centers. The provision for expenses related to the closing of the center was
$731,502, which included the write-off of certain leasehold improvements of
$593,929, transportation and storage costs of $70,750, severance compensation
to employees of $32,823, and other miscellaneous expenses of $34,000.

7. PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

<TABLE>
<CAPTION>
Estimated
Useful
Life December 31,
----------------------------
(years) 1994 1993
------- ------------ ------------
<S> <C> <C> <C>
Machinery and equipment ...................... 4 - 10 $ 31,441,163 $ 34,215,689
Leasehold improvements ....................... 10 - 12 12,034,679 13,400,465
Computers .................................... 5 2,726,629 2,713,741
Furniture and fixtures ....................... 5 - 7 841,393 864,458
Automobiles .................................. 3 - 5 188,600 208,649
------------ ------------
Total ........................................ 47,232,464 51,403,002
Less accumulated depreciation and amortization (17,164,220) (12,098,524)
------------ ------------
Property and equipment, net .................. $ 30,068,244 $ 39,304,478
============ ============
</TABLE>

Included in machinery and equipment at December 31, 1993 are assets with a
total cost of $2,946,171 and total accumulated depreciation of $491,373 which
were taken out of service and sold to centers under development which the
Company managed in 1994 (see Note 5). No losses on the transfer and sale of
such equipment were recognized.

The Company capitalizes interest as a component of the cost of the
property and equipment constructed for its own use. Interest of $33,070 and
$67,014 was capitalized during the nine months ended December 31, 1993 and
the year ended March 31, 1993, respectively.

Included in machinery and equipment at December 31, 1994 and 1993 are
assets under capital leases of $4,580,943 at both dates with accumulated
amortization of $2,752,035 and $1,763,909, respectively.

Depreciation expense, including amortization of capital lease assets, was
$5,658,276, $4,306,120, and $4,880,579 for the year ended December 31, 1994,
the nine months ended December 31, 1993 and the year ended March 31, 1993,
respectively.

F-59
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. LONG-TERM DEBT

The Company had a $15,000,000 credit agreement with a commercial bank. The
credit agreement, as amended, consisted of a $10,000,000 term loan and a
$5,000,000 revolving credit facility. At December 31, 1993, the Company had
$3,800,000 available to borrow under the revolving credit facility. Under the
agreement, the Company had the option of making "Eurodollar" loans or "Base
Rate" loans. Eurodollar loans bore interest at a fixed rate per annum equal
to LIBOR for the current interest period plus 2-3/4% (an interest period may
be one, two, three, or six months, as selected by the Company). Base Rate
loans bore interest at a rate per annum, fluctuating daily, equal to the
higher of the prime rate plus 1-1/2% or the federal funds rate plus 2%.
Interest on Eurodollar loans was payable at the end of the applicable
interest period and interest on Base Rate loans was payable monthly. At
December 31, 1993 there was outstanding under the credit agreement
$10,200,000 bearing interest at rates ranging from 6.01% to 6.19%.

Patient accounts receivable and certain property and equipment were
pledged as collateral under the credit agreement. In addition, the Company
was required to meet certain financial covenants primarily related to net
worth and long-term debt. The agreement also limited the amount of dividends
that could be paid by the Company.

The aggregate principal amount of the term loan was payable in quarterly
installments of $500,000 which commenced on September 30, 1993. In September
1994, the Company repaid all outstanding indebtedness under its credit
agreement. In connection with the cancellation of the credit agreement, the
Company recognized an extraordinary loss of $433,110 during the year ended
December 31, 1994. The extraordinary loss represents the write-off of the
remaining balances of $272,119 of debt discount and $160,991 of debt issue
costs associated with the credit agreement.

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1993
---------- -----------
<S> <C> <C>
Borrowings under the credit agreement described above, net of unamortized
discount of $320,493 at December 31, 1993 ............................. $ 9,879,507
Notes payable to a financial institution, due in monthly installments of
$74,177 including interest ranging from 10.5% to 12.0% through January
1997. Certain property and equipment are pledged as collateral on the
notes ................................................................. $1,571,491 2,224,523
---------- -----------
Total .................................................................. 1,571,491 12,104,030
Less amounts due within one year ........................................ (737,832) (2,653,033)
---------- -----------
Long-term debt .......................................................... $ 833,659 $ 9,450,997
========== ===========
</TABLE>

At December 31, 1994, scheduled aggregate long-term debt maturities were
$737,832 in 1995 and $833,659 in 1996.

9. COMMON STOCK AND WARRANTS

In February 1992, the Company sold 6,250,000 shares of common stock at $8
a share in its initial public offering. On September 4, 1992, the
stockholders of the Company approved an increase in the authorized number of
the Company's common shares to 50,000,000.

In September 1992, the Company's Board of Directors authorized the use of
up to $5,000,000 to purchase the Company's common shares in the open market,
from time to time. During 1992 and 1993, the Company purchased 2,088,792
shares for a total of $4,945,539, of which 259,137 shares have been
contributed to the Company's 401(k) Plan and 185,350 shares have been used
for options exercised by employees. At December 31, 1994, the remaining
1,644,305 shares are being held as treasury shares.

F-60
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

During the year ended March 31, 1992, the Company issued to its lending
bank warrants to purchase 356,067 shares of the Company's common stock or
preferred stock at a price of $.01 per share. The difference of $352,506
between the fair value of the warrants (valued at $1.00 per warrant or
$356,067 in total) and the exercise price ($.01 per warrant or $3,561 in
total) has been charged to discount on debt and has been credited to
additional paid-in capital. On June 11, 1992, the Company agreed to issue an
additional 93,933 warrants to its lending bank, of which 16,675 are
exercisable at $.01 per share and 77,258 are exercisable at $8 per share. The
difference of $133,233 between the fair value of the 16,675 warrants (valued
at $8 per warrant or $133,400 in total) and the exercise price ($.01 per
warrant or $167 in total) has been charged to discount on debt and has been
credited to additional paid-in capital. The warrants may be exercised at any
time through June 1, 2001 and the number of warrants issued are subject to
adjustment in certain events to prevent dilution. The Company has granted the
holder of the warrants certain rights with respect to the registration under
the Securities Act of 1933 of the warrants and the shares issuable upon their
exercise. During the year ended March 31, 1993, 180,000 warrants were
exercised at $.01 per share. At December 31, 1994, 192,742 warrants
exercisable at $.01 per share and 77,258 warrants exercisable at $8.00 per
share were outstanding.

10. INCOME TAXES

The Company has elected, for income tax purposes, a March 31 year end. At
December 31, 1994 the Company had available net operating loss carryforwards
of approximately $27,945,000 for federal income tax purposes, which expire
beginning in 2007. As a result of the merger discussed in Note 1, the Company
underwent an ownership change as defined in Section 382 of the Internal
Revenue Code of 1986, as amended. This ownership change substantially limits
the ability of the Company to utilize its net operating loss carryforwards in
future years.

Income tax computed at the federal statutory rate for the year ended
December 31, 1994, for the nine months ended December 31, 1993, and for the
year ended March 31, 1993 differs from the amount provided as follows:

<TABLE>
<CAPTION>
Nine Months
Year Ended Ended Year Ended
December 31, 1994 December 31, 1993 March 31, 1993
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Tax (benefit) at statutory rate $(5,888,648) (34.0)% $(1,110,860) (34.0)% $(283,016) (34.0)%
State taxes, less federal tax
effect ........................ (571,545) (3.3) (107,448) (3.3)
Surtax exemption ............... (8,414) (1.0)
Change in valuation allowance .. 4,598,162 26.5 1,047,001 32.0 117,140 14.1
Nondeductible amortization and
write-off of intangibles ...... 1,548,642 8.8 214,060 6.6 203,822 24.5
Merger expense ................. 484,294 2.8
Other .......................... (148,641) (0.8) 7,251 0.2 91,218 10.9
----------- ---- ----------- ---- --------- ----
Provision for income taxes ..... $ 22,264 -- $ 50,004 1.5% $ 120,750 14.5%
=========== ==== =========== ==== ========= ====
</TABLE>

Components of deferred income taxes at December 31, 1994 and 1993 are as
follows:

1994 1993
---------- ------------
Deferred income tax assets:
Net operating loss carryforwards ..... $10,898,834 $5,336,764
Start-up costs ....................... 111,458 185,091
Allowance for doubtful accounts ...... 163,079 182,067
Other ................................ 552,418 590,175
----------- ----------
11,725,789 6,294,097
----------- ----------

F-61
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Deferred income tax liabilities:
Property and depreciation ............ (5,101,717) (4,268,188)
----------- ----------
Valuation allowance ................... (6,624,072) (2,025,909)
----------- ----------
Net deferred income taxes ............. $ -- $ --
=========== ===========

Increases in the Company's valuation allowance during the year ended
December 31, 1994 reflect management's assessment of the Company's ability to
realize, in future periods, deferred tax assets.

11. EMPLOYEE BENEFITS

401(K) Savings Plan. Effective March 1, 1993, the Company adopted a
voluntary savings plan for eligible employees under Section 401(k) of the
Internal Revenue Code, whereby participants may contribute a percentage of
their compensation up to the maximum annual amount allowed under the Code.
The plan provides for matching contributions by the Company of the first 5%
of salary contributed by the employee. The Company's contributions are made
on a quarterly basis with the Company stock which vests upon the completion
of three years of service by the employee.

Expense recorded for the savings plan was $203,134, $249,241, and $31,624
for the year ended December 31, 1994, the nine months ended December 31,
1993, and the year ended March 31, 1993, respectively.

Stock Option Plan. The Company's 1991 Amended and Restated
Statutory-Nonstatutory Stock Option Plan (the "Plan") permits the Company to
grant statutory and non-statutory options to purchase shares of common stock
to certain directors, officers, and other key employees of the Company as
well as certain consultants and advisors. There are 3,500,000 shares of the
Company's common stock reserved for issuance under the Plan. Options
generally become exercisable over a three-year period, with a portion of the
shares issuable pursuant to each option becoming exercisable at each
anniversary of the grant. The options expire ten years after the date of
grant.

During 1994, the Company approved a plan to offer new option grants to
certain officers and other key employees who had previously received stock
option grants. The plan allowed employees the opportunity to cancel their
previous grant and receive a new grant of stock options. The number of shares
that may be purchased under the new stock option grant was determined by a
formula based on the relationship of the exercise price of the previous grant
to the closing price of the Company's common stock on February 1, 1994, the
date of the new option grant. Participation in the exchange of stock option
grants by employees was completely voluntary. The total number of options
outstanding that were eligible for exchange was 638,400 with exercise prices
ranging from $2.75 to $12.75. The total number of options exchanged was
391,400 with exercise prices ranging from $2.75 to $12.75. In return for the
options exchanged, 166,646 new options were issued at an exercise price of
$2.13 and the previously issued options were cancelled.

In March 1995, in connection with the merger of the Company with Oncology
Therapies, Inc. (see Note 1), the Company approved a plan to loan to
employees the proceeds necessary to exercise all vested options and
simultaneously repurchase the shares of common stock issued in connection
with the exercise of such options and repay the amounts loaned to employees.
This plan was executed simultaneously with the closing of the merger. In
total, $1,414,548 was loaned to employees and subsequently repaid to the
Company and options to purchase 771,669 shares of common stock were exercised
with exercise prices ranging from $1.00 to $2.13. These shares of common
stock were then repurchased by the Company at a merger consideration of
$2.625 per share. All other outstanding options were canceled as part of the
merger agreement.

12. RELATED PARTY TRANSACTIONS

The Company had, through September 1993, an office lease agreement for one
of its centers with a corporation, the stock of which is owned in part by the
former chairman of the Company. Rental expense of $32,000 and $48,000 was
incurred on this lease during the nine months ended December 31, 1993 and the
year ended March 31, 1993, respectively.

F-62
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company has entered into an office lease agreement for one of its
centers with a corporation, the stock of which is owned in part by a former
director of the Company. Rental expense of $101,328, $74,473, and $94,800 was
incurred on this lease for the year ended December 31, 1994, for the nine
months ended December 31, 1993, and for the year ended March 31, 1993,
respectively.

In March 1992, the Company began leasing an airplane for use in managing
its centers and investigating acquisition and development opportunities, some
of which are not accessible to commercial aircraft, from a corporation that
is primarily owned by the former chairman of the Company at the rate of
$7,000 per month. Rental expense of $84,000, $63,000, and $84,000 was
incurred on this lease for the year ended December 31, 1994, for the nine
months ended December 31, 1993, and for the year ended March 31, 1993,
respectively. The Company incurred other third-party costs in connection with
the operation of the leased airplane.

Prior to the merger, CTC had entered into a service contract with an
entity, related by common owners, to provide technical services. CTC paid a
monthly fee based on the number of scans read. Expenses included in cost of
revenues related to this contract were $502,878, $392,422, and $632,083 for
the year ended December 31, 1994, the nine months ended December 31, 1993 and
the year ended March 31, 1993, respectively.

CTC owns a 2.5% interest in a limited partnership that leases office space
to the Company under an agreement that expires in September 1995. Rental
expense related to this space was $80,722, $62,918, and $81,341 for the year
ended December 31, 1994, the nine months ended December 31, 1993 and the year
ended March 31, 1993, respectively.

13. COMMITMENTS AND CONTINGENCIES

The Company leases office space, generally under ten-year noncancelable
operating lease agreements. The lease agreements contain escalation clauses
for increases in operating costs. In addition, the Company leases an airplane
under a noncancelable operating lease with a related party and certain
machinery and equipment under capital and operating leases. Aggregate future
minimum lease commitments under operating leases and capital leases with an
initial or remaining lease term in excess of one year, including amounts
payable to related parties, together with the present value of the minimum
capital lease payments at December 31, 1994 are as follows:

<TABLE>
<CAPTION>
Operating Capital
Year Ending December 31, Leases Leases
- ------------------------------------------------------ ---------- -----------
<S> <C> <C>
1995 ................................................. $ 1,932,266 $1,129,993
1996 ................................................. 1,890,832 783,403
1997 ................................................. 1,735,852 317,018
1998 ................................................. 1,656,045 304,935
1999 ................................................. 1,630,129 25,361
Thereafter ........................................... 6,160,418 --
----------- ----------
Total ............................................ $15,005,542 2,560,710
===========
Less amounts representing interest and executory costs (355,223)
Present value of minimum payments .................... 2,205,487
Less current portion ................................. (952,989)
----------
Long-term portion of capital lease obligations ....... $1,252,498
==========
</TABLE>

Rental expense, including rent paid to related parties, for the year ended
December 31, 1994, the nine months ended December 31 1993, and the year ended
March 31, 1993 was $2,153,924, $1,616,981, and $1,823,471, respectively.

F-63
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company carries liability insurance covering general and medical
malpractice liability with annual limits of $15 million per occurrence and in
the aggregate with respect to each of its centers. Management believes such
coverage is adequate to cover claims, if any, that may result.

Since June 1992, a federal grand jury sitting in Atlanta, Georgia had been
investigating whether referrals by physicians who are stockholders of the
Company have been in compliance with the Medicare law. Beginning in October
1994, the Company engaged in active negotiations with representatives of the
Federal Government to resolve the matters that have been the subject of this
investigation of the Company. On December 15, 1994, the Company and the
Federal Government entered into an agreement to settle the grand jury
investigation. Under the terms of the settlement, the Company consented to a
civil judgment, providing for its payment of $2,000,000 and an injunction
against violations of the Medicare "anti-kickback" law. In agreeing to the
settlement, the Company did not admit that any of its activities violated the
Medicare law or any other law. An expense of $2,000,000 related to the
settlement is included in the Company's statement of operations for the year
ended December 31, 1994.

On February 16, 1995, six former stockholders of RCI filed a consolidated
amended Class Action Complaint in Delaware Chancery Court (In re Radiation
Care, Inc. Shareholders Litigation. Consolidated C.A promptly. No. 13805)
against RCI. Thomas Haire, Gerald King, Charles McKay, Abraham Gosman.
Oncology Therapies of America, Inc. ("OTA") and A.M.A. Financial Corporation,
("AMA") alleging that the RCI stockholders should have received greater
consideration for their RCI stock when RCI was merged with and into the
Company. Plaintiffs allege breaches of fiduciary duty by the former RCI
directors, as well as aiding and abetting such fiduciary duty breaches by Mr.
Gosman, OTA and AMA. Plaintiffs seek compensatory or recissionary damages of
an undisclosed amount on behalf of all RCI stockholders, together with an
award of the costs and attorneys' fees associated with the action. No class
has been certified in this litigation and plaintiffs' counsel have granted an
indefinite extension for the defendants to answer or otherwise respond to the
Complaint. Plaintiffs have taken no discovery and there has been virtually no
activity in the litigation since plaintiffs' filing of the consolidated
amended Class Action Complaint. The Company intends to file an answer denying
any liability in connection with this litigation.

On September 18, 1995, two former stockholders of RCI filed a Complaint
for Money Damages against RCI, OTA, Mr. Haire, Mr. King and Mr. McKay in the
Superior Court of Fulton County in the State of Georgia (Dennis E. Ellingwood
and Gregory W. Cotter v. Oncology Therapies, Inc., et al., Civil Action No.
34 727-E191464). Plaintiffs allege negligence, negligent misrepresentation
and a breach of fiduciary duty by former RCI directors Haire, King and McKay
and by RCI and OTA on the principles of respondeat superior. Plaintiffs seek
compensatory money damages in an amount of not less than $165,925 for one
plaintiff and $32,997 for the other, plus punitive damages, interest, costs
and attorneys fees. Plaintiffs allege essentially that they were induced to
invest in RCI as a result of a variety of misrepresentations and material
omissions made by RCI in its communications with its stockholders.

The Company believes that it has meritorious defense in all the
above-described pending actions. Although the resolution of these matters may
have a material adverse effect on the Company's financial condition, results
of operations and liquidity, the ultimate outcome of the litigation described
in the preceding three paragraphs cannot presently be determined.
Accordingly, no provision for any loss that may result upon resolution of
these suits has been made in the consolidated financial statements.

F-64
<PAGE>

RADIATION CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

A substantial portion of the Company's revenues has historically been
derived from patients referred to its centers by physicians who are
stockholders of the Company, and loss of such referrals would have a material
adverse effect on the future operations of the Company. In August 1993, OBRA
1993 was enacted. OBRA 1993 contains provisions that will, beginning January
1, 1995, restrict most physicians from referring Medicare or Medicaid
patients to radiation therapy and diagnostic imaging providers in which they
have a financial interest. OBRA 1993 contains an exemption for a financial
interest consisting of the ownership of investment securities that may be
purchased on terms generally available to the public in a company with $75
million of stockholders' equity as of its most recent fiscal year on or
preceding December 31, 1994 and with securities listed on a national trading
market, including NASDAQ. As of December 31, 1994, the Company's
stockholders' equity was approximately $47.6 million. Due to the merger
discussed in Note 1, the Company's management does not believe OBRA 93 will
adversely affect the Company's future operations.

14. ACQUISITIONS

On April 3, 1992, the Company exchanged 543,675 shares of its common stock
for all of the outstanding shares of common stock of Computerized Tomography
Center, Inc. ("CTC"). CTC operates an outpatient diagnostic imaging facility.
The combination has been accounted for as a pooling of interests and the
historical financial statements of the Company have been restated to include
the operations of CTC.

On May 8, 1992, the Company purchased the net assets of Peachtree Medical
Diagnostics Center ("PMDC"), a center of Peachtree Medical Diagnostics, L.P.,
for a total purchase price of approximately $3,951,950 (before acquisition
costs of $73,246), payable with 395,195 shares of the Company's common stock.
PMDC operates an outpatient diagnostics imaging facility. The excess of the
purchase price over the fair value of the net assets was $4,340,208. The
Company assumed liabilities of $1,416,000 in connection with the acquisition.
The acquisition has been accounted for as a purchase and has been included in
the Company's operations from May 8, 1992.

On May 27, 1992, the Company purchased the common stock of Biltmore
Advanced Imaging Center, Inc. ("BAIC"), which operates an outpatient
diagnostic imaging facility, for a total purchase price of $3,835,000 (before
acquisition costs of $495,000), payable with 464,846 shares of the Company's
common stock. The Company guaranteed by acquiring a letter of credit in the
amount of $3,250,000 that the value of the 464,846 shares to be sold by the
former shareholders of BAIC through January 31, 1993 would be at least
$3,250,000. The Company satisfied its additional purchase price obligation to
such shareholders by paying cash of $1,491,664 in February 1993. The excess
of the purchase price over the fair value of the net assets was $4,605,313.
The Company assumed liabilities of $2,812,000 in connection with the
acquisition. The acquisition has been accounted for as a purchase and has
been included in the Company's operations from May 27, 1992.

On June 10, 1992, the Company purchased the net assets of Community
Clinicians Leasing, L.P. ("CCL") for a total purchase price of $4,760,000
(before acquisition costs of $571,000), payable with 568,358 shares of the
Company's common stock. CCL owns a 65% interest in ParkView Imaging Center,
L.P. ("PVIC"), which operates an outpatient diagnostic imaging facility (see
Note 4). The Company guaranteed that the value of the shares issued would be
a minimum of $3,500,000 on or about the effective date of the Registration
Statement which covered the underlying shares or the Company would issue such
number of additional shares necessary to bring the consideration at that date
to $3,500,000. Accordingly, as of February 11, 1993, the Company issued
293,175 shares of common stock in satisfaction of this obligation. Since the
additional consideration was contingent on the future market value of the
shares issued on June 10, 1992, the issuance of such additional shares does
not result in an increase to the acquisition purchase price or to paid-in
capital. The Company assumed liabilities of $3,097,000 in connection with the
acquisition. The acquisition has been accounted for as a purchase and has
been included in the Company's operations from June 10, 1992.

F-65
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors
Aegis Health Systems, Inc.

We have audited the accompanying balance sheets of Aegis Health Systems,
Inc. as of December 31, 1994 and 1993, and the related statements of
operations and cash flows for each of the three years in the period ended
December 31, 1994. 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 financial position of Aegis Health Systems,
Inc. as of December 31, 1994 and 1993, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1994 in conformity with generally accepted accounting principles.

COOPERS & LYBRAND, L.L.P.

Oklahoma City, Oklahoma
August 24, 1995

F-66
<PAGE>

AEGIS HEALTH SYSTEMS, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
--------------------------
March 31,
1995 1994 1993
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Trade accounts receivable ........................ $ 214,450 $ 266,066 $ 284,767
Other current assets ............................. 36,429 -- --
----------- ----------- -----------
Total current assets ......................... 250,879 266,066 284,767
Property, plant and Equipment, net of accumulated
depreciation ...................................... 1,318,775 1,397,386 1,574,327
Organizational Costs, net .......................... -- -- 1,282
Other Assets ....................................... 3,114 3,309 3,309
----------- ----------- -----------
Total assets ................................. $ 1,572,768 $ 1,666,761 $ 1,863,685
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Book overdraft ................................... $ 32,234 $ 81,126 $ 43,902
Accounts payable and accrued liabilities ......... 295,942 238,886 210,636
Current maturities of long-term debt ............. 1,110,001 1,040,415 809,838
Current maturities of capital lease obligations .. 33,120 32,296 242,176
----------- ----------- -----------
Total current liabilities .................... 1,471,297 1,392,723 1,306,552
Long-term obligations
Long-term debt ................................... 730,372 913,225 346,599
Capital lease obligations ........................ 129,213 137,807 292,525
----------- ----------- -----------
Total liabilities ............................ 2,330,882 2,443,775 1,945,676
Commitments and contingencies (Note 7) ............. -- -- --
Stockholder's deficit
Common stock, $1 par, 50,000 shares authorized,
5,001 shares issued and outstanding .............. 5,001 5,001 5,001
Distributions in excess of earnings ............. (763,115) (781,995) (86,992)
----------- ----------- -----------
Total stockholder's deficit .................. (758,114) (776,994) (81,991)
----------- ----------- -----------
Total liabilities and stockholder's deficit .. $ 1,572,768 $ 1,666,761 $ 1,863,685
=========== =========== ===========
</TABLE>

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

F-67
<PAGE>

AEGIS HEALTH SYSTEMS, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
---------------------- -------------------------------------
1995 1994 1994 1993 1992
--------- --------- ----------- ---------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Operating revenues ...................... $ 719,313 $ 608,079 $ 2,741,890 $2,034,582 $1,697,313
--------- --------- ----------- ---------- ----------
Costs and expenses
Operating expenses ..................... 270,953 215,712 813,404 606,817 491,254
General and administrative expenses .... 323,767 304,180 1,212,898 1,119,839 933,488
Interest expense ....................... 25,729 45,678 243,049 234,907 173,523
Other expense .......................... 4,577 1,610 26,303 10,528 863
--------- --------- ----------- ---------- ----------
Total costs and expenses ............. 625,026 567,180 2,295,654 1,972,091 1,599,128
--------- --------- ----------- ---------- ----------
Net Income (Note 5) ..................... 94,287 40,899 446,236 62,491 98,185
Distributions in excess of earnings,
beginning of period ................... (781,995) (86,992) (86,992) (19,944) (71,797)
Distributions to stockholder ............ (75,407) (96,606) (1,141,239) (129,539) (46,332)
--------- --------- ----------- ---------- ----------
Distributions in excess of earnings, end
of period ............................. $(763,115) $(142,699) $ (781,995) $ (86,992) $ (19,944)
========= ========= =========== ========== ==========
</TABLE>

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

F-68
<PAGE>

AEGIS HEALTH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Three Months
Ended
March 31, Year Ended December 31,
--------------------- ------------------------------------
1995 1994 1994 1993 1992
--------- --------- ----------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net Income ........................... $ 94,287 $ 40,899 $ 446,236 $ 62,491 $ 98,185
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization ....... 78,611 78,273 315,271 278,766 203,423
Change in assets and liabilities ....
Increase (decrease) in trade
accounts receivable ............. 51,616 (14,062) 18,701 (160,733) 42,350
Increase (decrease) in other current
assets ........................... (36,429) (30,965) -- -- 30,621
Increase (decrease) in other assets 195 -- -- 2,966 (1,863)
Increase (decrease) in accounts
payable and accrued liabilities .. 57,056 74,244 28,250 170,714 9,847
--------- --------- ----------- --------- ---------
Net cash provided by operating
activities ....................... 245,336 148,389 808,458 354,204 382,563
--------- --------- ----------- --------- ---------
Cash flows used in investing activities
Capital expenditures ................. -- (3,166) (37,217) (256,325) (16,358)
Proceeds from sale of assets ......... -- -- -- -- 92,589
--------- --------- ----------- --------- ---------
Net cash provided (used) by
investing activities ............. -- (3,166) (37,217) (256,325) 76,231
--------- --------- ----------- --------- ---------
Cash flows provided by financing
activities
Borrowings under notes payable ....... -- -- 1,842,680 372,132 18,979
Payments on notes payable ............ (95,574) (136,308) (1,056,898) (360,660) (516,997)
Net borrowings (payments) on revolving
credit loans ........................ (17,693) 2,211 11,421 91,213 105,899
Principal payments on capital lease
obligations ......................... (7,770) (11,866) (464,429) (100,344) (20,119)
Distributions to stockholder ........... (75,407) (96,606) (1,141,239) (129,539) (46,332)
Increase (decrease) in book overdraft (48,892) 97,346 37,224 29,319 (224)
--------- --------- ----------- --------- ---------
Net cash provided (used) by
financing activities ............. (245,336) (145,223) (771,241) (97,879) (458,794)
--------- --------- ----------- --------- ---------
Net change in cash ..................... $ -- $ -- $ -- $ -- $ --
========= ========= =========== ========= =========
Supplemental cash flow information:
Cash paid during the year for interest $ 24,716 $ 45,678 $ 226,532 $ 202,665 $ 180,005
========= ========= =========== ========= =========
Supplemental disclosure of noncash
investing and financing activities:
Capital lease obligations assumed ... $ -- $ 99,831 $ 99,831 $ 611,130 $ --
========= ========= =========== ========= =========
</TABLE>

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

F-69
<PAGE>

AEGIS HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Aegis Health Systems, Inc. (the "Company") was incorporated in the State
of Oklahoma on May 19, 1989. The Company's primary business involves
providing lithotripsy services to hospitals, ambulatory surgery centers and
other health care facilities.

2. Summary of Significant Accounting Policies

Property, Plant and Equipment. Property, plant and equipment are recorded
at cost, or in the case of leased assets under capital leases, the present
value of future lease payments. When assets are sold or retired, the costs of
the assets and related accumulated depreciation are removed from the accounts
and any gain or loss is included in operations. Repairs and maintenance are
charged to expense as incurred.

Depreciation and amortization, including amortization of leased assets
under capital leases, are computed using the straight-line method over their
estimated useful lives as follows:

Buildings ................................. 31.5 years
Leasehold improvements .................... 10 years
Equipment ................................. 5-7 years
Furniture and office equipment ............ 7 years
Vehicles .................................. 5 years

Organizational Costs. Organizational costs are stated at cost and are
amortized under the straight-line method over their expected useful life of
five years.

Unaudited Interim Periods. The financial information as of March 31, 1995
and for the three-month periods ended March 31, 1995 and 1994 are unaudited.
The management of the Company believes that all adjustments, which consist
only of normal recurring adjustments, necessary for a fair presentation of
the balance sheet, statements of operations and statements of cash flows at
the date and for the period indicated have been included.

3. Property, Plant and Equipment

Property, plant and equipment consists of the following at December 31:

1994 1993
----------- ----------
Land and buildings ......................... $ 91,891 $ 91,891
Leasehold improvements ..................... 3,349 3,349
Equipment .................................. 2,102,713 1,595,950
Furniture and office equipment ............. 16,421 16,421
Vehicles ................................... 40,045 9,591
Leased assets under capital leases ......... 210,961 675,873
----------- ----------
2,465,380 2,393,075
Accumulated depreciation ................... (1,067,994) (818,748)
----------- ----------
Net property and equipment ................ $ 1,397,386 $1,574,327
=========== ==========

F-70
<PAGE>

AEGIS HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)

4. Long-Term Debt

Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
1994 1993
-------- ----------
<S> <C> <C>
Notes payable to banks, interest rates from 7.95% to
12%, due January 15, 1995 through October 1, 1998,
collateralized by accounts receivable and certain
property and equipment ................................. $ 135,258 $ 177,032
Notes payable to finance companies, interest rates from
11% to 21%, due May 1, 1995 through June 1, 1997,
collateralized by equipment ............................ 1,609,849 782,293
Revolving line of credit, interest at 9.75%, due October
4, 1995, collateralized by accounts receivable ......... 208,533 197,112
--------- ----------
1,953,640 1,156,437
Less current portion ................................... 1,040,415 809,838
--------- ----------
$ 913,225 $ 346,599
========== ==========
</TABLE>

All long-term debt is personally guaranteed by the Company's stockholder.

Aggregate maturities of long-term debt at December 31, 1994 are as
follows:

1995 ....... $1,040,415
1996 ....... 757,282
1997 ....... 115,078
1998 ....... 9,803
1999 ....... 10,669
Thereafter . 20,393
----------
$1,953,640
==========

5. Income Taxes

The stockholder of the Company has elected to adopt the provisions of
Subchapter S of the Internal Revenue Code of 1986. As a result, the Company
is not subject to corporate income taxes, except for taxes on capital gains,
if any. Accordingly, no provisions have been made in the accompanying
financial statements for federal and state income taxes since such taxes are
liabilities of the individual stockholder and the amounts thereof depend upon
his tax situation.

The Company's tax returns are subject to examination by federal and state
taxing authorities. In the event of an examination of such tax returns, the
liability of the stockholder could be changed if adjustments in the
distributable income were ultimately sustained by the taxing authorities.

6. Related Party Transactions

During 1994, the Company executed various notes payable to extinguish
certain debt of affiliated entities owned by the Company's stockholder. Prior
to executing the new notes, the Company had made all principal and interest
payments of the affiliates' debt. Principal amounts outstanding under such
notes payable totaled $703,791 at December 31, 1994.

Also, the Company paid certain operating expenses on behalf of these
affiliated entities. Amounts paid by the Company on behalf of the affiliated
entities for principal, interest and operating expenses totaled $1,078,837,
$145,813 and $44,489 for 1994, 1993 and 1992, respectively. Such amounts have
been included in distributions to the Company's stockholder.

F-71
<PAGE>

AEGIS HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)

7. Leases

Future minimum lease payments under capital and noncancelable operating
leases as of December 31, 1994 are as follows:

Capital Operating
Fiscal Year Lease Leases
- ----------------------------------------- ------ ---------
1995 .................................... $ 48,214 $35,706
1996 .................................... 47,802 23,804
1997 .................................... 45,741 --
1998 .................................... 45,741 --
1999 .................................... 24,327 --
Thereafter .............................. 1,865 --
-------- -------
Total minimum obligations .............. 213,690 $59,510
=======
Less estimated interest ................ 43,587
--------
Present value of net minimum obligations $170,103
========

Rent expenses amounted to approximately $36,773, $37,673 and $27,092 in
1994, 1993 and 1992, respectively.

8. Subsequent Event

On April 12, 1995, the Company sold all of the assets used in its business
of providing lithotripsy services to CCC National Lithotripsy, Inc. for
consideration totaling $7,134,815. Pursuant to the Agreement for Purchase and
Sale of Assets, the Company sold certain property, plant and equipment,
including two mobile lithotripter systems and certain accounts receivable and
cash in an amount not to exceed $230,000 and assigned existing service
contracts as well as leases related to one stationary lithotripter system and
two semi-tractors. The purchase price was derived based on the value of the
assets sold and the net revenues generated by the Company's lithotripsy
operations, which excludes certain administrative and other costs included in
the Company's financial statements.

As a result of the sale, the Company paid all of its remaining debt
obligations and presently has no operations.

F-72
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders of
Oncology & Radiation Associates, P.A.:

We have audited the accompanying balance sheets of Oncology & Radiation
Associates, P.A. (a Florida corporation) as of December 31, 1993 and 1994 and
as of September 12, 1995, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the period from inception
(September 1, 1992) to December 31, 1992 and for each of the two years in the
period ended December 31, 1994 and for the period from January 1, 1995 to
September 12, 1995. 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Oncology & Radiation
Associates, P.A. as of December 31, 1993 and 1994 and as of September 12,
1995, and the results of its operations and its cash flows for the period
from inception (September 1, 1992) to December 31, 1992 and for each of the
two years in the period ended December 31, 1994 and for the period from
January 1, 1995 to September 12, 1995, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Miami, Florida,
October 26, 1995.

F-73
<PAGE>

ONCOLOGY & RADIATION ASSOCIATES, P.A.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------------------
September 12,
1993 1994 1995
----------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................... $ 269,438 $ 6,256 $1,140,007
Accounts receivable, net of allowances of $5,747,352,
$6,131,128 and $5,863,246 in 1993, 1994 and 1995,
respectively .......................................... 1,156,251 1,499,834 2,006,767
Prepaid expenses ........................................ 33,777 73,792 70,732
----------- ---------- ----------
Total current assets ................................ 1,459,466 1,579,882 3,217,506
----------- ---------- ----------
Property and equipment, net ............................. 183,554 168,477 193,762
----------- ---------- ----------
Covenant not-to-compete, net of accumulated amortization
of $279,206 and $501,779 in 1994 and 1995, respectively 899,630 620,424 397,852
----------- ---------- ----------
Total assets ....................................... $ 2,542,650 $2,368,783 $3,809,120
=========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses ................... $ 650,306 $ 657,114 $1,068,180
Short-term debt ......................................... 318,750 -- --
Current portion of long-term debt ....................... 279,206 299,390 315,480
Due to stockholders ..................................... 1,103,058 900,259 642,495
Deferred revenue ........................................ -- -- 105,000
----------- ---------- ----------
Total current liabilities ........................... 2,351,320 1,856,763 2,131,155
Long-term debt, net of current portion .................. 620,424 321,034 82,372
----------- ---------- ----------
Total liabilities ................................... 2,971,744 2,177,797 2,213,527
----------- ---------- ----------
Commitments and contingencies (Notes 1 and 7)
Stockholders' equity:
Common stock, $.001 par value, 500 shares authorized, 156
shares issued and outstanding ......................... 1 1 1
Retained earnings (deficit) ............................. (429,095) 190,985 1,595,592
----------- ---------- ----------
Total stockholders' equity (deficit) ................ (429,094) 190,986 1,595,593
----------- ---------- ----------
Total liabilities and stockholders' equity
(deficit) ......................................... $ 2,542,650 $2,368,783 $3,809,120
=========== ========== ==========
</TABLE>

The accompanying notes to financial statements are an integral part of
these balance sheets.
F-74
<PAGE>

ONCOLOGY & RADIATION ASSOCIATES, P.A.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Period from Period
Inception From
(September 1, Year Ended January 1, 1995
1992) to December 31, to
December 31, ------------------------ September 12,
1992 1993 1994 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net patient revenue .................. $2,025,630 $7,847,205 $13,151,687 $10,857,924
Operating costs and expenses:
Salaries and benefits ............... 880,061 4,996,798 7,804,457 5,778,034
Medical supplies expense ............ 197,892 550,800 965,752 1,014,486
Data processing fees ................ 23,192 155,187 406,305 307,928
General and malpractice insurance ... 86,214 369,522 576,079 442,285
Depreciation and amortization ....... 12,870 80,254 348,170 262,296
Provision for bad debts ............. 71,798 30,000 -- --
Other operating expenses ............ 201,453 1,712,521 1,172,353 833,748
---------- ---------- ----------- -----------
Total operating costs and expenses 1,473,480 7,895,082 11,273,116 8,638,777
---------- ---------- ----------- -----------
Operating income (loss) .......... 552,150 (47,877) 1,878,571 2,219,147
Other income (expense):
Interest income ..................... -- 5,212 13,455 12,889
Interest expense .................... -- (3,778) (17,062) (27,429)
---------- ---------- ----------- -----------
Total other income (expense) ..... -- 1,434 (3,607) (14,540)
---------- ---------- ----------- -----------
Net income (loss) ................ $ 552,150 $ (46,443) $ 1,874,964 $ 2,204,607
========== ========== =========== ===========
</TABLE>

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

F-75
<PAGE>

ONCOLOGY & RADIATION ASSOCIATES, P.A.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

Common Stock Retained
---------------- Earnings
Shares Amount (Deficit) Total
------- ------ ----------- -----------
Issuance of shares at inception 63 $ 1 $ -- $ 1
Net income .................... -- -- 552,150 552,150
--- --- ----------- -----------
BALANCE, December 31, 1992 .... 63 1 552,150 552,151
Issuance of shares ........... 93 -- -- --
Net loss ..................... -- -- (46,443) (46,443)
Distributions to stockholders -- -- (934,802) (934,802)
--- --- ----------- -----------
BALANCE, December 31, 1993 .... 156 1 (429,095) (429,094)
Net income ................... -- -- 1,874,964 1,874,964
Distributions to stockholders -- -- (1,254,884) (1,254,884)
--- --- ----------- -----------
BALANCE, December 31, 1994 .... 156 1 190,985 190,986
Net income ................... -- -- 2,204,607 2,204,607
Distributions to stockholders -- -- (800,000) (800,000)
--- --- ----------- -----------
BALANCE, September 12, 1995 ... 156 $ 1 $ 1,595,592 $ 1,595,593
=== === =========== ===========

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

F-76
<PAGE>

ONCOLOGY & RADIATION ASSOCIATES, P.A.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Period from
Inception
(September 1,
1992) to Year Ended Period
December 31, ----------------------- From January 1, 1995
1992 1993 1994 to Sept. 12, 1995
----------- --------- ----------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .................... $ 552,150 $ (46,443) $ 1,874,964 $ 2,204,607
----------- --------- ----------- -----------
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization ....... 12,870 80,254 348,170 262,296
Provision for bad debts ............. 71,798 30,000 -- --
Changes in assets and liabilities:
Accounts receivable ................ (1,051,800) (205,229) (343,583) (506,933)
Prepaid expenses ................... -- (33,777) (40,015) 3,060
Accounts payable and accrued
expenses ......................... 380,977 325,605 6,808 411,066
Deferred revenue ................... -- -- -- 105,000
----------- --------- ----------- -----------
Total adjustments ................. (586,155) 196,853 (28,620) 274,489
----------- --------- ----------- -----------
Net cash (used in) provided by
operating activities ............ (34,005) 150,410 1,846,344 2,479,096
----------- --------- ----------- -----------
Cash flows from investing activities:
Capital expenditures ................. -- (54,487) (53,887) (65,008)
----------- --------- ----------- -----------
Cash flows from financing activities:
Borrowings on short-term debt ........ -- 318,750 -- --
Payments on short-term debt .......... -- -- (318,750) --
Payments on long-term debt ........... -- -- (279,206) (222,573)
Due to stockholders .................. 322,476 501,096 (202,799) (257,764)
Distributions to stockholders ........ -- (934,802) (1,254,884) (800,000)
----------- --------- ----------- -----------
Net cash provided by (used in)
financing activities ............ 322,476 (114,956) (2,055,639) (1,280,337)
----------- --------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents ............ 288,471 (19,033) (263,182) 1,133,751
Cash and cash equivalents, beginning of
period ............................... -- 288,471 269,438 6,256
----------- --------- ----------- -----------
Cash and cash equivalents, end of period $ 288,471 $ 269,438 $ 6,256 $ 1,140,007
=========== ========= =========== ===========
Supplemental disclosure of noncash
transactions:
Note payable under covenant not-
to-compete .......................... $ -- $ 899,630 $ -- $ --
=========== ========= =========== ===========
Contribution of property and
equipment ........................... $ 222,209 $ -- $ -- $ --
=========== ========= =========== ===========
</TABLE>

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

F-77
<PAGE>

ONCOLOGY & RADIATION ASSOCIATES, P.A.
NOTES TO FINANCIAL STATEMENTS
December 31, 1993 and 1994 and September 12, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Business

Oncology & Radiation Associates, P.A. (the "Company") is a Florida
corporation organized on September 1, 1992 to provide medical oncology and
radiation services. The Company operates two radiation departments at area
hospitals and eight medical oncology offices throughout Dade County. The
Company has a December 31 year-end.

On September 13, 1995, the Company entered into an asset purchase
agreement and a 20-year management service agreement with Continuum Care
Corporation ("Continuum"), an unaffiliated entity. Continuum will pay the
Company $10,653,000 which includes the purchase of certain assets, as
defined. Terms of the agreement specify $5,250,000 to be paid initially with
the remaining $5,403,000 to be paid semi-annually, incurring interest at 9%,
over the next five years. Continuum will receive the first $2.1 million of
the Company's profits, as defined, and an agreed-upon percentage of the
remaining profit over the term of the management service agreement.

b. Cash and Cash Equivalents

The Company considers all highly liquid investments with original
maturities of three months or less at the date of purchase to be cash
equivalents. Included in the cash and cash equivalents balances are
interest-bearing deposits of $1,068,536 in 1995. There were no
interest-bearing deposits at December 31, 1993 and 1994.

c. Property and Equipment

d. Accounts Receivable and Revenues

Accounts receivable are primarily amounts due under fee-for-service
contracts from third-party payors such as insurance companies (47%) and
government-sponsored health care programs (35%). These receivables are
presented net of an estimated allowance for contractual adjustments and
uncollectible receivables. Contractual adjustments result from the difference
between the rates for services performed and reimbursement amounts from the
government-sponsored health care programs and insurance companies for such
services.

At September 12, 1995, deferred revenue represents that portion of monthly
managed care fees received in advance and related to the period from
September 13, 1995 through September 30, 1995.

e. Income Taxes

The Company is an S Corporation for tax reporting purposes; as such, its
income is directly taxed to its stockholders and, therefore, no income tax
provision is reflected in the accompanying statements of operations. Had the
Company been a C Corporation during 1992, 1993, 1994 and 1995, the unaudited
pro forma provision for income taxes would be approximately $215,000, $0,
$731,000 and $860,000, respectively.

f. Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair value
of certain financial instruments. Cash and cash equivalents, accounts
receivable, prepaid expenses, other assets and accounts payable and accrued
expenses are reflected in the accompanying financial statements at cost which
approximates fair value.

g. Covenant Not-To-Compete

The covenant not-to-compete is amortized on a straight-line basis over the
three-year term of the related agreement (see Note 6).

F-78
<PAGE>

ONCOLOGY & RADIATION ASSOCIATES, P.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

December 31,
-------------------
September 12,
1993 1994 1995
-------- --------- ---------
Furniture, fixtures and equipment $277,147 $ 319,424 $ 390,060
Leasehold improvements .......... -- 11,502 13,923
-------- --------- ---------
277,147 330,926 403,983
Less: Accumulated depreciation .. (93,593) (162,449) (210,221)
-------- --------- ---------
$183,554 $ 168,477 $ 193,762
======== ========= =========

3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

December 31,
-------------------
September 12,
1993 1994 1995
-------- -------- -----------
Accounts payable ............ $249,587 $341,484 $ 380,000
Accrued hospital fees ....... 400,719 315,630 279,705
Accrued salaries and benefits -- -- 408,475
-------- -------- ----------
$650,306 $657,114 $1,068,180
======== ======== ==========

4. SHORT-TERM DEBT

Short-term debt consists of a note payable which bears interest at prime
plus 1%. This note was repaid in 1994.

5. DUE TO STOCKHOLDERS

Due to stockholders consists of the following:

<TABLE>
<CAPTION>
December 31,
----------------------- September 12,
1993 1994 1995
---------- -------- --------
<S> <C> <C> <C>
Amounts payable under employment agreements $ 365,391 $532,524 $477,202
Noninterest-bearing advances .............. 185,292 165,292 165,293
Distributions payable ..................... 552,375 202,443 --
---------- -------- --------
$1,103,058 $900,259 $642,495
========== ======== ========
</TABLE>

6. LONG-TERM DEBT

Long-term debt consists of a note payable for the Company's covenant
not-to-compete, which bears interest at 7% and is payable in monthly
installments of $27,778, through December 30, 1996. Future maturities are as
follows:

Year Ended December 31, Amount
-------------------------- --------
1995 ..................... $299,390
1996 ..................... 321,034
--------
$620,424
========

F-79
<PAGE>

ONCOLOGY & RADIATION ASSOCIATES, P.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)

7. COMMITMENTS AND CONTINGENCIES:

a. Employment Agreements

The Company has employment agreements with certain physicians and/or
stockholders. Future minimum payments under such agreements are as follows:

Year Ended December 31, Amount
-------------------------- ----------
1995 ..................... $1,316,417
1996 ..................... 734,083
1997 ..................... 425,000
1998 ..................... 175,000
1999 ..................... 175,000
----------
$2,825,500
==========

b. Insurance

The physicians employed by the Company are required to maintain insurance
coverage for their professional malpractice claims as a condition of
employment. Such insurance provides for coverage to the extent individual
claims do not exceed $1,000,000 per incident and $3,000,000 in the aggregate
per year. Upon termination of employment, each physician is required to
purchase insurance coverage for the remaining outstanding exposure related to
incidents which may be incurred, but reported subsequent to the termination
of their employment. Accordingly, the Company does not provide reserves for
such claims.

c. Operating Leases

The Company leases equipment and office space under operating leases which
expire through 1997. Future annual minimum payments under operating leases
are as follows:

Year Ended December 31, Amount
-------------------------- --------
1995 ..................... $244,655
1996 ..................... 213,769
1997 ..................... 138,568
--------
$596,992
========

Rent expense of approximately $2,213, $205,000, $286,000 and $213,000 was
incurred in 1992, 1993, 1994 and 1995, respectively.

d. Legal Matters

An employee of the Company has filed a claim with the Equal Employment
Opportunity Commission. The Company denies liability and is defending the
claim vigorously. The Company and legal counsel are unable to estimate the
amount of any potential loss as a result of this claim, but believes the
loss, if any, would not materially affect the operations of the Company.

F-80
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders of
Osler Medical, Inc.:

We have audited the accompanying balance sheet of Osler Medical, Inc. (a
Florida corporation) as of September 14, 1995, and the related statements of
operations and retained earnings and cash flows for the period from January
1, 1995 through September 14, 1995. 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 audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Osler Medical, Inc. as of
September 14, 1995, and the results of its operations and its cash flows for
the period from January 1, 1995 through September 14, 1995 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Miami, Florida,
October 26, 1995.

F-81
<PAGE>

OSLER MEDICAL, INC.

BALANCE SHEET
SEPTEMBER 14, 1995

<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................................................... $ 355,728
Accounts receivable, net of allowances of $505,031 ................................ 1,515,264
Prepaid expenses .................................................................. 34,736
----------
Total current assets .......................................................... 1,905,728
PROPERTY AND EQUIPMENT, net ....................................................... 1,179,409
OTHER ASSETS ...................................................................... 15,621
----------
Total assets .................................................................. $3,100,758
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ............................................. $ 814,413
Deferred income taxes ............................................................. 294,500
Current portion of long-term debt ................................................. 354,297
Due to stockholder ................................................................ 34,175
----------
Total current liabilities ..................................................... 1,497,385
LONG-TERM DEBT, net of current portion ............................................ 1,316,221
----------
Total liabilities ............................................................. 2,813,606
----------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 7)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 20,000 shares authorized, no shares issued and
outstanding ..................................................................... --
Common stock, Class A, $.01 par value, 20,000 shares authorized, 11,000 shares
issued and outstanding .......................................................... 110
Common stock, Class B, $.01 par value, 20,000 shares authorized, 1,000 shares
issued and outstanding .......................................................... 10
Retained earnings ................................................................. 287,032
----------
Total stockholders' equity .................................................... 287,152
----------
Total liabilities and stockholders' equity .................................... $3,100,758
==========
</TABLE>

The accompanying notes to financial statements are an integral part
of this balance sheet.

F-82
<PAGE>

OSLER MEDICAL, INC.

STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH SEPTEMBER 14, 1995

NET PATIENT REVENUE $9,031,159
----------
OPERATING COSTS AND EXPENSES:
Salaries and benefits 5,171,905
Medical supplies 473,530
Rent expense 610,023
Malpractice insurance 514,147
Depreciation expense 226,142
Provision for bad debts 63,634
Other operating expenses 1,084,642
----------
Total operating costs and expenses 8,144,023
----------
Operating income 887,136
INTEREST EXPENSE 78,919
----------
Income before provision for income taxes 808,217
PROVISION FOR INCOME TAXES (315,000)
----------
Net income 493,217
ACCUMULATED DEFICIT, beginning of period (206,185)
----------
RETAINED EARNINGS, end of period $ 287,032
==========

The accompanying notes to financial statements are an integral part
of this statement.

F-83
<PAGE>

OSLER MEDICAL, INC.

STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH SEPTEMBER 14, 1995

<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................... $ 493,217
-----------
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation ................................................................. 226,142
Provision for bad debts ...................................................... 63,634
Provision for deferred income taxes .......................................... 294,500
Changes in assets and liabilities:
Accounts receivable ......................................................... (213,343)
Prepaid expenses ............................................................ (34,736)
Other assets ................................................................ 28,300
Accounts payable and accrued expenses ....................................... 539,300
-----------
Total adjustments ......................................................... 903,797
-----------
Net cash provided by operating activities ................................. 1,397,014
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................................................... (203,659)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt .................................................. 2,181,080
Payments on long-term debt .................................................... (1,669,530)
Due to stockholders ........................................................... (1,626,086)
-----------
Net cash used in financing activities ..................................... (1,114,536)
-----------
Net increase in cash and cash equivalents ................................. 78,819
CASH AND CASH EQUIVALENTS, beginning of period ................................ 276,909
-----------
CASH AND CASH EQUIVALENTS, end of period ...................................... $ 355,728
===========
</TABLE>

The accompanying notes to financial statements are an integral part
of this statement.

F-84
<PAGE>

OSLER MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 14, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Business

Osler Medical, Inc. (the "Company") is a Florida corporation. Prior to
April 1, 1995, the Company operated as a partnership. The partnership was
originally organized in September 1985. The Company provides multi-specialty
medical services and has a December 31 year-end.

On September 15, 1995, the Company sold various assets to Continuum Care
Corporation, an unaffiliated entity.

b. Cash and Cash Equivalents

The Company considers all highly liquid investments with original
maturities of three months or less at the date of purchase to be cash
equivalents. Approximately $185,000 was in excess of Federally insured limits
at September 14, 1995.

c. Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.
Property and equipment are depreciated using accelerated methods over the
estimated useful lives of the assets ranging from 5 to 7 years. Leasehold
improvements are amortized over their estimated lives of 31.5 years using the
straight-line method.

d. Accounts Receivable and Revenues

Accounts receivable are primarily amounts due under fee-for-service
contracts from third-party payors such as insurance companies (27%), patients
(13%) and government-sponsored health care programs (60%). These receivables
are presented net of an estimated allowance for contractual adjustments and
uncollectible receivables. Contractual adjustments result from the difference
between the rates for services performed and reimbursement amounts from the
government-sponsored health care programs and insurance companies for such
services.

e. Income Taxes

The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes," which requires that deferred income taxes be recognized for
the tax consequences in future years of differences between the tax basis of
assets and liabilities and their financial reporting basis at rates based on
enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income.

f. Fair Value of Financial Instruments

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at September 14, 1995:

Furniture, fixtures and equipment . $ 2,347,283
Leasehold improvements ............ 531,320
-----------
2,878,603
Less: Accumulated depreciation .... (1,699,194)
-----------
$ 1,179,409
===========

F-85
<PAGE>

OSLER MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)

3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at
September 14, 1995:

Accounts payable .............. $176,006
Accrued self-insurance (Note 7) 362,420
Income taxes payable .......... 20,500
Accrued salaries and benefits . 255,487
--------
$814,413
========

4. DUE TO STOCKHOLDER

Due to stockholder represents a note bearing interest at 10.5%, payable in
monthly installments of approximately $7,700 through January 1996.

5. LONG-TERM DEBT

Long-term debt consists of the following at September 14, 1995:

<TABLE>
<CAPTION>
<S> <C>
Note payable in monthly installments of $14,206 through February 1999, bearing
interest at 7.5% and secured by various assets of the Company ................... $ 504,995
Note payable in monthly installments of $20,608 through August 2000, bearing
interest at 8.75% and secured by various assets of the Company .................. 985,275
Capital lease payable in monthly installments of $2,778 through 2000 bearing
interest
at 4% ........................................................................... 150,878
Capital lease payable in monthly installments of $525 through 1999, bearing
interest
at 8% ........................................................................... 23,570
Capital lease payable in monthly installments of $494 through 1997, bearing
interest
at 8% ........................................................................... 5,800
----------
$1,670,518
==========
</TABLE>

Future maturities for the twelve months ending September 14 are as
follows:

Capital
Notes Leases
Payable Payable Total
----------- ----------- -----------
1996 ............................. $ 293,363 $ 64,982 $ 358,345
1997 ............................. 327,600 41,880 369,480
1998 ............................. 355,488 39,636 395,124
1999 ............................. 282,661 39,636 322,297
2000 ............................. 231,158 13,885 245,043
----------- ----------- -----------
1,490,270 200,019 1,690,289
Less: Amount representing interest -- (19,771) (19,771)
----------- ----------- -----------
$ 1,490,270 $ 180,248 $ 1,670,518
=========== =========== (354,297)
Less: Current portion ............ -----------
$ 1,316,221
===========

F-86
<PAGE>

OSLER MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)

6. INCOME TAXES

The provision for income taxes reflects an estimate of taxes from the date
the Company elected C-Corporation status, April 1, 1995, to September 14,
1995, and consists of the following:

Current ........ $ 20,500
Deferred ....... 294,500
---------
$315,000
=========
Federal ........ 283,000
State .......... 32,000
---------
$315,000
=========

A reconciliation of the tax provision at the statutory rate of 34% to the
effective tax rate is as follows:

Tax provision at the statutory rate ............................... $ 283,000
State income taxes ................................................ 32,000
---------
$ 315,000
=========
Deferred income taxes consist of the following:
Book/tax differences in recording accounts receivable ............. $ 591,000
Book/tax differences in recording prepaid expenses ................ 13,500
Book/tax differences in recording accounts payable and accrued
expenses ....................................................... (310,000)
---------
$ 294,500
=========

7. COMMITMENTS AND CONTINGENCIES

a. Service Agreements

The Company has service agreements with terms in excess of one year.
Future payments under these agreements are as follows:

Twelve Months
Ending September 14 Total
---------------------- ----------
1996 ................. $ 200,197
1997 ................. 206,709
1998 ................. 212,437
1999 ................. 160,073
2000 ................. 115,111
Thereafter ........... 140,017
----------
$1,034,544
==========

b. Operating Leases

The Company leases equipment and office space under operating leases which
expire through 2001. All of these leases of office space are with a
partnership owned by stockholders of the Company. Future annual minimum
payments under operating leases are as follows:

F-87
<PAGE>

OSLER MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)

Twelve Months Related Unaffiliated
Ending September 14 Party Parties Total
-------------------- ---------- ------------- ----------
1996 ............... $ 698,434 $136,743 $ 835,177
1997 ............... 709,489 174,762 884,251
1998 ............... 747,616 138,153 885,769
1999 ............... 795,565 105,537 901,102
2000 ............... 995,538 40,750 1,036,288
Thereafter ......... 320,819 -- 320,819
---------- -------- ----------
$4,267,461 $595,945 $4,863,406
========== ======== ==========

Rent expense of approximately $610,000 was incurred for the period from
January 1, 1995 through September 14, 1995. All of this expense was
associated with the related party.

c. Malpractice Insurance

The physicians employed by the Company have insurance coverage for their
professional malpractice claims which is paid for them by the Company. Such
insurance provides for coverage to the extent individual claims do not exceed
$250,000--$2,000,000 per incident and $750,000--$4,000,000 in the aggregate
per year, depending on the physician's coverage.

Upon termination of employment, physicians are not required to purchase
insurance coverage for the remaining outstanding exposure related to
incidents which may be incurred, but reported subsequent to the termination
of their employment. Accordingly, the Company has reserved $362,420 to
provide for this self-insured exposure.

8. BENEFIT PLAN

The Company provides a defined contribution plan under Section 401(k) of
the Internal Revenue Code to substantially all of its employees. Employer
contributions are discretionary and no such contributions were made to the
plan for the period from January 1, 1995 through September 14, 1995.

9. RELATED PARTY

The Company has contracted to provide report reading services to an entity
owned by a stockholder of the Company. The Company received $14,500 for these
services for the period from January 1, 1995 through September 14, 1995.

F-88
<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Directors and Stockholders
of Continuum Care Corporation:

We have audited the accompanying balance sheets of Osler Medical (a
Partnership) as of December 31, 1994 and 1993, and the related statements of
income and partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Osler Medical as of
December 31, 1994 and 1993, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.

Hoyman, Dobson & Company, P.A.
July 27, 1995

F-89
<PAGE>

OSLER MEDICAL

BALANCE SHEETS
December 31, 1994 and 1993

<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .................................... $ 276,909 $ 615,221
Accounts receivable, net of allowance for doubtful accounts of
$469,693 in 1994 and $387,749 in 1993 ...................... 1,361,555 1,186,418
Loans receivable, related parties ............................ 4,000 --
---------- ----------
Total current assets ..................................... 1,642,464 1,801,639
---------- ----------
Property and equipment, at cost less accumulated depreciation
of $1,473,033 in 1994 and $1,275,019 in 1993 ............... 1,201,892 783,094
Deposits ..................................................... 43,921 7,520
---------- ----------
Total assets ............................................. $2,888,277 $2,592,253
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Line of credit ............................................... $ 569,801 $ 294,218
Accounts payable and accrued expenses ........................ 264,413 622,910
Refunds payable .............................................. 10,700 4,400
Current portion of obligation under capital lease ............ 5,187 4,710
Current portion of long-term debt ............................ 205,125 158,382
Distributions payable to partners ............................ 1,565,570 1,525,640
---------- ----------
Total current liabilities ................................ 2,620,796 2,610,260
---------- ----------
Long-term liabilities and Obligation under Capital Lease ..... 4,727 9,914
Long-term debt, less current portion ......................... 468,939 94,691
---------- ----------
Total long-term liabilities .............................. 473,666 104,605
---------- ----------
Total Liabilities ............................................ 3,094,462 2,714,865
Partners' capital ............................................ (206,185) (122,612)
---------- ----------
Total liabilities and partners' capital ...................... $2,888,277 $2,592,253
========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-90
<PAGE>

OSLER MEDICAL

STATEMENTS OF INCOME AND PARTNERS' CAPITAL
December 31, 1994 and 1993

1994 1993
----------- -----------
Revenue:
Gross patient revenue ............. $12,246,700 $10,685,039
Patient write-offs and refunds .... (3,255,819) (2,740,428)
----------- -----------
Net patient revenue ........... 8,990,881 7,944,611
Salaries, wages and benefits ...... 2,994,383 1,804,151
Professional fees ................. 89,724 63,821
Supplies .......................... 701,752 490,088
Utilities ......................... 54,952 43,587
Depreciation and amortization. .... 264,190 156,280
Rent .............................. 722,676 696,973
Other ............................. 867,527 1,388,282
----------- -----------
Total Operation Expenses .......... 5,695,204 4,643,182
----------- -----------
Operating income .............. 3,295,677 3,301,429
Other income (expense):
Miscellaneous income .............. 1,489 2,967
Interest expense .................. (93,543) (38,776)
Gain (loss) on disposal of assets . (3,773) 300
----------- -----------
Net other income (expense) .... (95,827) (35,509)
----------- -----------
Net Income ........................ 3,199,850 3,265,920
Partners' capital--beginning of
year .............................. (122,612) (99,310)
Contributed capital ............... -- 300,000
Distributions to the partners ..... (3,283,423) (3,589,222)
----------- -----------
Partners' capital--end of year .... $ (206,185) $ (122,612)
=========== ===========

The accompanying notes are an integral part of these statements.

F-91
<PAGE>

OSLER MEDICAL

STATEMENTS OF CASH FLOWS
Years ended December 31, 1994 and 1993

<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from patients ................................ $ 8,822,044 $ 7,779,722
Cash paid to suppliers and employees ....................... (5,794,423) (4,195,094)
Interest paid .............................................. (93,543) (38,776)
----------- -----------
Net cash provided by operating activities .............. 2,934,078 3,545,852
----------- -----------
Cash flows from investing activities:
Capital acquisitions ....................................... (686,751) (517,209)
Collection of related party loans .......................... -- 2,888
Related party loans extended ............................... (4,000) --
Deposit paid for capital acquisition ....................... (30,000) --
Proceeds from sale of capital assets ....................... -- 10,710
----------- -----------
Net cash used by investing activities .................. (720,751) (503,611)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt ............................... 700,000 80,000
Net borrowings under line of credit ........................ 275,583 59,354
Repayment of long-term debt ................................ (279,009) (84,673)
Distributions paid to partners ............................. (3,243,503) (3,422,627)
Partners' buy-in ........................................... -- 300,000
Payments on capital lease obligation ....................... (4,710) (4,277)
----------- -----------
Net cash used by financing activities .................. (2,551,639) (3,072,223)
----------- -----------
Net decrease in cash and cash equivalents .................. (338,312) (29,982)
Cash and cash equivalents, January 1 ....................... 615,221 645,203
----------- -----------
Cash and cash equivalents, December 31 ..................... $ 276,909 $ 615,221
=========== ===========
Reconciliation of net income to net cash provided by
operating activities:
Net income ................................................. $ 3,199,850 $ 3,265,920
----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation .............................................. 264,190 117,505
Loss (gain) on disposal of assets ......................... 3,773 (300)
Increase in accounts receivable ........................... (175,137) (163,109)
Increase in deposits ...................................... (6,401) --
Increase (decrease) in accounts payable and accrued
expenses ................................................. (358,497) 327,576
Increase (decrease) in refunds payable .................... 6,300 (1,740)
----------- -----------
Total adjustments ......................................... (265,772) 279,932
----------- -----------
Net cash provided by operating activities .............. $ 2,934,078 $ 3,545,852
=========== ===========
Supplemental schedule of noncash investing and financing
activities:
Increase in distributions to partners incurred from cash to
accrual conversion ....................................... $ (127,854) $ (170,818)
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-92
<PAGE>

OSLER MEDICAL
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 and 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business. Osler Medical, organized in September 1985 as a partnership, is a
multi-specialty medical group which utilizes the latest in diagnostic
equipment. Approximately fifty-seven percent of the Partnership's patients
are Medicare, Medicaid or Workers' Compensation recipients.

Basis of Accounting. The Partnership presents its financial statements
on the accrual basis of accounting. Revenues are recognized when they are
earned and expenses are recognized when they are incurred.

Cash Equivalents. For purposes of the statement of cash flows, the
Partnership considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

Depreciation Method. The cost of property and equipment is depreciated
over the estimated useful lives of the related assets. Leasehold improvements
are depreciated over the lesser of the term of the related lease or the
estimated useful lives of the assets. Depreciation is computed on the
accelerated cost recovery system and the modified accelerated cost recovery
system as appropriate.

Income Taxes. Osler Medical is not a taxpaying entity for federal income
tax purposes, and thus no income tax expense has been recorded in the
statements. Income from the partnership is taxed to the partners through
their individual returns.

2. PROPERTY AND EQUIPMENT

The following is a summary of property and equipment at December 31, 1994
and 1993:

1994
<TABLE>
<CAPTION>
Accumulated Net Book Useful
Cost Depreciation Value Lives
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Automobiles ..................... $ 11,347 $ 8,079 $ 3,268 5 years
Computer equipment .............. 175,437 55,638 119,799 5 years
Laboratory equipment ............ 2,102 922 1,180 5-7 years
Office equipment ................ 402,848 306,782 96,066 5-7 years
Medical equipment ............... 589,460 511,757 77,703 5-7 years
Diagnostic equipment ............ 945,701 535,691 410,010 5-7 years
Leasehold improvements .......... 523,951 37,608 486,343 5-39 years
Property held under capital lease 24,079 16,556 7,523 5 years
---------- ---------- ----------
Total ........................... $2,674,925 $1,473,033 $1,201,892
========== ========== ==========
</TABLE>

F-93
<PAGE>

OSLER MEDICAL
NOTES TO FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
Net
Accumulated Book Useful
1993 Cost Depreciation Value Lives
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Automobiles ..................... $ 11,347 $ 5,900 $ 5,447 5 years
Computer equipment .............. 43,732 23,647 20,085 5 years
Laboratory equipment ............ 20,131 18,308 1,823 5-7 years
Office equipment ................ 347,626 262,779 84,847 5-7 years
Medical equipment ............... 544,015 499,136 44,879 5-7 years
Diagnostic equipment ............ 848,087 429,902 418,185 5-7 years
Leasehold improvements .......... 219,096 21,798 197,298 5-39 years
Property held under capital lease 24,079 13,549 10,530 5 years
---------- ---------- --------
Total ........................... $2,058,113 $1,275,019 $783,094
========== ========== ========
</TABLE>

Depreciation expense charged to operations in 1994 and 1993 was $264,190
and $117,505, respectively.

The property held under capital lease is diagnostic equipment.

3. LINE OF CREDIT

At December 31, 1994, Osler had three lines of credit available with a
bank totaling $800,000. As of December 31, 1994 there were outstanding draws
against the lines of $569,801, $369,801 of this amount is due on demand and
$200,000 is due March 31, 1995. Interest is payable monthly on all three
lines of credit at the bank prime rate (8.5% at December 31, 1994) plus 2.0%.
The lines of credit are collateralized by all accounts receivable, machinery,
furniture, fixtures, equipment and leasehold improvements of Osler Medical.
The partners of Osler Medical have personally guaranteed the debts.

Osler Medical had a $300,000 line of credit with a bank at December 31,
1993. As of December 31, 1993 there were outstanding draws against the line
of $294,218 which were due March 31, 1994. Interest is payable monthly at the
bank prime rate (6.0% at December 31, 1994). The line of credit is
collateralized by all accounts receivable, machinery, furniture, fixtures,
equipment and leasehold improvements of Osler Medical. The partners of Osler
Medical have personally guaranteed the debt.

4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following is a summary of accounts payable and accrued expenses at
December 31, 1994 and 1993:

1994 1993
-------- --------
Accounts payable $137,476 $448,619
Accrued wages 44,191 56,007
Contract labor 17,942 91,059
Accrued vacation 29,690 --
Other accrued liabilities 35,114 27,225
-------- --------
$264,413 $622,910
======== ========

Employees of Osler Medical are entitled to paid personal leave days,
depending on job classifications, length of service and other factors. Until
December 31, 1994, the Company did not have an accounting software system
which tracked accrued personal days. It is, therefore, impracticable for
Osler Medical to estimate the amount of the liability at December 31, 1993,
and accordingly, no liability has been recorded. The amount of compensated
absences at December 31, 1994 can be reasonably determined and the liability
has been recorded in accounts payable and accrued expenses in the
accompanying financial statement.

F-94
<PAGE>

OSLER MEDICAL
NOTES TO FINANCIAL STATEMENTS--(Continued)

5. LONG TERM DEBT

Long term debt outstanding as of December 31, 1994 and 1993 consists of
the following:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Note payable to bank in monthly installments of $14,026 including
interest at 7.5%, beginning February 1994; secured by machinery,
furniture and equipment .......................................... $ 579,373 $ --
Note payable to bank; principal and interest due in full on
January 8, 1994; interest accrues at .5% over the bank prime rate
(6.0% at December 31, 1993); secured by machinery, furniture and
equipment ........................................................ -- 80,000
Note payable to P.A. of partner in monthly installments of $7,738,
including interest at 8.75%, beginning February 1991,
uncollateralized ................................................. 94,691 173,073
--------- ---------
Total .............................................................. 674,064 253,073
Less current portion ............................................... (205,125) (158,382)
--------- ---------
Total long-term debt ............................................... $ 468,939 $ 94,691
========= =========
</TABLE>

Following are maturities of long-term debt for each of the next five
years:
Year ending December 31, Amount
-------------------------- --------
1995 ..................... $205,125
1996 ..................... 146,089
1997 ..................... 149,163
1998 ..................... 160,743
1999 ..................... 12,944
--------
$674,064
========

Total interest expense for the year ended December 31, 1994 and 1993 was
$93,543 and $38,776, respectively.

6. OPERATING LEASE

Osler Medical is the lessee of office space and equipment under various
leases expiring in various years through 2002. Some of the leases are with
related parties, see Note 11.

Minimum future rental payments under non-cancelable operating leases
having remaining terms in excess of one year as of December 31, 1994 are as
follows:

Year ending December 31, Amount
----------------------------------------- ----------
1995 .................................... $ 843,814
1996 .................................... 870,673
1997 .................................... 885,561
1998 .................................... 887,655
1999 .................................... 904,252
Subsequent to 1999 ...................... 1,087,255
----------
Total minimum future rental payments .... $5,479,210
==========

Osler Medical has several leases for office space and equipment with a
partnership of two of the partners of Osler Medical. These leases have
scheduled rent increases calculated as follows: the base rent is increased
annually

F-95
<PAGE>

OSLER MEDICAL
NOTES TO FINANCIAL STATEMENTS--(Continued)

from the previous years rent by the greater of six percent or any increase in
the consumer price index (CPI). However, that percent is never to exceed
twelve percent or be greater than two percent above the published CPI.

Rent expense paid for operating leases for the year ended December 31,
1994 and 1993 was $771,173 and $731,278, respectively.

7. CAPITAL LEASE

Osler Medical is the lessee of diagnostic equipment under a capital lease
expiring in 1996. The asset and liability under this capital lease are
recorded at the lower of the present value of the minimum leases payments or
the fair market value of the asset. The asset is depreciated over the lesser
of the lease term or its estimated productive life. Depreciation of this
asset is included in depreciation expense for 1994 and 1993.

Minimum future lease payments under the capital lease as of December 31,
1994 are as follows:

Year ending December 31, Amount
- -------------------------------------------- -------
1995 ....................................... $ 5,920
1996 ....................................... 4,940
-------
Total minimum lease payments ............... 10,860
Less: amount representing interest ......... 946
-------
Present value of net minimum lease payments. $ 9,914
=======

Total interest expense on this capital lease was $1,210 and $1,643 for the
years ended December 31, 1994 and 1993, respectively.

8. MAINTENANCE AND SERVICE AGREEMENTS

The Partnership has entered into several equipment maintenance agreements
and one service agreement with a related party having various expiration
dates through the year 2000.

Minimum future payments under maintenance and service agreements having
remaining terms in excess of one year as of December 31, 1994 are as follows:

Year ending December 31, Amount
- ------------------------------------ ----------
1995 ............................... $ 222,687
1996 ............................... 204,035
1997 ............................... 207,810
1998 ............................... 214,342
1999 ............................... 137,728
Subsequent to 1999 ................. 214,957
----------
Total minimum future rental payments $1,201,559
==========

Maintenance and service costs charged to operations under these agreements
for the years ended December 31, 1994 and 1993 were $125,322 and $117,209,
respectively.

9. EMPLOYEE RETIREMENT PLAN

The Partnership sponsors a profit-sharing plan which allows substantially
all full-time employees to defer compensation under Section 401 (k) of the
Internal Revenue Code and the employer to electively contribute to the plan.
Employer contributions to the plan are made at the discretion of the Board of
Directors.

There were no employer contributions made to the plan for the years ended
December 31, 1994 and 1993.

F-96
<PAGE>

OSLER MEDICAL
NOTES TO FINANCIAL STATEMENTS--(Continued)

10. INCOME TAXES

The partnership is not subject to income tax. Income is taxed directly to
its partners. The partnership reported income of approximately $3,083,700 and
$3,100,500 for income tax purposes, for the years ended December 31, 1994 and
December 31, 1993, respectively. The difference between taxable income and
the income reflected in the financial statements results primarily from
timing differences in reporting revenues and expenses for financial and tax
purposes. Such timing differences result from the use of the accrual basis
method of accounting for financial reporting and cash basis method for tax
reporting.

11. RELATED PARTY TRANSACTIONS

Osler Medical has several operating leases with a partnership of two of
the partners in Osler. The leases are for office space and equipment. The
leases for office space are for ten years beginning on dates from January
1990, to December 1990. Rental expense for the office space was $658,475 and
$636,407 for the years ended December 31, 1994 and 1993, respectively. Future
minimum lease payments under these leases are included in Note 6. The
equipment lease with the partnership ended in April 1993. At the end of the
lease, the lessor offered and Osler chose to exercise an option to purchase
the leased equipment for $1. This bargain purchase was not part of the
original operating lease agreement. Rental expense under this lease for the
year ended December 31, 1993 was $56,000.

Osler Medical also entered into a management agreement with the
partnership described above. The management agreement is for a term of ten
years beginning on December 1990. Management expense under this agreement was
$64,201 and $60,566 for the years ended December 31, 1994 and 1993,
respectively. Minimum future payments under this agreement are included in
Note 8.

Osler Medical has a note payable to a P.A. owned by one of the partners of
Osler Medical. The outstanding balance on this note at December 31, 1994 and
1993 was $94,691 and $173,073, respectively. See Note 5 for the terms of the
note.

Osler Medical has contracted to provide report reading services to a
Company owned by one of the partners of Osler Medical. The Company paid Osler
$33,946 and $61,986 for reading services for the years ended December 31,
1994 and December 31, 1993, respectively.

12. CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Partnership to
concentrations of credit risk consist primarily of temporary cash
investments. The Partnership places its temporary cash investments with a
financial institution. The amount of credit exposure in excess of
federally-insured limits at December 31, 1994 and December 31, 1993 was
$260,596 and $163,397, respectively.

13. COMMITMENTS AND CONTINGENCIES

A. Self Insurance

The Partnership has an agreement whereby it is self insuring the health
care of its employees and covered dependents up to $10,000 per year per
employee and covered dependents. Health care expenses of covered individuals
in excess of $10,000 per year are paid out of insurance purchased by the
Partnership. Administration of the self insurance is handled by an insurance
company. Funds advanced for claims are recorded as current assets and charged
to expenses as claims are paid. The annual aggregate stop loss under this
insurance plan was approximately $293,000 and $138,000 for the years ended
December 31, 1994 and 1993, respectively. The annual aggregate liability
calculated by the insurance company for the insurance coverage for years
ended December 31, 1994 and 1993 was $148,950 and $137,976, respectively. The
total amount of claims and premiums paid by the Partnership under this policy
for the years ended December 31, 1994 and 1993 were $207,337 and $189,122,
respectively. The Partnership has accrued $35,114 and $27,225 at December 31,
1994 and 1993 for claims incurred but not reported.

F-97
<PAGE>

OSLER MEDICAL
NOTES TO FINANCIAL STATEMENTS--(Continued)

B. Professional Employment Agreement

Osler Medical entered into an employment agreement with a physician on
July 14, 1994. Under this agreement, the partnership will pay the physician
$10,000 as an incentive to exercise a partnership purchase option. If the
option is not exercised the incentive money must be repaid to Osler Medical.
In addition, the agreement guarantees the physician a monthly gross salary of
$10,000 for the first six months of employment. Starting the seventh month of
employment, the physician will be paid based upon a compensation formula in
the agreement. The agreement ends July 9, 1997 unless terminated prior to
that date with 120 days written notice and mutual agreement of the parties.

14. SUBSEQUENT EVENTS

A. Line of Credit

The Partnership entered into a line of credit for $198,603 in April 1995.
The funds were borrowed to pay off an existing line of credit due on May 31,
1995. This line of credit is due June 30, 1995. Interest is payable monthly
at the bank prime rate plus 2.0%. The line is secured by all accounts
receivable, machinery, equipment, furniture, fixtures and leasehold
improvements of Osler Medical and is cross-collateralized. The line is
personally guaranteed by the partners of Osler Medical.

The Partnership entered into a line of credit on June 21, 1995 for
$500,000. The amount paid off an existing $300,000 line of credit. The line
is due on demand. Interest is payable monthly at the bank prime rate plus
2.0%. The line is secured by all accounts receivable, machinery, equipment,
furniture, fixtures and leasehold improvements of Osler Medical and is
cross-collateralized. The line is personally guaranteed by the partners of
Osler Medical.

On July 12, 1995, the Partnership consolidated its three existing lines of
credit ($300,000, $198,603 and $500,000) into a note of $998,603. The note is
payable in monthly installments of $20,608, including interest at 8.75% per
annum, beginning August 17, 1995. The note is collateralized by all accounts
receivable, machinery, equipment, furniture, fixtures, and leasehold
improvements of Osler Medical and is cross-collateralized. The note is
personally guaranteed by the partners of Osler Medical. The following
maturities of this note payable are as follows:

Year ending December 31, Amount
-------------------------- --------
1995 ..................... $ 83,217
1996 ..................... 199,721
1997 ..................... 199,721
1998 ..................... 199,721
1999 ..................... 116,502
--------
Subsequent to 1999 ....... $998,603
========

B. Capital Lease

The Partnership signed a five year capital lease agreement on March 17,
1995. The lease is for diagnostic equipment valued at $150,878. The following
is the minimum future lease payments for this capital lease are as follows:

F-98
<PAGE>

OSLER MEDICAL
NOTES TO FINANCIAL STATEMENTS--(Continued)

Year ending December 31, Amount
--------------------------------------- --------
1995 .................................. $ 24,999
1996 .................................. 33,332
1997 .................................. 33,332
1998 .................................. 33,332
1999 .................................. 33,332
Subsequent to 1999 .................... 8,333
--------
Total minimum lease payments .......... 166,659
Less: amount representing interest .... 15,781
--------
Present value of minimum lease payments $150,878
========

C. Change in Tax Status

Effective January 1, 1995, Osler Medical changed its tax status from a
partnership to a C-Corporation.

D. Sale of the Partnership

Osler Medical is in the process of negotiating an agreement to sell all of
the assets, properties and businesses used in the practice and owned by the
Partnership to an unrelated party for approximately $3,600,000. The assets
which are not included in the sale are goodwill, patient lists and medical
records, cash or cash equivalents on hand and on deposit in banks and the
personal assets of the physicians.

F-99
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C.

BALANCE SHEET
As of April 14, 1995
(unaudited)

<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash ........................................................................... $ 276,651
Accounts receivable ............................................................ 1,242,634
Inventory ...................................................................... 113,723
Prepaid expenses ............................................................... 14,201
----------
Total current assets ....................................................... 1,647,209
Net property and equipment ..................................................... 438,863
Other assets
Deferred taxes ................................................................. 58,123
Investment in subsidiary ....................................................... 27,477
----------
Total other assets ......................................................... 85,600
Total assets ............................................................... $2,171,672
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ............................................................... 12,282
Accrued expenses and other liabilities ......................................... 61,636
Note payable--line of credit ................................................... --
Note payable--stockholders ..................................................... 440,300
Current portion of long term debt .............................................. 155,992
Deferred income taxes .......................................................... 183,793
----------
Total current liabilities .................................................. 854,003
Long term debt less current portion ............................................ 219,899
----------
Total liabilities .......................................................... 1,073,902
Stockholders' equity
Common stock--Class A $.05 par value, 4,800 shares authorized; 4,601 shares
issued ....................................................................... 230
Common stock--Class B $.05 par value, 5,200 shares authorized, 1,600 shares
issued ....................................................................... 80
Additional paid in capital ..................................................... 61,815
Retained earnings .............................................................. 1,035,645
----------
Total stockholders' equity ................................................. 1,097,770
Total liabilities and stockholders' equity ..................................... $2,171,672
==========
</TABLE>

F-100
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C.

STATEMENT OF OPERATIONS AND RETAINED EARNINGS
For the period January 1, 1995--April 14, 1995
(unaudited)

Revenue
Drug sales, net ................................... $1,418,839
Less cost of sales ................................ 503,994
----------
Gross profit from drug sales .................... 914,845
Patient revenues, net ............................. 1,159,674
----------
Gross profit from drug sales and patient revenues 2,074,519
Other revenues .................................... 25,570
----------
Total revenues .................................... 2,100,089
----------
Operating expenses
Physician compensation ............................ 597,044
Clinic salaries, wages and benefits ............... 484,134
Clinic rents ...................................... 72,897
Clinic supplies ................................... 84,166
Other clinic costs ................................ 194,064
Depreciation ...................................... 19,529
Interest .......................................... 9,732
----------
Total operating expenses ...................... 1,461,566
----------
Net income before income taxes .................... 638,523
Income taxes ...................................... 20,902
----------
Net income ........................................ 617,621
Retained earnings, beginning ...................... 418,024
----------
Retained earnings, ending ......................... $1,035,645
==========

F-101
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C.

STATEMENT OF CASH FLOWS
For the period January 1, 1995--April 14, 1995
(unaudited)

Cash flows from operating activities
Net income .................................................... $ 617,621
Adjustments to reconcile net income to net cash (used)
in operating activities
Depreciation ................................................. 19,529
Equity in income of subsidiary ............................... 105
Changes in operating assets and liabilities
Accounts receivable ......................................... 9,831
Inventory ................................................... 49,907
Prepaid expenses ............................................ 12,312
Accounts payable ............................................ (131,148)
Accrued expenses and other liabilities ...................... (957,590)
---------
Net cash (used) in operating activities ................... (379,433)
---------
Cash flows from investing activities
Purchase of property and equipment ............................ (209)
---------
Net cash used by investing activities ..................... (209)
---------
Cash flows from financing activities
Payment of notes payable--line of credit ...................... (237,000)
Payments of long-term debt .................................... (41,563)
Proceeds from notes payable--stockholders. .................... 199,500
---------
Net cash (used) by financing activities ................... (79,063)
---------
Net decrease in cash .......................................... (458,705)
Cash, beginning of year ....................................... 735,356
---------
Cash, end of year ............................................. $ 276,651
=========
Supplemental disclosures:
Cash paid during the year for interest ........................ $ 9,732
=========
Cash paid during the year for income taxes .................... $ 20,902
=========

F-102
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Stockholders
Georgia Oncology-Hematology Clinic, P.C.
Atlanta, Georgia

We have audited the accompanying consolidated balance sheet of Georgia
Oncology-Hematology Clinic, P.C. and Subsidiary as of December 31, 1994 and
the related consolidated statements of operations and retained earnings, and
cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Georgia
Oncology-Hematology Clinic, P.C. and Subsidiary as of December 31, 1994, and
the results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles.

BABUSH, NEIMAN, KORNMAN & JOHNSON

June 26, 1995

F-103
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
December 31, 1994

<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents ....................................................... $ 747,970
Accounts receivable, less allowance for doubtful accounts of $339,006 ........... 1,297,413
Inventory ....................................................................... 163,630
Prepaid expenses ................................................................ 26,709
----------
Total current assets ........................................................ 2,235,722
Net property and equipment ...................................................... 458,183
----------
Other assets
Deferred taxes .................................................................. 58,123
----------
Total assets .................................................................... $2,752,028
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ................................................................ $ 173,606
Accrued expenses and other liabilities .......................................... 1,019,226
Note payable--line of credit .................................................... 237,000
Note payable--stockholders ...................................................... 240,800
Current portion of long-term debt ............................................... 155,255
Deferred income taxes ........................................................... 183,793
----------
Total current liabilities ...................................................... 2,009,680
Long-term debt, less current portion ............................................ 262,199
----------
Total liabilities ............................................................. 2,271,879
----------
Stockholders' equity
Common stock--Class A, $.05 par value, 4,800 shares authorized; 4,601 shares
issued ........................................................................ 230
Common stock--Class B, $.05 par value, 5,200 shares authorized; 1,600 shares
issued ........................................................................ 80
Additional paid-in capital ...................................................... 61,815
Retained earnings ............................................................... 418,024
----------
Total stockholders' equity ..................................................... 480,149
----------
Total liabilities and stockholders' equity ...................................... $2,752,028
==========
</TABLE>

See notes to consolidated financial statements

F-104
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
For the year ended December 31, 1994

Revenues
Drug sales net .................................... $4,502,513
Less cost of sales ................................ 2,519,182
----------
Gross profit from drug sales .................... 1,983,331
Patient revenues, net ............................. 4,099,952
----------
Gross profit from drug sales and patient revenues 6,083,283
Other revenues .................................... 13,897
----------
Total revenues .................................... 6,097,180
----------
Operating Expenses
Physician compensation ............................ 2,659,297
Clinic salaries, wages and benefits ............... 1,671,337
Clinic rents ...................................... 216,415
Clinic supplies ................................... 287,752
Other clinic costs ................................ 1,048,524
Depreciation ...................................... 115,792
Interest .......................................... 52,984
----------
Total operating expenses ...................... 6,052,101
----------
Income before income taxes ........................ 45,079
Income taxes ...................................... 11,393
----------
Net income ........................................ 33,686
Retained earnings, beginning ...................... 387,838
Distributions ..................................... (3,500)
----------
Retained earnings, ending ......................... $ 418,024
==========

See notes to consolidated financial statements

F-105
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 1994

Cash flows from operating activities
Net income .................................................... $ 33,686
Adjustments to reconcile net income to net cash provided
by operating activities
Loss on disposal of property and equipment ................... 745
Depreciation ................................................. 115,792
Provision for bad debts ...................................... 179,424
Deferred income taxes ........................................ (5,816)
Changes in operating assets and liabilities
Accounts receivable ......................................... (495,521)
Inventory ................................................... (85,421)
Prepaid expenses ............................................ (3,227)
Accounts payable ............................................ 51,615
Accrued expenses and other liabilities ...................... 686,925
---------
Net cash provided by operating activities ..................... 478,202
---------
Cash flows from investing activities
Proceeds from disposal of property and equipment .............. 100
Purchase of property and equipment ............................ (192,003)
Other assets .................................................. 6,000
---------
Net cash used by investing activities ......................... (185,903)
---------
Cash flows from financing activities
Proceeds from notes payable--line of credit ................... 137,000
Payments of long-term debt .................................... (140,999)
Proceeds from long-term debt .................................. 170,576
Proceeds from notes payable--stockholders ..................... 210,000
Distributions ................................................. (3,500)
---------
Net cash provided by financing activities ..................... 373,077
---------
Net increase in cash .......................................... 665,376
Cash, beginning of year ....................................... 82,594
---------
Cash, end of year ............................................. $ 747,970
=========
Supplemental disclosures
Cash paid during the year for interest ........................ $ 52,984
=========
Cash paid during the year for income taxes .................... $ 4,397
=========
Purchase of property and equipment financed by notes payable .. $ 116,877
=========

See notes to consolidated financial statements

F-106
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C. AND SUBSIDIARY
Notes to Consolidated Financial Statements

A. Accounting Policies

Description of Business. Georgia Oncology-Hematology Clinic, P.C. (the
"Corporation") was incorporated in 1975 under the laws of Georgia. The
Corporation was formed to operate medical oncology facilities in Atlanta,
Georgia. The Corporation offers a comprehensive range of medical oncology
services at three facilities in the Atlanta area.

Property and Equipment. Property and equipment are stated at cost.
Depreciation of property and equipment is generally calculated over the
estimated useful lives of the assets using accelerated methods. Depreciation
of leasehold improvements is calculated on a straight line basis over the
term of the lease. Routine maintenance and repairs are charged to expenses as
incurred, while costs of betterments and renewals are capitalized.

Income Taxes. The Corporation is taxable under provisions of the Internal
Revenue Code. The Corporation recognizes deferred income tax on all
significant timing differences between financial and income tax reporting
(see Note H).

Net Revenues. Net revenues are reported at the estimated realizable amounts
from patients, third-party payors, and others for services rendered. Revenue
under certain third-party payor agreements is subject to audit and
retroactive adjustments. Provisions for estimated third-party payor
settlements and adjustments are estimated in the period the related services
are rendered and adjusted in future periods as final settlements are
determined. During the year ended December 31, 1994, approximately 41% of net
revenue was received under the Medicare program and 2% under state
reimbursement programs. The Medicare program and state reimbursement programs
pay physician services based on fee schedules which are determined by the
related government agency. The Corporation has negotiated agreements with
managed care organizations to provide physician services based on fee
schedules. No individual managed care organization is material to the
Corporation.

Inventory. Inventory is stated at the lower of first-in first-out, cost or
market.

Principles of Consolidation. The consolidated financial statements include
the accounts of Georgia Oncology-Hematology Clinic, P.C. and its wholly
owned subsidiary, Georgia Oncology-Hematology Services, Inc. All material
intercompany transactions have been eliminated.

B. Net Property and Equipment

Major classifications of property and equipment and their respective
depreciable lives are summarized below:

Depreciable
Lives Total
--------- ----------
Furniture and equipment ...................... 5-7
years $ 693,950
Leasehold improvements ....................... 3-13
years 537,894
--------- ----------
1,231,844
Less accumulated depreciation and amortization 773,661
----------
Total ........................................ $ 458,183
==========

C. Notes Payable

During 1994, the Corporation obtained a line of credit from a bank in the
amount of $250,000. The line of credit matures on May 31, 1995. Interest is
charged at the prime rate plus 0.5%. The accounts receivable of the
Corporation are pledged as collateral against the line of credit. The amount
outstanding under the line of credit at December 31, 1994 was $237,000 with
available credit of $13,000.

F-107
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C. AND SUBSIDIARY
Notes to Consolidated Financial Statements--(Continued)

At various times, the Corporation has obtained notes from its
stockholders. The notes are unsecured and are payable on demand. Interest is
charged at the prime rate. Amounts outstanding under the notes at December
31, 1994 were $240,800. All notes from stockholders and related accrued
interest were repaid in May, 1995.

The prime rate at December 31, 1994 was 8.5%.

D. Long-Term Debt

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
<S> <C>
Note payable to a bank, due in monthly installments of $8,253 plus interest at the
prime rate plus 0.5% through November 1997 collateralized by furniture, fixtures
and equipment ................................................................... $ 288,845
Note payable to a bank, due in monthly installments of $1,500 plus interest at 7%
through February 1997, collateralized by computer equipment ..................... 38,699
Note payable to a corporation, due in monthly installments of $2,440 including
principal and interest at 7% through March 1997 collateralized by furniture,
fixtures and equipment .......................................................... 60,800
Note payable to a corporation, due in monthly installments of $1,168 including
principal and interest at 7% through March 1997 collateralized by leasehold
improvements .................................................................... 29,110
---------
Total long-term debt ............................................................. 417,454
Less current maturities ........................................................... (155,255)
---------
Long-term debt, less current maturities ........................................... $ 262,199
=========
</TABLE>

At December 31, 1994 scheduled aggregate long-term debt maturities are as
follows:

Year Ending December 31, Amount
-------------------------- ---------
1995 ..................... $155,255
1996 ..................... 158,019
1997 ..................... 104,180
---------
$417,454
=========

E. Operating Leases

Leases that do not meet the criteria for capitalization are classified as
operating leases with related rentals charged to operations as incurred.
Under agreements classified as operating leases, the Company leases
facilities for its three locations and certain equipment. The lease for one
of the locations, with an aggregate monthly expense of $8,287 expires on
January 31, 1996. This lease has been renewed for five years.

The lease for the second location, with an aggregate monthly expense of
$4,700 plus direct costs expires on May 31, 1997. The Company has an option
to renew this lease for five years. The lease for the third location, with an
aggregate monthly expense of $1,608 in 1994, expires on November 30, 1996.
The Company has an option to renew this lease for five years with rent
increasing by 5% each year.

F-108
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C. AND SUBSIDIARY
Notes to Consolidated Financial Statements--(Continued)

The following is a schedule by year of future minimum lease payments under
operating leases as of December 31, 1994.

Year Ending December 31,
--------------------------
1995 ..................... $182,008
1996 ..................... 181,044
1997 ..................... 125,214
1998 ..................... 99,444
1999 ..................... 99,444
Thereafter ............... 107,731
---------
Total .............. $794,885
=========

Total rent expense for the year ended December 31, 1994 was $216,415.

F. Employee Benefit Plan

The Corporation has a qualified defined contribution 401(k) Profit Sharing
Plan covering substantially all employees. Employee contributions in the form
of pretax salary deferrals are discretionary and are determined based upon a
percentage of each employee's compensation, as defined. Employer
contributions are determined at the discretion of the Company. Contributions
to the plan totalled $176,521 for the year ended December 31, 1994.

G. Contingencies

The Corporation maintains general liability and malpractice insurance
providing the Corporation with coverage of $5 million per incident and $7
million in aggregate. As of December 31, 1994, there were no asserted
malpractice claims against the Corporation; accordingly, no amounts for
potential losses have been accrued in the accompanying financial statements.
In addition, the Corporation has not accrued for a loss of unreported
incidents or for losses in excess of insurance coverage, as the amount, if
any, cannot be reasonably estimated and the profitability of an adverse
outcome cannot be determined at this time. It is the opinion of management
that the ultimate resolution of any unasserted claims will not have a
material adverse effect on the financial position or operating results of the
Corporation.

H. Income Taxes

Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Corporation's deferred tax liabilities and assets as of
December 31, 1994 were as follows:

December 31,
1994
------------
Deferred current tax liabilities:
Cash to accrual adjustments ....... $342,461
Deferred current tax assets:
Cash to accrual adjustments ....... 158,668
--------
Net deferred current tax liabilities $183,793
========
Deferred long-term tax assets:
Depreciable and amortizable assets $ 58,123
========

F-109
<PAGE>

GEORGIA ONCOLOGY-HEMATOLOGY CLINIC, P.C. AND SUBSIDIARY
Notes to Consolidated Financial Statements--(Continued)

The provision for income taxes for the year ended December 31, 1994 is as
follows:

Current:
Federal ............. $14,520
State ............... 2,689
-------
17,209
-------
Deferred:
Federal ............. (5,468)
State ............... (348)
-------
(5,816)
-------
Net income tax expense $11,393
=======

I. Related Party Transactions

The Corporation has loans from its stockholders amounting to $240,800 at
December 31, 1994 (see Note C).

J. Subsequent Events

On April 17, 1995, PhyChoice, Inc. acquired the operating assets of the
Corporation. Simultaneous with the acquisition, the Corporation entered into
a 10-year management services agreement with PhyChoice, Inc. The management
services agreement became effective April 17, 1995. The Company has entered
into merger discussions with Cancer Specialists of Georgia, P.C.

K. Deposits in Excess of Federally Insured Limits

The Company has cash deposits with a financial institution which fluctuate
in excess of federally insured limits. If this financial institution were not
to honor its contractual obligation to the Company then the Company could
incur losses. Management is of the opinion that there is no risk because of
the financial strength of the financial institution. At December 31, 1994,
the Company had cash deposits of $1,007,183 with the financial institution
resulting in $907,183 being at risk.

F-110
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.

COMBINED BALANCE SHEET
JULY 25, 1995

<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................................................ $ 236,422
Accounts receivable, less allowances for adjustments and doubtful accounts ....... 692,839
Prepaid expenses ................................................................. 111,107
----------
Total current assets ......................................................... 1,040,368
----------
PROPERTY AND EQUIPMENT, less accumulated depreciation of $124,952 ................ 158,518
----------
PROPERTY UNDER CAPITAL LEASES, less accumulated amortization of $29,578 .......... 37,879
----------
OTHER ASSETS
Organization costs, less accumulated amortization of $246 ........................ 574
Other assets ..................................................................... 10,000
----------
Total other assets ........................................................... 10,574
----------
Total assets ................................................................. $1,247,339
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................................................. $ 108,160
Other accrued expenses and liabilities ........................................... 67,944
Due to related party ............................................................. 6,400
Current portion of obligations under capital leases .............................. 7,731
Deferred income taxes--current ................................................... 142,630
Accrued income taxes ............................................................. 25,000
----------
Total current liabilities .................................................... 357,865
----------
OTHER LIABILITIES
Obligations under capital leases ................................................. 36,875
Deferred income taxes ............................................................ 12,870
----------
Total other liabilities ...................................................... 49,745
----------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value; 75 and 600 shares authorized, issued and
outstanding .................................................................... 675
Additional paid-in capital ....................................................... 24,243
Retained earnings ................................................................ 814,811
----------
Total stockholders' equity ................................................... 839,729
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................... $1,247,339
==========
</TABLE>

F-111
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.

COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE PERIOD JANUARY 1, 1995 THROUGH JULY 25, 1995

REVENUE
Net patient service revenue ......... $2,403,860
Other income ........................ 22,969
----------
Total revenue ................... 2,426,829
----------
OPERATING EXPENSES
Cost of affiliated physician services 579,881
Salaries, wages and benefits ........ 537,283
Rents and leases .................... 112,645
Supplies ............................ 628,048
Other operating costs ............... 157,567
Depreciation and amortization ....... 24,767
Net interest expense ................ 18,411
----------
Net operating expenses .......... 2,058,602
----------
NET INCOME (LOSS) BEFORE INCOME TAXES 368,227
INCOME TAX
Current ............................. 25,000
Deferred ............................ 16,730
----------
41,730
----------
NET INCOME .......................... 326,497
RETAINED EARNINGS--BEGINNING OF
PERIOD ............................ 488,314
----------
RETAINED EARNINGS--END OF PERIOD .... $ 814,811
==========

F-112
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.

COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1995 THROUGH JULY 25, 1995

CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................... $ 326,497
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................ 24,767
Deferred income taxes ........................................ 16,730
Changes in operating assets and liabilities:
Accounts receivable, net .................................... (177,143)
Prepaid expenses ............................................ (25,164)
Deposits .................................................... 1,064
Accounts payable ............................................ 18,475
Other accrued expenses and liabilities ...................... (19,495)
Due to related party ........................................ (1,100)
Accrued income taxes ........................................ 25,000
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................. 189,631
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ............................ (16,335)
---------
NET CASH (USED) BY INVESTING ACTIVITIES ................... (16,335)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of capital lease obligations ......................... (7,689)
---------
NET CASH (USED) BY FINANCING ACTIVITIES ................... (7,689)
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ..................... 165,607
CASH AND CASH EQUIVALENTS--BEGINNING OF PERIOD ................ 70,815
---------
CASH AND CASH EQUIVALENTS--END OF PERIOD ...................... $ 236,422
=========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest ........................ $ 18,411
=========
Purchase of equipment with proceeds of capital lease
obligations ................................................. $ 19,220
=========

F-113
<PAGE>

WEIL, AKMAN, BAYLIN & COLEMAN, P.A.
Certified Public Accountants
201 West Padonia Road, Suite 600
Timonium, Maryland 21093-2186

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Oncology-Hematology Associates, P.A. and
Oncology-Hematology Infusion Therapy, Inc.

We have audited the accompanying combined balance sheets of
Oncology-Hematology Associates, P.A. and Oncology-Hematology Infusion
Therapy, Inc. (1994 only) as of December 31, 1994 and 1993, and the related
combined statements of operations and retained earnings and cash flows for
the years then ended of Oncology-Hematology Associates, P.A. and for the
period March 7, 1994 (date of inception) through December 31, 1994 of
Oncology-Hematology Infusion Therapy, Inc. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial
statements based on our audit.

We conducted our audit 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
combined financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of
Oncology-Hematology Associates, P.A. and Oncology-Hematology Infusion
Therapy, Inc. (1994 only) at December 31, 1994 and 1993, and the results of
its operations and its cash flows for the years then ended and from March 7,
1994 (date of inception) through December 31, 1994 of Oncology-Hematology
Infusion Therapy, Inc. in conformity with generally accepted accounting
principles.

WEIL, AKMAN, BAYLIN & COLEMAN, P.A.

Timonium, Maryland
August 4, 1995

F-114
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.

COMBINED BALANCE SHEETS
DECEMBER 31,

1994 1995
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents .............................. $ 70,815 $194,081
Accounts receivable, less allowances for adjustments and
doubtful accounts .................................... 515,696 465,201
Prepaid expenses ....................................... 85,943 76,574
Deposits ............................................... 1,064 --
-------- --------
Total current assets ............................... 673,518 735,856
-------- --------
PROPERTY AND EQUIPMENT, less accumulated depreciation of
$107,911 in 1994 and $87,710 in 1993 ................. 159,224 67,930
-------- --------
PROPERTY UNDER CAPITAL LEASES, less accumulated
amortization of $21,948 in 1994 and $13,213 in 1993 .. 26,289 17,942
-------- --------
OTHER ASSETS
Organization costs, less accumulated amortization of
$150 ................................................. 670 --
Other assets ........................................... 10,000 10,000
-------- --------
Total other assets ................................. 10,670 10,000
-------- --------
Total Assets ........................................... $869,701 $831,728
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ....................................... $ 89,685 $ 22,169
Other accrued expenses and liabilities ................. 87,439 74,985
Due to related party ................................... 7,500 --
Current portion of obligations under capital leases .... 9,844 6,448
Deferred income taxes--current ......................... 125,570 155,700
-------- --------
Total current liabilities .......................... 320,038 259,302
-------- --------
OTHER LIABILITIES
Obligations under capital leases ....................... 23,231 17,496
Deferred income taxes .................................. 13,200 9,600
-------- --------
Total other liabilities ............................ 36,431 27,096
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value; 75 (1993 and 1994) and
600 shares (1994 only) authorized, issued and
outstanding .......................................... 675 75
Additional paid-in capital ............................. 24,243 18,843
Retained earnings ...................................... 488,314 526,512
-------- --------
Total stockholders' equity ......................... 513,232 545,330
-------- --------
Total liabilities and stockholders' equity ............. $869,701 $831,728
======== ========

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

F-115
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.

COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, (ONCOLOGY-HEMATOLOGY
ASSOCIATES, P.A.) FOR THE PERIOD MARCH 7, 1994 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1994 (ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.)

1994 1993
---------- ----------
REVENUE
Net patient service revenue ......... $3,738,339 $3,397,458
Other income ........................ 10,211 44,196
---------- ----------
Total revenue ................... 3,748,550 3,441,654
---------- ----------
OPERATING EXPENSES
Cost of affiliated physician services 1,401,663 1,479,424
Salaries, wages and benefits ........ 864,690 731,714
Rents and leases .................... 157,269 129,663
Supplies ............................ 1,038,571 982,007
Other operating costs ............... 206,600 147,010
Depreciation and amortization ....... 29,086 20,487
Net interest expense ................ 19,299 12,028
---------- ----------
Net operating expenses .......... 3,717,178 3,502,333
---------- ----------
NET INCOME (LOSS) BEFORE INCOME TAXES 31,372 (60,679)
INCOME TAX (BENEFIT) ................ (26,530) (61,316)
NET INCOME .......................... 57,902 637
RETAINED EARNINGS AT BEGINNING OF
YEAR .............................. 526,412 525,775
DISTRIBUTIONS TO STOCKHOLDERS ....... (96,000) --
---------- ----------
RETAINED EARNINGS AT END OF YEAR .... $ 488,314 $ 526,412
========== ==========

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

F-116
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.

COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, (ONCOLOGY-HEMATOLOGY
ASSOCIATES, P.A.) FOR THE PERIOD MARCH 7, 1994 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1994 (ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.)

1994 1993
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................... $ 57,902 637
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ....................... 29,086 20,487
Deferred income taxes ............................... (26,530) (61,340)
Changes in operating assets and liabilities:
Accounts receivable, net ........................... (50,495) 193,404
Prepaid expenses ................................... (9,369) (5,030)
Other assets ....................................... -- (10,000)
Deposits ........................................... (1,064) --
Accounts payable ................................... 67,516 (9,437)
Other accrued expenses and liabilities ............. 12,454 22,428
Due to related party ............................... 7,500 --
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........ 87,000 151,149
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ................... (111,495) (18,688)
Organizational costs ................................. (820) --
--------- --------
NET CASH (USED) BY INVESTING ACTIVITIES .......... (112,315) (18,688)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of capital lease obligations ................ (7,951) (3,872)
Issuance of capital stock ............................ 600 --
Additional paid in capital ........................... 5,400 --
Dividends paid ....................................... (96,000) --
--------- --------
NET CASH (USED) BY FINANCING ACTIVITIES .......... (97,951) (3,872)
--------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS . (123,266) 128,589
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR ......... 194,081 65,492
--------- --------
CASH AND CASH EQUIVALENTS--END OF YEAR ............... $ 70,815 $194,081
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest ............... $ 19,299 $ 12,028
========= ========
Cash paid during the year for income taxes ........... $ -- $ 24
========= ========

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

F-117
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Oncology-Hematology Associates, P.A. and Oncology-Hematology Infusion
Therapy were incorporated on January 1, 1978 and February 4, 1994,
respectively, under the laws of the State of Maryland. The Companies were
formed to operate oncology and hematology facilities in Clinton and
Greenbelt, Maryland, dedicated to providing comprehensive cancer treatment
and diagnosis.

Basis of Combination

The combined financial statements for the 1994 year include the financial
statements of Oncology-Hematology Associates, P.A. and Oncology-Hematology
Infusion Therapy, Inc. which are related through common ownership and
management. All intercompany transactions and accounts have been eliminated
in combination.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.

Property and Equipment

Property and equipment are carried at cost and are depreciated on the
straight-line method over the following lives:

Life (Years)
-------------
Leasehold improvements ...... 15
Furniture and fixtures ...... 7
Equipment ................... 7
Data processing equipment ... 5

Income Taxes

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes relate primarily to the differences between reporting
the financial statements on the accrual basis and the income tax return on
the cash basis. The deferred tax assets and liabilities represent the future
tax return consequences of these differences, which will either be taxable or
deductible when the assets or liabilities are recovered or settled.

The stockholders of Oncology-Hematology Infusion Therapy, Inc. have
consented to the Company's election to come within the provisions of Section
1372(A) of the Internal Revenue Code which provides that income of the
Corporation will be taxed directly to its stockholders; thus no provision for
Federal income taxes has been provided.

Net Revenue

Net revenue is reported at the estimated realizable amounts from patients,
third-party payors and others for services rendered. Revenue under certain
third-party payor agreements is subject to audit and retroactive adjustments.
Provisions for estimated third-party payor settlements and adjustments are
estimated in the period the related services are rendered and adjusted in
future periods as final settlements are determined. The Medicare and Medicaid
programs pay physician services based on fee schedules which are determined
by the related government agency. The Company has negotiated agreements with
managed care organizations to provide physician services based on fee
schedules. No individual managed care organization is material to the
Company.

Cost of Affiliated Physician Services

Cost of affiliated physician services represents salaries, bonuses and
selected benefits paid to the affiliated physicians. Physicians compensation
generally is determined based on the excess of collections over expenses
prior to physician compensation.

F-118
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE B. CASH

Oncology-Hematology Associates P.A. maintains cash balances at a local
bank. Cash accounts at banks are insured by the FDIC for up to $100,000.
Amounts in excess of insured limits were approximately $10,200 at December
31, 1994 and $35,528 at December 31, 1993.

NOTE C. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at December 31,:

1994 1993
--------- ---------
Accounts Receivable ................... $ 830,179 $ 824,971
Less: Adjustments for third party payor (294,483) (344,770)
Allowance for doubtful accounts . (20,000) (15,000)
--------- ---------
Accounts receivable--net .............. $ 515,696 $ 465,201
========= =========

NOTE D. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31,:

1994 1993
--------- --------
Leasehold improvements .......... $ 103,009 $ 43,885
Furniture, fixtures and equipment 82,023 51,454
Data processing equipment ....... 82,103 60,301
--------- --------
267,135 155,640
Less: accumulated depreciation .. (107,911) (87,710)
--------- --------
Property and equipment--net ..... $ 159,224 $ 67,930
========= ========

The statement of income includes depreciation expense of $20,201 for the
year ended December 31, 1994 and $14,256 for the year ended December 31,
1993.

NOTE E. PROPERTY UNDER CAPITAL LEASES

All property under capital leases have been leased from a partnership
owned exclusively by the Company's shareholders. Property under capital
leases consisted of the following at December 31,:

1994 1993
-------- --------
Medical equipment ............... $ 29,942 $ 15,510
Computer equipment .............. 18,295 15,645
-------- --------
48,237 31,155
Less: accumulated depreciation .. (21,948) (13,213)
-------- --------
Property under capital
leases--net ................... $ 26,289 $ 17,942
======== ========

The statement of income includes depreciation expense of $8,735 for the
year ended December 31, 1994 and $6,231 for the year ended December 31,
1993.

F-119
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE F. OBLIGATIONS UNDER CAPITAL LEASES

The Company leases equipment under capital leases. The leases require
monthly payments which vary from $25 to $1,200 and mature through October
1999. Under the terms of the leases, the Company has a bargain purchase
option at the end of each lease.

Future minimum lease payments under the capital leases at December 31,
1994 are as follows:

1995 .................................. $29,550
1996 .................................. 21,300
1997 .................................. 20,300
1998 .................................. 15,300
1999 and thereafter ................... 3,950
-------
Total minimum lease payments ......... 90,400
Less: amount representing interest ... 57,325
-------
Value of minimum lease payments ...... 33,075
Current portion of lease obligations . 9,844
-------
Long-term portion of lease obligations $23,231
=======

The statement of income includes interest expense of $19,299 for the year
ended December 31, 1994 and $12,028 for the year ended December 31, 1993.

NOTE G. INCOME TAXES

Effective January 1, 1993, the Company changed its method of accounting
for income taxes to the liability method required by Financial Accounting
Standards Board (FASB) Statement No. 109, "Accounting for Income Taxes."

Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and
assets as of December 31, were as follows:

1994 1993
-------- --------
Current deferred tax liabilities:
Cash to accrual adjustments ....... $147,350 $177,200
Current deferred tax assets:
Cash to accrual adjustments ....... (21,780) (21,500)
-------- --------
Net deferred current tax liabilities $125,570 $155,700
======== ========
Long-term deferred tax liabilities:
Cash to accrual adjustments ....... $ 19,400 $ 17,800
Long-term deferred tax assets:
Depreciable and amortizable assets (6,200) (8,200)
-------- --------
Net deferred long-term liabilities . $ 13,200 9,600
======== =========

F-120
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993

The provision for income taxes consisted of the following at December 31,:

1994 1993
-------- ---------
Current income tax
(benefit)
Federal .................. $ -- $ --
State .................... -- 24
Deferred taxes ........... (26,530) (61,340)
-------- --------
$(26,530) $(61,316)
======== ========

NOTE H. RELATED PARTY TRANSACTIONS

The Company paid building and equipment rentals of $24,720 in 1993 and
$54,720 in 1994 per lease agreements to a partnership formed 100% by the
Company's shareholders for its Greenbelt office. The Company also paid
rent of $93,530 in 1993 and $26,700 in 1994 for its Clinton office space
from a partnership in which the Company's shareholders own 11.28%. Payroll
and other expenses were paid by the Company for the operation of a jointly
owned medical lab proportionate to the number of tests done specifically
for the Company. At December 31, 1994, $2,060 was payable by the Company
as a result of the related party transactions. There were no amounts due
at December 31, 1993.

NOTE I. COMMITMENTS

The Company leases its principal place of business and equipment from a
partnership partially owned by its shareholders. The minimum annual
rentals total $92,990 plus property taxes. The leases expire in October
1995 and November 1995.

The Company leases its secondary place of business and equipment from a
partnership owned by the Company's shareholders. The minimum annual
rentals total $54,720 plus insurance and taxes. The leases expire in
September 1996 and December 1999.

Minimum annual rental payments are as follows:

Years Ended
December 31,
-------------------
1995 .............. $114,260
1996 .............. 58,540
1997 .............. 30,000
1998 .............. 30,000
1999 and thereafter 30,000
--------
$262,800
========

Minimum annual rentals to be received from noncancelable subleases are as
follows:

1995 ............... $ 8,400
1996 ............... 3,500
-------
$11,900
=======

F-121
<PAGE>

ONCOLOGY-HEMATOLOGY ASSOCIATES, P.A. AND
ONCOLOGY-HEMATOLOGY INFUSION THERAPY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE J. CONTINGENCIES

In addition to the general liability and malpractice insurance carried by
the individual physicians, the Company maintains general liability and
malpractice insurance providing the Company with coverage of $1,000,000
per incident and $3,000,000 in aggregate per doctor. As of December 31,
1994, there were no asserted malpractice claims against the Company,
accordingly, no amounts for potential losses have been accrued in the
accompanying financial statements. In addition, the Company has not
accrued a loss for unreported incidents or for losses in excess of
insurance coverage, as the amount, if any, cannot be reasonably estimated
and the probability of an adverse outcome cannot be determined at this
time. It is the opinion of management that the ultimate resolution of any
unasserted claims will not have a material adverse effect on the financial
position or operating results of the Company.

NOTE K. SUBSEQUENT EVENT

In July 1995, Phychoice, Inc. acquired the operating assets of the
Company. Along with the acquisitions, the Company entered into a 15 year
management services agreement with Phychoice, Inc. The management services
agreement became effective on July 6, 1995.

NOTE L. PROFIT SHARING PLAN

The Company has a profit sharing plan and money purchase pension plan. All
employees 25 or older with three years of service during which 1,000 hours
of service are completed are eligible to participate. Contributions to the
plan are made annually as determined, within plan limits, by the Company.
The Company contribution for the year ended December 31, 1994, was $33,854
and $113,907 for the profit sharing plan and money purchase pension plan,
respectively. For the year ended December 31, 1993, $36,877 and $104,946
was contributed for the profit sharing and money purchase pension plans,
respectively.

F-122
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders of Cancer Specialists of Georgia, P.C.:

We have audited the accompanying balance sheet of Cancer Specialists of
Georgia, P.C. as of July 31, 1995 and the related statements of operations
and retained earnings (accumulated deficit) and cash flows for the nine month
period 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 audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cancer Specialists of
Georgia, P.C. as of July 31, 1995 and the results of its operations and its
cash flows for the nine month period then ended in conformity with generally
accepted accounting principles.

Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 9, 1996

F-123
<PAGE>

CANCER SPECIALISTS OF GEORGIA, P.C.

BALANCE SHEET
JULY 31, 1995

<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash .................................................................... $ 8,833
Accounts receivable, less allowance for doubtful accounts of $501,337 ... 1,692,965
Inventory ............................................................... 114,940
Prepaid expenses and other .............................................. 17,584
----------
Total current assets ................................................ 1,834,322
----------
NET PROPERTY AND EQUIPMENT .............................................. 224,822
----------
OTHER ASSETS:
Deferred income taxes ................................................... 38,622
Goodwill and other intangibles, net of accumulated amortization of
$17,583 ............................................................... 143,417
----------
Total other assets .................................................. 182,039
----------
TOTAL ASSETS ........................................................ $2,241,183
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Bank overdraft .......................................................... $ 97,820
Accounts payable ........................................................ 1,074,029
Accrued expenses and other liabilities .................................. 660,123
Notes payable ........................................................... 758,974
Current portion of long-term debt ....................................... 112,428
Deferred income taxes ................................................... 35,185
----------
Total current liabilities ........................................... 2,738,559
----------
TOTAL LIABILITIES ................................................... 2,738,559
----------
Commitments and contingencies (Notes E and G) ........................... --
STOCKHOLDERS' DEFICIT:
Common stock, no par value; 200,000 shares authorized;
1,500 shares issued and outstanding ................................... 1,500
Accumulated deficit ..................................................... (498,876)
----------
Stockholders' deficit ............................................... (497,376)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ......................... $2,241,183
==========
</TABLE>

See notes to financial statements.

F-124
<PAGE>

CANCER SPECIALISTS OF GEORGIA, P.C.

STATEMENT OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
For the nine month period ended July 31, 1995

REVENUES
Drug sales, net ................................. $ 5,104,710
Less cost of sales .............................. 2,647,762
-----------
Gross profit from drug sales ................ 2,456,948
Patient revenues, net ........................... 4,504,518
-----------
6,961,466
OTHER REVENUES .................................. 12,949
-----------
TOTAL REVENUES .............................. 6,974,415
-----------
OPERATING EXPENSES
Physician compensation .......................... 1,912,862
Clinic salaries, wages and benefits. ............ 1,500,365
Management fees--related party (Note I). ........ 1,713,609
Clinic and equipment rents--related party
(Note I) ..................................... 605,494
Clinic and equipment rents ...................... 220,725
Clinic supplies ................................. 384,277
Other clinic costs .............................. 951,438
Provision for bad debts ......................... 501,337
Provision for write-off of intangible asset ..... 86,644
Depreciation and amortization ................... 95,835
Interest ........................................ 39,675
-----------
TOTAL OPERATING EXPENSES .................... 8,012,261
-----------
NET LOSS BEFORE INCOME TAX BENEFIT .............. (1,037,846)
INCOME TAX BENEFIT .............................. 231,006
-----------
NET LOSS ........................................ (806,840)
RETAINED EARNINGS, BEGINNING .................... 307,964
-----------
ACCUMULATED DEFICIT, ENDING ..................... $ (498,876)
===========

See notes to financial statements.

F-125
<PAGE>

CANCER SPECIALISTS OF GEORGIA, P.C.

STATEMENT OF CASH FLOWS
For the nine month period ended July 31, 1995

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ..................................................... $(806,840)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization ............................... 95,835
Provision for bad debts ..................................... 501,337
Provision for write-off of intangible asset ................. 86,644
Deferred income taxes ....................................... (231,006)
Amortization of discount on debt ............................ 8,991
Changes in operating assets and liabilities:
Accounts receivable ........................................ (528,462)
Inventory .................................................. 6,719
Prepaid expenses and other ................................. 5,916
Accounts payable ........................................... (29,829)
Accrued expenses and other liabilities. .................... 343,932
----------
NET CASH USED BY OPERATING ACTIVITIES ........................ (546,763)
----------
CASH FLOWS FOR INVESTING ACTIVITIES
Purchase of property and equipment ........................... (1,295)
----------
NET CASH USED BY INVESTING ACTIVITIES ........................ (1,295)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in bank overdraft ..................................... 97,820
Proceeds from notes payable .................................. 448,974
Payments of long-term debt ................................... (287,015)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES .................... 259,779
----------
NET DECREASE IN CASH ......................................... (288,279)
CASH, BEGINNING OF PERIOD .................................... 297,112
----------
CASH, END OF PERIOD .......................................... $ 8,833
==========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest ..................... $ 29,651
==========

See notes to financial statements.

F-126
<PAGE>

CANCER SPECIALISTS OF GEORGIA, P.C.
NOTES TO FINANCIAL STATEMENTS

A. ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS--Cancer Specialists of Georgia, P.C. (the
"Corporation") was incorporated in 1988 under the laws of Georgia. The
Corporation's fiscal year is the calendar year. These financial statements
are for the nine month period ended July 31, 1995. The Corporation was formed
to operate medical oncology facilities in Atlanta, Georgia. The Corporation
offers a comprehensive range of medical oncology services at eleven
facilities in the Atlanta area.

PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.
Depreciation of property and equipment is generally calculated over the
estimated useful lives of the assets using accelerated methods. Depreciation
of leasehold improvements is calculated on a straight line basis over the
term of the lease. Routine maintenance and repairs are charged to expense as
incurred, while costs of betterments and renewals are capitalized.

INCOME TAXES--The Corporation is taxable under provisions of the Internal
Revenue Code. The Corporation recognizes deferred income tax on all
significant timing differences between financial and income tax reporting.
(See Note H)

NET REVENUES--Net revenues are reported at the estimated realizable amounts
from patient, third-party payors, and others for services rendered. Revenue
under certain third-party payor agreements is subject to audit and
retroactive adjustments. Provisions for estimated third-party payor
settlements and adjustments are estimated in the period the related services
are rendered and adjusted in future periods as final settlements are
determined. During the nine month period ended July 31, 1995, approximately
40% of net revenue was received under the Medicare program and 1% under state
reimbursement programs. The Medicare program and state reimbursement programs
pay physician services based on fee schedules which are determined by the
related government agency. The Corporation has negotiated agreements with
managed care organizations to provide physician services based on fee
schedules. No individual managed care organization is material to the
Corporation.

INVENTORY--Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.

GOODWILL AND OTHER INTANGIBLES--The excess of purchase price over the fair
value of assets acquired in a business combination accounted for by the
purchase method (goodwill) and the value assigned to non-competition
agreements are amortized on a straight-line basis over a 15-year period. The
Corporation periodically assesses the recoverability of goodwill when there
are indications of potential goodwill impairment based on estimates of
undiscounted future cash flows for the applicable business acquired. The
amount of impairment is calculated by comparing anticipated discounted future
income from acquired businesses with the carrying value of the related
goodwill. In performing this analysis, management considers such factors as
current results, trends and future prospects, in addition to other economic
factors.

F-127
<PAGE>

CANCER SPECIALISTS OF GEORGIA, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)

B. NET PROPERTY AND EQUIPMENT

Major classifications of property and equipment and their respective
depreciable lives are summarized below:

Depreciable
Lives Total
------------------ ---------
Furniture and equipment ............... 7 years $ 25,295
Leasehold improvements ................ 7-13 years 338,602
---------
363,897
Less accumulated depreciation and
amortization ........................ (139,075)
---------
Total ............................. $ 224,822
=========

C. NOTES PAYABLE

The Corporation has a line of credit from a bank in the amount $250,000.
The line of credit matures on August 30, 1995. Interest is payable monthly at
the prime rate minus 0.5%. The amount outstanding under the line of credit at
July 31, 1995 was $210,130 with available credit of $39,870. The line of
credit is collateralized by accounts receivable of the Corporation.

At July 31, 1995, the Corporation had a note payable to a bank in the
amount of $248,844. The note was payable on July 31, 1995 and was repaid
subsequent to this date without penalty. Interest was payable monthly at the
prime rate minus 0.5%. The note payable was collateralized by accounts
receivable of the Corporation.

At July 31, 1995, the Corporation had a note payable to a bank in the
amount of $150,000. The note was payable on July 28, 1995 and was repaid
subsequent to this date without penalty. Interest was payable monthly at the
prime rate minus 0.5%. The note payable was collateralized by accounts
receivable of the Corporation.

At July 31, 1995, the Corporation had notes payable to two of its
stockholders for a total amount of $150,000. The notes are payable in
quarterly installments beginning on August 1, 1995 and mature May 1, 1996.
Interest is payable quarterly at the prime rate plus 0.5%. The notes payable
are collateralized by accounts receivable of the Corporation.

The prime rate at July 31, 1995 was 8.75%.

D. LONG-TERM DEBT

The long-term debt is summarized as follows:

<TABLE>
<CAPTION>
<S> <C>
Note payable to a bank, due in monthly installments of $11,165 including principal and
interest at 6.75% through August 1995, collateralized by personal guaranties from
the stockholders ................................................................... $ 33,701
Non-interest bearing note issued in connection with acquisition of assets of a
practice, due in monthly installments of $16,082 through December 1995, face amount
of $192,978 (less unamortized discount of $1,681 based on imputed interest rate of
8.5%) .............................................................................. 78,727
---------
Total long-term debt ............................................................. 112,428
Less current maturities .......................................................... (112,428)
---------
Long-term debt, less current maturities .......................................... $ --
=========
</TABLE>

F-128
<PAGE>

CANCER SPECIALISTS OF GEORGIA, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)

E. OPERATING LEASES

All leases are classified as operating leases with related rentals charged
to operations as incurred. Under agreements classified as operating leases,
the Company leases facilities for its eleven locations and most of its
medical and business equipment.

The following is a schedule by year of future minimum lease payments under
operating leases as of July 31, 1995.

Year Ending
December 31, Amount
----------------------------------------------------- ----------
1995 (for the period August 1--December 31, 1995) ... $ 616,395
1996 ................................................ 1,040,494
1997 ................................................ 994,113
1998 ................................................ 736,506
1999 ................................................ 620,403
Thereafter .......................................... 1,426,841
----------
Total ........................................... $5,434,752
==========

Total rent expense for the nine months ended July 31, 1995 was $826,219.

F. EMPLOYEE BENEFIT PLAN

During 1995 the Corporation had a qualified defined contribution plan
covering substantially all employees. Contributions were determined each year
at the employers' discretion. There were no contributions for the nine month
period ended July 31, 1995.

G. CONTINGENCIES

The Corporation maintains general liability and malpractice insurance
providing the Corporation with coverage of $1 million per incident and $3
million in aggregate. As of July 31, 1995, there were no asserted malpractice
claims against the Corporation; accordingly, no amounts for potential losses
have been accrued in the accompanying financial statements.

H. INCOME TAXES

Deferred Current Tax Liabilities
Cash to accrual adjustments ............... $720,175
Deferred Current Tax Assets
Cash to accrual adjustments ............... 684,990
---------
Net Deferred Current Tax Liabilities ........ $ 35,185
=========
Deferred Long-Term Tax Assets
Depreciable and amortizable assets ........ $ 38,622
=========

F-129
<PAGE>

CANCER SPECIALISTS OF GEORGIA, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)

The provision for income taxes for the nine month period ended July 31,
1995 is as follows:

Current
Federal ............. $ --
State ............... --
---------
--
---------
Deferred
Federal ............. (217,146)
State ............... (13,860)
---------
(231,006)
---------
NET INCOME TAX BENEFIT $(231,006)
=========

I. RELATED PARTY TRANSACTIONS

The Corporation has a management agreement with a company whose
stockholders include two of the stockholders of the Corporation and a family
member of one of the stockholders of the Corporation. The management company
provides practice management and billing and collections services. The
management agreement provides for a fee equivalent to 16% of adjusted net
collections. Expenses related to the management agreement were $1,713,609 for
the nine month period ended July 31, 1995.

The Corporation has office leases for two of its clinics with a
partnership that is owned by three stockholders of the Corporation and a
family member of a stockholder. Rental expense of $231,750 was incurred on
these leases during the nine month period ended July 31, 1995.

The Corporation leases certain medical and business equipment from a
partnership that is owned by a stockholder of the Corporation and certain
family members of the stockholder. Rental expense of $285,418 was incurred on
this lease during the nine month period ended July 31, 1995.

The Corporation leases certain medical and business equipment from a
partnership that is owned by a stockholder of the Corporation and certain
family members of the stockholder. Rental Expense of $46,017 was incurred on
this lease during the nine month period ended July 31, 1995.

The Corporation leases certain medical and business equipment from a
corporation that is owned by a stockholder of the Corporation and certain
family members of the stockholder. Rental expense of $42,309 was incurred on
this lease during the nine month period ended July 31, 1995.

J. PROVISION FOR WRITE-OFF OF INTANGIBLE ASSET

In July 1995, the Corporation recorded a provision of $86,644 for the
write-off of the remaining unamortized balance of a noncompetition agreement.
The individual with whom the agreement had been made is now deceased.
Therefore, the Corporation determined that the noncompetition agreement no
longer had any value.

K. SUBSEQUENT EVENTS

On August 15, 1995, PhyChoice, Inc. acquired the operating assets of the
Corporation. Also, on August 15, 1995, the Corporation merged with Georgia
Oncology-Hematology Clinic, P.C. to form Georgia Cancer Specialists, P.C.
Simultaneous with the acquisition of assets and the merger, the newly formed
Georgia Cancer Specialists, P.C. entered into a 10-year management services
agreement with PhyChoice, Inc. The management services agreement became
effective August 15, 1995.

F-130
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of
Mobile Lithotripter of Indiana Partners

We have audited the balance sheets of Mobile Lithotripter of Indiana
Partners as of September 30, 1995 and 1994, and the related statements of
income, partners' capital and cash flows for the years then ended and for the
period from February 12, 1993 (date of formation) to September 30, 1993.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mobile Lithotripter of
Indiana Partners at September 30, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended and for the period
from February 12, 1993 to September 30, 1993 in conformity with generally
accepted accounting principles.

KATZ, SAPPER & MILLER, LLP
Certified Public Accountants

Indianapolis, Indiana
October 25, 1995

F-131
<PAGE>

MOBILE LITHOTRIPTER OF INDIANA PARTNERS

BALANCE SHEETS
September 30, 1995 and 1994

1995 1994
---------- ----------
ASSETS
CURRENT ASSETS
Cash and equivalents--Note 6 ........................ $ 442,187 $ 383,971
Accounts receivable--hospitals ...................... 265,381 260,672
Prepaid expenses .................................... 5,512 20,023
---------- ----------
Total Current Assets ............................ 713,080 664,666
---------- ----------
EQUIPMENT
Medical and office equipment. ....................... 950,984 520,664
Less: Accumulated amortization ...................... 250,577 171,772
---------- ----------
Total Equipment ................................. 700,407 348,892
---------- ----------
OTHER ASSETS
Goodwill, net of amortization of $1,277,378 in 1995
and $798,362 in 1994 ............................. 5,907,875 6,386,892
---------- ----------
TOTAL ASSETS .................................... $7,321,362 $7,400,450
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable and accrued expenses ............... $ 52,746 $ 28,807
Current maturities of long-term debt--Note 2 ........ 173,124
---------- ----------
Total Current Liabilities ....................... 52,746 201,931
LONG-TERM DEBT
Equipment lease obligation--Note 2 .................. 144,106
---------- ----------
Total liabilities ............................... 52,746 346,037
PARTNERS' CAPITAL--Note 6 ........................... 7,268,616 7,054,413
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ............. $7,321,362 $7,400,450
========== ==========

See Accompanying Notes to Financial Statements.

F-132
<PAGE>

MOBILE LITHOTRIPTER OF INDIANA PARTNERS

STATEMENTS OF INCOME
Years Ended September 30, 1995 and 1994 and
Period from February 12, 1993 to September 30, 1993

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- -----------
<S> <C> <C> <C>
REVENUE
Rental income--Note 3 $2,399,731 $1,990,894 $1,467,614
Supply income 159,650 132,680 110,980
Interest income 18,272 8,933 2,408
---------- ---------- ----------
Total Revenue 2,577,653 2,132,507 1,581,002
---------- ---------- ----------
COSTS AND EXPENSES
Operating--Notes 4 and 5 481,481 429,651 313,008
Amortization and depreciation 587,027 582,809 387,325
General and administrative--
Note 4 217,899 206,500 158,249
Interest expense 27,517 48,236 41,889
---------- ---------- ----------
Total Costs and Expenses 1,313,924 1,267,196 900,471
---------- ---------- ----------
NET INCOME $1,263,729 $ 865,311 $ 680,531
========== ========== ==========
</TABLE>

See Accompanying Notes to Financial Statements.

F-133
<PAGE>

MOBILE LITHOTRIPTER OF INDIANA PARTNERS

STATEMENTS OF PARTNERS' CAPITAL
Years Ended September 30, 1995 and 1994 and
Period from February 12, 1993 to September 30, 1993

<TABLE>
<CAPTION>
<S> <C>
Cash contributed by T(2) Medical, Inc. ............................................ $ 4,507,153
Assets and goodwill contributed to Mobile Lithotripter of Indiana Limited, an
Indiana Limited Partnership ..................................................... 7,131,571
Special distribution to Mobile Lithotripter of Indiana Limited, an Indiana Limited
Partnership ..................................................................... (4,507,153)
-----------
NET INITIAL PARTNERS' CAPITAL ..................................................... 7,131,571
Net income for the period ......................................................... 680,531
Distributions to partners ......................................................... (150,000)
-----------
PARTNERS' CAPITAL AT SEPTEMBER 30, 1993 ........................................... 7,662,102
Net income for the year ........................................................... 865,311
Distributions to partners ......................................................... (1,473,000)
-----------
PARTNERS' CAPITAL AT SEPTEMBER 30, 1994 ........................................... 7,054,413
Net income for the year ........................................................... 1,263,729
Distributions to partners ......................................................... (1,049,526)
-----------
PARTNERS' CAPITAL AT SEPTEMBER 30, 1995--Note 6 ................................... $ 7,268,616
===========
</TABLE>

See Accompanying Notes to Financial Statements.

F-134
<PAGE>

MOBILE LITHOTRIPTER OF INDIANA PARTNERS

STATEMENTS OF CASH FLOWS
Years Ended September 30, 1995 and 1994 and
Period from February 12, 1993 to September 30, 1995

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income .......................................... $ 1,263,729 $ 865,311 $ 680,531
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of equipment ....... 108,010 103,792 67,980
Amortization of goodwill ......................... 479,017 479,017 319,345
Loss on abandonment of equipment ................. 5,260
(Increase) decrease in certain current assets:
Accounts receivable--hospitals .................. (4,709) (2,765) (257,907)
Prepaid expenses ................................ 14,511 7,253 (27,276)
Increase (decrease) in certain current
liabilities:
Accounts payable and accrued expenses ........... 23,939 (8,275) 37,082
----------- ----------- -----------
Net cash provided by operating activities ...... 1,889,757 1,444,333 819,755
----------- ----------- -----------
INVESTING ACTIVITIES
Acquisitions of equipment ........................... (464,785) (10,784)
----------- -----------
Net cash (used) by investing activities. ........ (464,785) (10,784)
------------ -----------
FINANCING ACTIVITIES
Principal payments on long-term debt ................ (317,230) (153,639) (92,694)
Cash contributed by T(2) Medical, Inc ............... 4,507,153
Special distribution to Mobile Lithotripter of
Indiana Limited, an Indiana Limited Partnership .. (4,507,153)
Distributions to partners ........................... (1,049,526) (1,473,000) (150,000)
----------- ----------- -----------
Net cash (used) by financing activities ......... (1,366,756) (1,626,639) (242,694)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS .... 58,216 (193,090) 577,061
CASH AND EQUIVALENTS
Beginning of Period ................................. 383,971 577,061
----------- ----------- -----------
End of Period ....................................... $ 442,187 $ 383,971 $ 577,061
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest expense ...................... $ 27,517 $ 48,236 $ 41,889
Noncash investing and financing activities:
Assets and liabilities contributed by Mobile
Lithotripter of Indiana Limited, an Indiana
Limited Partnership:
Goodwill ......................................... $ 7,185,254
Medical equipment under capital lease ............ 509,880
Lease obligation on medical equipment ............ (563,563)
Trade-in value of tractor .......................... 24,038
</TABLE>

See Accompanying Notes to Financial Statements.

F-135
<PAGE>

MOBILE LITHOTRIPTER OF INDIANA PARTNERS
NOTES TO FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Mobile Lithotripter of Indiana Partners (the Partnership) was formed as an
Indiana general partnership on February 12, 1993 by T(2) Medical, Inc. (T(2), a
publicly-held company, and Mobile Lithotripter of Indiana Limited, an Indiana
Limited Partnership (MLIL). Unless earlier terminated in accordance with the
specific provisions of the Partnership Agreement, the Partnership terminates
on February 11, 2012. T(2) was designated as the "Managing Partner" of the
Partnership.

The Partnership operates a mobile extracorporeal renal shockwave
lithotripter and rents it to various hospitals located in Indiana. Most of
the stockholders of MLI, Inc., general partner of MLIL, are urologists who
are members of the medical staffs of the hospitals which rent the
lithotripter. The Partnership commenced operations in February 1993.

Upon formation of the Partnership, T(2) contributed cash of $4,507,153 and
MLIL contributed substantially all of its assets and business, other than its
accounts receivable and cash on hand, to the Partnership. The Partnership
also assumed MLIL's liabilities and hospital rental agreements. The value of
the net assets contributed to the Partnership by MLIL was $7,131,571,
including goodwill of $7,185,254 attributable to the business and the
relationships with the hospitals previously served by MLIL. Immediately after
the formation of the Partnership, MLIL received a special distribution from
the Partnership of the $4,507,153 of cash which had been contributed by T(2).
The acquisition of the MLIL assets was accounted for by the purchase method,
with T(2) acquiring 63.2% of the Partnership. Thus, MLIL retained a 36.8%
interest in the Partnership.

On December 31, 1994, MLIL sold its remaining 36.8% interest in the
Partnership to CCC-Indiana Lithotripsy, Inc., a wholly-owned subsidiary of
Phymatrix Corp., for $2,638,085. T(2) merged into Coram Healthcare Corporation
in July 1994.

Cash and Equivalents: For purposes of the statement of cash flows, cash
equivalents include bank time deposits with original maturities of three
months or less. The Partnership maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The Partnership has not
experienced any losses in such accounts.

Equipment: Medical equipment under capital lease was recorded at its fair
value on the date it was contributed to the Partnership and is being
amortized over five years using the straight-line method. Equipment purchased
subsequently was recorded at cost and is being depreciated over the expected
useful lives using the straight-line method.

Goodwill: Relates primarily to the value attributed to the business and the
relationships with various Indiana hospitals served by the Partnership and
its predecessor, MLIL. Goodwill totaling $7,185,254 is being amortized on a
straightline basis over fifteen years.

Income Taxes: No provision for income taxes is required because the allocated
shares of the Partnership's income or loss are included in the income tax
returns of the partners.

NOTE 2--EQUIPMENT LEASE

The Partnership leased a mobile extracorporeal renal shockwave
lithotripter housed in a custom trailer and truck tractor under a five-year
noncancellable capital lease assumed by the Partnership on February 12, 1993.
The lease obligation was payable in monthly installments of $16,823,
including interest imputed at 12%. However, the capital lease was paid in
full in August 1995.

F-136
<PAGE>

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Partnership also assumed a three-year service contract for corrective
and preventative maintenance for the lithotripter. Service expense paid
pursuant to this agreement was $72,615 for the year ended September 30, 1995,
$118,261 for the year ended September 30, 1994, and $84,506 for the period
ended September 30, 1993. The contract was cancelled in June 1995, when the
Partnership entered into a thirteen-month service contract with
Servicetrends, a wholly-owned subsidiary of Coram Healthcare Corporation.
Service expense paid pursuant to this new agreement was $23,125 for the year
ended September 30, 1995. The new service contract requires payments totaling
$69,375 in the year ending September 30, 1996.

NOTE 3--RENTAL AGREEMENTS

The Partnership rents its lithotripter to hospitals under three-year
operating leases which include two rental options. Option A was selected by
six hospitals and has a stated fee per lithotripsy procedure with no minimum
usage fee required. Option B was selected by seven hospitals and has
discounted fees based on increased usage and requires a minimum rental fee
which varies by hospital. A hospital may change to the other option after the
initial twelve-month period. The rental agreements are renewable in 1996.
Minimum future rentals to be received under Option B leases total $207,954
for the year ending September 30, 1996.

NOTE 4--RELATED PARTY TRANSACTIONS

Pursuant to a management agreement dated February 12, 1993, MLI, Inc., the
general partner of MLIL, received a monthly management fee based on 7.5% of
the annual pre-tax profits of the Partnership. Effective January 1995, MLI,
Inc. receives a monthly management fee of $9,000. Management fees paid to
MLI, Inc. were $112,981 and $108,275 for the years ended September 30, 1995
and 1994, respectively, and $80,901 for the period ended September 30, 1993.

The Partnership pays consulting fees of $2,000 per month through May 31,
1996, to Heritage Group, Inc., an affiliate of one of MLIL's limited
partners. Consulting fees paid to Heritage Group, Inc. were $24,000 for each
of the years ended September 30, 1995 and 1994, and $16,000 for the period
ended September 30, 1993.

The Partnership purchased supplies from Servicetrends totaling $8,000 in
the year ended September 30, 1995.

NOTE 5--PENSION PLAN

The Partnership contributes to a multi-employer defined contribution
pension plan for all employees who are at least twenty-one years old and who
have a half year of service with the Partnership. Partnership contributions
to the Plan are based on 11% of each participant's annual salary.
Contributions by the Partnership were $15,157 and $13,106 for the years ended
September 30, 1995 and 1994, respectively, and $10,448 for the period ended
September 30, 1993.

NOTE 6--SUBSEQUENT EVENT

On October 9, 1995, the Partnership distributed cash of $200,000 to its
partners.

F-137
<PAGE>

UROMED TECHNOLOGIES, INC.

CONTENTS

Page
------
Independent Auditor's Report ........................ F-139
Financial Statements:
Balance Sheet ...................................... F-140
Statement of Income and Retained Earnings .......... F-141
Statement of Cash Flows ............................ F-142
Financial Notes .................................... F-143
Additional Material:
Schedule of General and Administrative Expenses .... F-146

F-138
<PAGE>

INDEPENDENT AUDITOR'S REPORT

The Board of Directors
UroMed Technologies, Inc.

We have audited the accompanying balance sheets of UroMed Technologies,
Inc., as of September 28, 1994, December 31, 1993 and 1992, and the related
statements of income and retained earnings and cash flows for the periods
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 audit.

We conducted our audit in accordance with generally accepted auditing
standards. These 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of UroMed Technologies,
Inc., as of September 28, 1994, December 31, 1993 and 1992, and the results
of its operations and its cash flows for the periods then ended in conformity
with generally accepted accounting principles.

Our audit of the financial statements included in this report was directed
to an expression of our opinion on these statements taken as a whole. The
additional material presented in this report has been subjected to certain
audit procedures applied in connection with our audit of the basic financial
statements. The additional material, while not considered necessary to the
fair presentation of the financial position, results of operations, and cash
flows of the Company, is, in our opinion, fairly stated in all material
respects when considered in relation to the financial statements taken as a
whole.

ROY CLINE, CPA, PA
CERTIFIED PUBLIC ACCOUNTANTS

June 22, 1995

F-139
<PAGE>

UROMED TECHNOLOGIES, INC.

BALANCE SHEETS

September 28, December 31, December 31,
1994 1993 1992
----------- ---------- ------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash .................................................. $ 50,332 $ 73,423 $ 24,988
Accounts receivable ................................... 392,827 140,847 16,312
Prepaid expenses ...................................... -- 2,021 498
---------- -------- --------
Total Current Assets ................................ 443,159 216,291 41,798
Property and Equipment ................................ 1,390,915 698,326 --
Other Assets .......................................... -- 5,000 --
---------- -------- --------
Total Assets ........................................ $1,834,074 $919,617 $ 41,798
========== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of capital lease obligations .......... $ 306,183 $176,071 $ --
Accounts payable ...................................... -- 24,419 --
Accrued bonuses ....................................... 200,000 -- --
Accrued expenses ...................................... 45,144 10,024 5,498
---------- -------- --------
Total Current Liabilities ........................... 551,327 210,514 5,498
---------- -------- --------
Long-Term Liabilities
Stockholder loan ...................................... -- 27,000 75,018
Capital lease obligations, exclusive of current portion 791,430 384,957 --
---------- -------- --------
Total Long-Term Liabilities ......................... 791,430 411,957 75,018
---------- -------- --------
Stockholders' Equity
Common stock, $1 par value, 500 shares authorized, 332
shares issued and outstanding, 168 shares held in
treasury ............................................ 500 500 500
Retained earnings ..................................... 559,816 365,645 (39,218)
---------- -------- --------
560,316 366,145 (38,718)
Less treasury stock, at cost, 168 shares .............. 68,999 68,999 --
---------- -------- --------
Total Stockholders' Equity .......................... 491,317 297,146 (38,718)
---------- -------- --------
Total Liabilities and Stockholders' Equity .......... $1,834,074 $919,617 $ 41,798
========== ======== ========
</TABLE>

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

F-140
<PAGE>

UROMED TECHNOLOGIES, INC.

STATEMENT OF INCOME AND RETAINED EARNINGS

<TABLE>
<CAPTION>
Period Ended Year Ended Inception to
September 28, December 31, December 31,
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Revenues Earned ...................... $1,740,469 $1,159,967 $ 23,500
Cost of Revenues ..................... 400,535 415,370 38,196
----------- ---------- --------
Gross Profit ......................... 1,339,934 744,597 (14,696)
General and Administrative Expenses .. 800,695 309,699 24,503
----------- ---------- --------
Income From Operations ............... 539,239 434,898 (39,199)
Other Income (Expense)
Interest expense ................... (65,068) (30,035) (19)
----------- ---------- --------
Net Income (Loss) .................... 474,171 404,863 (39,218)
Retained Earnings, beginning of period 365,645 (39,218) --
Less Dividends ....................... 280,000 -- --
----------- ---------- --------
Retained Earnings, end of period ..... $ 559,816 $ 365,645 $(39,218)
========== ========== ========
</TABLE>

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

F-141
<PAGE>

UROMED TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Period Ended Year Ended Inception to
September 28, December 31, December 31,
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Cash received from customers ................... $1,488,489 $1,035,433 $ 7,188
Cash paid to suppliers and employees ........... (900,095) (678,620) (57,699)
Interest paid .................................. (65,068) (30,035) (19)
---------- ---------- --------
Net Cash Provided (Used) In Operating Activities 523,326 326,778 (50,530)
---------- ---------- --------
Cash Flows From Investing Activities
Cash payments for the purchase of property ..... (80,080) (142,353) --
Payment of deposits ............................ 5,000 (5,000) --
---------- ---------- --------
Net Cash Provided (Used) In Investing Activities (75,080) (147,353) --
---------- ---------- --------
Cash Flows From Financing Activities
Proceeds from issuance of common stock ......... -- -- 500
Borrowings from stockholder .................... -- -- 75,018
Purchase of treasury stock ..................... -- (68,999) --
Repayments on stockholder loan ................. (27,000) (48,019)
Dividends paid ................................. (280,000) -- --
Payments on capital lease obligations .......... (164,337) (13,972) --
---------- ---------- --------
Net Cash Provided (Used) by Financing Activities (471,337) (130,990) 75,518
---------- ---------- --------
Net Increase (Decrease) in Cash ................ (23,091) 48,435 24,988
Cash, beginning of period ...................... 73,423 24,988 --
---------- ---------- --------
Cash, end of period ............................ $ 50,332 $ 73,423 $ 24,988
========== ========== ========
</TABLE>

RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net income (loss) for the period ........................ $ 474,171 $ 404,863 $(39,218)
--------- --------- --------
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization .......................... 88,413 19,027 --
(Increase) decrease in accounts receivable ............. (251,980) (124,534) (16,312)
(Increase) decrease in prepaid expenses ................ 2,021 (1,523) (498)
Increase (decrease) in accounts payable ................ (24,419) 24,419 --
Increase (decrease) in accrued liabilities ............. 235,120 4,526 5,498
--------- --------- --------
Total Adjustments ...................................... 49,155 (78,085) (11,312)
--------- --------- --------
Net Cash Provided (Used) In Operating Activities ....... $ 523,326 $ 326,778 $(50,530)
========= ========= ========
Supplemental disclosures:
Capital lease obligations incurred in connected with
asset acquisitions
Assets acquired ........................................ $ 781,002 $ 717,353 $ --
Liabilities assumed .................................... 700,922 575,000 --
--------- --------- --------
Cash given ............................................. $ 80,080 $ 142,353 $ --
========= ========= ========
</TABLE>

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

F-142
<PAGE>

UROMED TECHNOLOGIES, INC.
FINANCIAL NOTES

1. Summary of Significant Accounting Policies

Company's Activities and Operating Cycle

The Company was incorporated June 8, 1992 under the laws of the State of
Florida. The Company is engaged in the business of providing medical
lithotripsy services to Florida-based hospitals and ambulatory surgery
centers. The Company staffs its mobile lithotripters with a licensed tractor
trailer operator and a licensed radiographic technologist who assists the
attending physician. The mobile lithotripter makes scheduled visits to
various client hospitals and ambulatory surgery centers where local
urologists generally perform one or more procedures per site visit.

Revenue Recognition

Revenue is recognized at the Company's established rates at the time
services are provided. Net calculated adjustments arising under reimbursement
rates with third party payors are accrued on an estimated basis in the period
in which the services are rendered and adjusted as final settlements are
determined.

Property and Equipment

Property and equipment is recorded at cost. For financial statement
purposes depreciation is provided over the estimated useful lives of the
related assets using the straight-line method. The estimated useful lives of
the depreciable assets are:

Mobile Lithotripter Units ........ 10 years
Lithotripter Unit Improvements ... 10 years
Furniture and Equipment .......... 10 years
Office Machinery ................. 7 years

Lease agreements for equipment, which are equivalent to installment
purchase contracts, are recognized as capital leases by the Company. All of
the Company's capital leases have bargain purchase options and the Company is
amortizing the related assets over their estimated economic lives.
Expenditures for maintenance and repairs are charged to operations as
incurred. The cost of assets sold or retired and the related amounts of
accumulated depreciation are eliminated from the accounts in the year of
disposal and the resulting gains or losses are included in operations.

Income Taxes

The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be an S corporation. In lieu of corporate income
taxes, the shareholders of an S corporation are taxed on their proportionate
share of the company's taxable income. Therefore, no provision or liability
for Federal income taxes has been included in the financial statements.

Bad Debts

Individual customer accounts are reviewed periodically for collectibility.
Specifically identified uncollectible amounts are charged to expense in the
period in which the accounts are deemed worthless.

Cash Flows

For purposes of reporting cash flows, cash includes demand deposits with
banks.

F-143
<PAGE>

UROMED TECHNOLOGIES, INC.
FINANCIAL NOTES--(Continued)

2. Stockholders' Equity

The following is the changes in stockholders' equity:

<TABLE>
<CAPTION>
Period Ended Year Ended Inception to
September 28, December 31, December 31,
1994 1993 1992
----------- ---------- ------------
<S> <C> <C> <C>
Beginning Balance .......................... $ 297,146 $(38,718) $ --
Common stock issued, $1 par value, 500
shares authorized, issued and outstanding -- -- 500
Less treasury stock 168 shares ............. -- (68,999) --
Net Income (Loss) .......................... 474,171 404,863 (39,218)
Less dividends ............................. (280,000) -- --
--------- -------- --------
Total Stockholders' Equity ............... $ 491,317 $297,146 $(38,718)
========= ======== ========
</TABLE>

3. Commitments and Contingencies

In the normal course of business, the company entered into a capital lease
agreement in September 1993. As of December 31, 1993, the equipment was not
fully operational. The equipment became fully operational in March, 1994. At
that time, the company paid interest payments only for three months then the
first lease payment of principal and interest was due June 24, 1994.

4. Property and Equipment

The Company's property, equipment, and the related depreciation and
amortization:

<TABLE>
<CAPTION>
Accumulated Net
Original Current Amortization- Book
Cost Depreciation Depreciation Value
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Lithotripter Unit Improvements $ 217,694 $13,696 $ 13,696 $ 203,998
Mobile Lithotripter Units ..... 1,270,000 73,933 92,698 1,177,302
Furniture and Equipment ....... 9,163 717 978 8,185
Office machinery .............. 1,497 67 67 1,430
---------- ------- -------- ----------
Totals for September 28, 1994 $1,498,354 $88,413 $107,439 $1,390,915
========== ======= ======== ==========
Trailer ....................... $ 134,475 $13,447 $ 13,447 $ 121,028
Mobile Lithotripter Unit ...... 575,000 4,792 4,792 570,208
Office furniture .............. 7,878 788 788 7,090
---------- ------- -------- ----------
Totals for December 31, 1993 $ 717,353 $19,027 $ 19,027 $ 698,326
========== ======= ======== ==========
</TABLE>

F-144
<PAGE>

UROMED TECHNOLOGIES, INC.
FINANCIAL NOTES--(Continued)

5. Capital Lease Obligation

<TABLE>
<CAPTION>
Period Ended Year Ended Inception to
September 28, December 31, December 31,
1994 1993 1992
----------- ---------- ------------
<S> <C> <C> <C>
Capital lease obligation payable in monthly
installments of $18,285 including interest at 9%,
collateralized by Mobile Lithotripter, final payment
due November 1996 .................................. $ 430,465 $561,028 $--
Capital lease obligation payable in monthly
installments of $14,427 including interest at 9%,
collateralized by Mobile Lithotripter, final payment
due May 1999 ....................................... 667,148 -- --
---------- -------- ---
Total amount due ..................................... 1,097,613 561,028 --
Amount due within one year ........................... 306,183 176,071 $--
---------- -------- ---
Long-term amount ..................................... $ 791,430 $384,957 $--
========== ======== ===
</TABLE>

The following is the future minimum lease payments.

<TABLE>
<CAPTION>
Period Ended Year Ended
September December Inception to
28, 31, December 31,
------------ ----------- -------------
<S> <C> <C> <C>
1994 ...................................... $ $219,418 $--
1995 ...................................... 392,543 219,418 --
1996 ...................................... 392,543 201,133 --
1997 ...................................... 209,694 -- --
1998 ...................................... 173,125 -- --
1999 ...................................... 115,416 -- --
---------- -------- ---
Total minimum lease payments .............. 1,283,321 639,969 --
Less amounts representing interest ........ 185,708 78,941 --
---------- -------- ---
Present value of net minimum lease payments $1,097,613 $561,028 $--
========== ======== ===
</TABLE>

6. Profit-Sharing Plan

All employees are eligible to participate in the Company's Profit-Sharing
Plan as long as they are at least 21 years of age and have completed one year
of employment. The Plan provides for contributions by the Company in such
amounts as management may determine. The profit-sharing contributions charged
to operations were $57,367 for the period ended September 28, 1994.

7. Event Subsequent to the Date of the Report of Independent Auditor

On September 29, 1994, the Company sold substantially all of its assets
for cash and the assumption of the Company's lease obligations.

F-145
<PAGE>

UROMED TECHNOLOGIES, INC.

SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES

Period
Ended Year Ended
September December Inception to
28, 31, December 31,
1994 1993 1992
----------- ---------- ------------
Accounting fees ............. $ 17,162 $ 6,524 $ 217
Salary--officers ............ 333,000 128,939 8,308
Advertising and promotion ... 4,571 9,229 1,263
Auto and truck .............. 26,723 5,229 --
Bank charges ................ -- 92 31
Continuing education ........ 1,298 -- --
Professional fees ........... 36,215 135 --
Contract labor .............. 1,766 741 --
Contributions ............... 2,000 500 --
Depreciation and amortization 88,413 19,027 --
Dues and subscriptions ...... 210 709 --
Insurance expense ........... 46,331 27,917 4,542
Legal fees .................. 2,551 3,932 --
Licenses and taxes .......... 7,584 -- 437
Travel and entertainment .... 35,498 41,756 --
Office expense .............. 1,634 8,710 341
Medical directors ........... 97,500 -- --
Miscellaneous ............... 2,879 95 --
Office salaries ............. -- -- 6,058
Rent--location .............. 5,634 11,571 850
Taxes--payroll .............. 16,995 26,425 1,556
Telephone and utilities ..... 15,364 18,168 900
Pension contribution ........ 57,367 -- --
-------- -------- -------
Total ................... $800,695 $309,699 $24,503
======== ======== =======

F-146
<PAGE>

TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
NUTRICHEM, INC.

We have audited the accompanying balance sheets of Nutrichem, Inc. as of
November 17, 1994, and December 31, 1993 and the related statements of
income, retained earnings, and cash flows for the periods 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 audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nutrichem, Inc. as of
November 17, 1994 and December 31, 1993, and the results of its operations
and its cash flows for the periods then ended in conformity with generally
accepted accounting principles.

The December 31, 1993 financial statements were previously reviewed, and
our report thereon, dated February 24, 1994, stated we were not aware of any
material modifications that should be made to those statements for them to be
in conformity with generally accepted accounting principles. However, a
review is substantially less in scope than an audit and does not provide a
basis for the expression of an opinion on the financial statement taken as a
whole.

Regan, Russell, Schickner & Shah, P.A.
September 13, 1995

F-147
<PAGE>

NUTRICHEM, INC.
BALANCE SHEETS
NOVEMBER 17, 1994 AND DECEMBER 31, 1993

1994 1993
--------- -----------
ASSETS
Current assets:
Cash ............................................. $ 452,509 $ 103,468
Marketable securities ............................ 24,875 --
Accounts receivable (net of allowance
of $402,052 and $0, respectively) ............. 2,455,506 950,838
Loan receivable--stockholder ..................... 28,000 --
Inventory ........................................ 139,135 --
Deposits ......................................... 12,421 17,000
Advances to employees ............................ 1,405 2,030
---------- ----------
Total current assets ......................... 3,113,851 1,073,336
---------- ----------
Property and equipment:
Machinery and equipment .......................... 150,521 6,656
Transportation equipment ......................... 15,200 40,999
Office furniture and fixture ..................... 26,080 19,303
Leasehold improvements ........................... 3,592 3,592
---------- ----------
195,393 70,550
Less: Accumulated depreciation ................... 21,954 2,849
---------- ----------
173,439 67,701
---------- ----------
$3,287,290 $1,141,037
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $ 311,766 $ 110,723
Loan payable--stockholders ....................... -- 102,902
Payroll taxes payable ............................ 6,114 17,136
Accrued payroll .................................. 12,644 --
Other accrued expenses ........................... 17,594 41,585
---------- ----------
Total current liabilities .................... 348,118 272,346
---------- ----------
Stockholders' equity:
Common stock--no par value; authorized
5,000 shares; issued and
outstanding 1,000 shares ...................... 1,000 1,000
Retained earnings ................................ 2,938,172 867,691
---------- ----------
2,939,172 868,691
---------- ----------
$3,287,290 $1,141,037
========== ==========

See Independent Audit Report.
The accompanying notes are an integral part of these financial statements.
F-148
<PAGE>

NUTRICHEM, INC.
STATEMENTS OF INCOME
For the Period Ended November 17, 1994 and December 31, 1993

1994 1993
Amount Amount
--------- -----------
Earned Revenues ................................... $4,492,523 $2,142,122
---------- ----------
Direct Expenses:
Medications and related costs .................... 957,920 414,648
Medical supplies. ................................ 79,145 50,185
Salaries--pharmacist ............................. 49,821 62,151
Outside pharmacy services ........................ 73,155 91,922
Nursing costs .................................... 175,118 62,511
Medical consultation fees ........................ 128,053 67,650
Other direct expenses ............................ 13,800 15,644
---------- ----------
Total direct expenses. ............................ 1,477,012 764,711
---------- ----------
Operating, Selling and Administrative
Expenses:
Auto expenses .................................... 42,656 9,251
Bookkeeping services ............................. 23,768 10,766
Commissions ...................................... 249,123 --
Conventions, meetings, and seminars .............. 17,442 25,906
Depreciation ..................................... 28,996 2,849
Entertainment .................................... 41,425 13,383
Insurance ........................................ 43,689 11,482
Legal and professional expenses .................. 42,485 23,118
Miscellaneous .................................... 8,948 --
Office expense ................................... 64,844 19,138
Pension expense .................................. -- 41,585
Rent ............................................. 18,491 13,686
Salaries--office ................................. 103,435 30,124
Salaries--officers ............................... 174,487 155,339
Taxes--payroll ................................... 36,255 13,489
Telephone and answering service .................. 48,986 36,702
---------- ----------
Total operating, selling and administrative
expenses .......................................... 945,030 406,818
---------- ----------
Net Income ........................................ $2,070,481 $ 970,593
========== ==========

See Independent Audit Report.
The accompanying notes are an integral part of these financial statements.
F-149
<PAGE>

NUTRICHEM, INC.
STATEMENTS OF RETAINED EARNINGS
For the Period Ended November 17, 1994 and December 31, 1993

1994 1993
---------- ---------
ACCUMULATED ADJUSTMENTS
ACCOUNT
Balance--Beginning ........... $ 867,691 $ --
Net Income ................... 2,070,481 970,593
Stockholder Distributions .... -- (102,902)
---------- ---------
Balance--Ending .............. $2,938,172 $ 867,691
========== =========

See Independent Audit Report.
The accompanying notes are an integral part of these financial statements.
F-150
<PAGE>

NUTRICHEM, INC.
STATEMENTS OF CASH FLOWS
For the Period Ended November 17, 1994 and December 31, 1993

<TABLE>
<CAPTION>
1994 1993
----------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income .............................................. $ 2,070,481 $ 970,593
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ........................................... 28,996 2,849
(Increase) Decrease in operating assets:
Inventory .............................................. (139,135) --
Marketable securities .................................. (24,875) --
Accounts receivable .................................... (1,504,668) (950,838)
Deposits ............................................... 4,579 (17,000)
Increase (Decrease) in operating liabilities:
Accounts payable ....................................... 201,043 110,723
Payroll taxes payable .................................. (11,022) 17,136
Accrued payroll ........................................ 12,644 --
Other accrued expenses ................................. (23,991) 41,585
----------- ---------
Net cash provided by operating activities ............... $ 614,052 $ 175,048
=========== =========
</TABLE>

See Independent Audit Report.
The accompanying notes are an integral part of these financial statements.
F-151
<PAGE>

NUTRICHEM, INC.
STATEMENTS OF CASH FLOWS
For the Period Ended November 17, 1994 and December 31, 1993

1994 1993
--------- --------
Net Cash Provided by Operating Activities ...... $ 614,052 $175,048
--------- --------
Cash Flows From Investing Activities:
Proceeds from sale of fixed assets ............. 45,605 --
Purchase of equipment .......................... (180,339) (70,550)
Advances to employees .......................... -- (2,030)
Loan repayment from employees .................. 625 --
Loan to stockholders ........................... (28,000) --
--------- --------
Net cash used by investing activities .......... (162,109) (72,580)
--------- --------
Cash Flow From Financing Activities:
Debt reduction ................................. (102,902) --
Proceeds from issuance of stock ................ -- 1,000
--------- --------
Net cash (used) provided by financing activities (102,902) 1,000
--------- --------
Net Increase in Cash ........................... 349,041 103,468
Cash--Beginning ................................ 103,468 --
--------- --------
Cash--Ending ................................... $ 452,509 $103,468
========= ========

See Independent Audit Report.
The accompanying notes are an integral part of these financial statements.
F-152
<PAGE>

NUTRICHEM, INC.
NOTES TO FINANCIAL STATEMENTS
November 17, 1994 and December 31, 1993

NOTE 1--Summary of Significant Accounting Policies

This summary of significant accounting policies of Nutrichem, Inc. is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's
management who is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial
statements.

Business activity. The Company is a Maryland corporation organized to
provide medical services on an out-patient or in-home basis. The Company's
significant service operations commenced in March 1993. The Company has a
year end of December 31.

Inventory. The Company values inventories at the lower of cost (first-in,
first-out method) or market. The inventory consists of medication and medical
supplies.

Property and equipment. Property and equipment are stated at cost.
Individual purchases over $300 and improvements which prolong the useful life
of an asset are capitalized, while expenditures for maintenance, small items
and minor repairs are expensed as incurred. Depreciation for financial
statement purposes is calculated on the straight-line method and is provided
on a consistent basis, based upon the estimated useful life of the particular
asset. The Company has adopted the Modified Accelerated Cost Recovery System
(MACRS) for income tax purposes.

Income taxes. Effective January 1, 1994, the Company changed its method of
accounting for income tax purposes from overall cash basis to overall accrual
basis under Internal Revenue Code 446, Revenue Procedure 92-74. On November 17,
1994, CCC-Infusion, Inc., a "C" Corporation purchased 80% of the outstanding
stock of Nutrichem, Inc. As a result of this stock transfer, Nutrichem Inc.'s
status as a Subchapter "S" corporation terminated under Internal Revenue Code
Section 1361 (b) (1) (B). Consequently, the Company is taxed as a "S"
Corporation for the short year ended November 17, 1994 and as a "C" Corporation
for the period November 18, 1994 through December 31, 1994. As such, profits and
losses of the "S" Corporation for the short-year ended November 17, 1994 are
passed through to the stockholders and are recorded on their personal income tax
returns.

NOTE 2--Accounts Receivable

At November 17, 1994, the allowance for contractual adjustments and bad
debts amounted to $402,052. The allowance is based on the Company's
collection history and current trends.

At December 31, 1993, accounts receivable includes unbilled accounts
receivable in the amount of $447,070 for services provided prior to December
31, 1993. Subsequent to December 31, 1993, the Company has collected all of
its accounts receivable outstanding at December 31, 1993.

NOTE 3--Related Party Transaction

At November 17, 1994, the Company had an outstanding loan receivable from
its stockholder, Raj Mantena amounting to $28,000. The loan was repaid
December 4, 1994.

At December 31, 1993, the Company had outstanding loans payable to its
stockholders, John Chay and Raj Mantena, amounting to $27,372 and $75,530
respectively, totaling $102,902. The loans are payable upon demand.

See Independent Audit Report.

F-153
<PAGE>

NUTRICHEM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
November 17, 1994 and December 31, 1993

NOTE 4--Pension Plan

The Company has a simplified employee pension plan that covers all
qualified employees. Contributions to the plan are at the discretion of the
Board of Directors. For the period ended November 17, 1994, the Board of
Director's have elected not to contribute to the plan. During 1993,
contributions to the plan charged to operations were $41,586.

NOTE 5--Supplemental Disclosures of Cash Flow Information

Noncash Financing Activities

For the period ending December 31, 1993, the Company had noncash financing
activities in the amount of $102,902 relating to stockholder distributions
and loans.

See Independent Audit Report.

F-154
<PAGE>

To the Stockholders of
FirstChoice Home Care, Inc.
Boca Raton, Florida

We have audited the accompanying balance sheet of FirstChoice Home Care,
Inc. (an S corporation) as of December 31, 1993, and November 22, 1994, and
the related statements of income, retained earnings, and cash flows for the
year and the interim ten months and 22 days then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
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
audit provides a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of
FirstChoice Home Care, Inc. as of December 31, 1993, and November 22, 1994,
and the results of their operations and their cash flows for the year and
interim period then ended in conformity with generally accepted accounting
principles.

Patrick & Associates, P.A.
June 8, 1995

See Independent Audit Report.

F-155
<PAGE>

FIRSTCHOICE HOME CARE, INC.
BOCA RATON, FLORIDA
BALANCE SHEETS
December 31, 1993, and November 22, 1994

1993 1994
------- ---------
ASSETS
Current Assets:
Cash ................................................. $ 25,686 $ 67,406
Accounts receivable .................................. 385,864 116,244
Prepaid expenses ..................................... 7,755 1,333
Due from shareholders ................................ 20 31,137
-------- --------
Total current assets ............................. $419,325 $216,120
Property & Equipment:
Furniture and fixtures ............................... 15,717 15,611
Less accumulated depreciation ........................ (1,474) (4,374)
-------- --------
Total Property & Equipment ....................... 14,243 11,237
Other Assets:
Organization cost .................................... 17,275 12,957
Deposits ............................................. 537 537
-------- --------
Total other assets ............................... 17,812 13,494
-------- --------
Total assets ..................................... $451,380 $240,851
======== ========
LIABILITIES
Current liabilities:
Accounts payable ..................................... $215,011 $131,652
Note payable--Medicare ............................... 15,402 0
Payroll taxes payable ................................ 4,555 8,810
Accrued payroll ...................................... 14,206 11,084
Accrued pension contribution ......................... 54,457 0
Due to related parties ............................... 27,917 0
Other current liabilities ............................ 583 0
Other accrued expenses ............................... 0 10,535
Notes payable--current portion ....................... 105,000 105,000
-------- --------
Total current liabilities ........................ $437,131 $267,081
Long term Liabilities:
Accrued vacation liabilities ......................... 31,663 55,163
------- ---------
Total liabilities ................................ $468,794 $322,244
EQUITY
Common stock (par value $.01, 100,000 shares
authorized,
2,000 issued) ...................................... 20 20
Accumulated deficit .................................. (17,434) (81,413)
-------- --------
Total equity ..................................... (17,414) (81,393)
-------- --------
Total liabilities and equity ......................... $451,380 $240,851
======== ========

The accompanying notes are an integral part of these statements.
See Independent Audit Report.
F-156
<PAGE>

FIRSTCHOICE HOME CARE, INC.
BOCA RATON, FLORIDA
STATEMENTS OF INCOME AND RETAINED EARNINGS
Year Ending December 31, 1993, and Interim Period Ending November 22, 1994

1993 1994
--------- -----------
Net patient service revenue . $1,757,001 $2,448,645
Operating expenses:
Professional care of patients 1,065,670 1,489,830
Administrative and general .. 631,872 880,420
Depreciation and amortization 6,451 7,009
Interest expense ............ 10,105 21,966
Rent expense ................ 77,660 115,449
---------- ----------
Total operating expenses .... 1,791,758 2,514,674
---------- ----------
Net operating loss .......... (34,757) (66,029)
Other income ................ 1,070 2,050
---------- ----------
Net loss .................... (33,687) (63,979)
Accumulated
deficit--beginning .......... 16,253 (17,434)
---------- ----------
Accumulated deficit--ending . $ (17,434) $ (81,413)
========== ==========

The accompanying notes are an integral part of these statements.
See Independent Audit Report.
F-157
<PAGE>

FIRST CHOICE HOME CARE, INC.
BOCA RATON, FLORIDA
STATEMENTS OF CASH FLOWS
For Year Ending December 31, 1993, and Interim Period Ending November 22, 1994

1993 1994
--------- --------
Cash flow from operating activities
Net loss ....................................... $ (33,687) $(63,979)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense .......................... 1,503 2,691
Amortization expense .......................... 4,711 4,318
(Increase) Decrease in:
Accounts receivable .......................... (187,420) 269,620
Due from related parties ..................... 0 (31,117)
Prepaid expenses ............................. (7,755) 6,422
Deposits ..................................... 1,346 0
Increase (Decrease) in:
Trade accounts & notes payable ............... 224,333 (98,761)
Payroll taxes payable ........................ 4,149 4,255
Accrued expenses ............................. 6,287 (47,044)
Other current liabilities .................... 583 (583)
Due to related parties ....................... 0 (27,917)
Accrued vacation liabilities ................. 31,663 23,500
--------- --------
Total adjustments .......................... 79,400 105,384
--------- --------
Net cash provided by operating activities ...... 45,713 41,405
Cash flows from investing activities
Purchase of equipment .......................... (15,717) 315
--------- --------
Net cash used by investing activities .......... (15,717) 315
--------- --------
Cash flows from financing activities
Payment on short term notes .................... (12,149) 0
--------- --------
Net cash provided by financing activities ...... (12,149) 0
--------- --------
Net decrease in cash ........................... 17,847 41,720
Beginning cash ................................. 7,839 25,686
--------- --------
Ending cash .................................... $ 25,686 $ 67,406
========= ========
Supplemental Disclosures
Interest paid .................................. $ 10,105 $ 21,966
Income taxes paid .............................. $ 0 $ 0

The accompanying notes are an integral part of these statements.
See Independent Audit Report.
F-158
<PAGE>

FIRSTCHOICE HOME CARE, INC.
BOCA RATON, FLORIDA
NOTES TO FINANCIAL STATEMENTS
December 31, 1993, and November 22, 1994

NOTE 1--Summary of Significant Accounting Policies

This summary of significant accounting policies of FirstChoice Health
Care, Inc. (the Company) is presented to assist in the understanding of the
Company's financial statements. The financial statements and notes are the
representation of Company's management who are responsible for their
integrity and objectivity. Management's accounting policies conform with the
generally accepted accounting principles and have been consistently applied
in the preparation of these financial statements.

Business Activity. The Company provides health care services "in the home"
based on a course of treatment prescribed by the patients' physician. The
Company is compensated for its services primarily by Medicare, but
compensation can also be from Medicaid, private payments and private
insurance.

Concentrations of Credit Risk. At November 22, 1994, amounts due from
Medicare were $113,095.

Cash. Cash, for purposes of the statement of cash flows consists of checking
and bank money market accounts.

Revenue and Cost Recognition. The primary funding source, Medicare,
compensates the Company on a "cost reimbursement" basis, meaning Medicare
covers all reasonable cost incurred in providing patient care. Therefore,
there will be no "profit" in the traditional sense. "Profit" is realized
indirectly through owners' compensation and benefits, acquisition of assets,
and deferred compensation.

Depreciation. Depreciation is determined principally on the straight-line
method over the estimated useful lives of the assets, using the American
Hospital Association's "Estimated Useful Lives of Depreciable Hospital
Assets" Guidebook, 1983 edition or 1988 edition. If an asset is not in the
AHA Guide, regulations of the Internal Revenue Service are used.

Income Taxes. The Company has elected to be taxed as an "S" corporation,
where net income is generally reported on a pro-rata basis to each
shareholder, who in turn reports that income on their personal income tax
return.

NOTE 2--Related Party Transactions

Intercompany transactions occur between First Choice Network (Home Office)
and First Choice Health Care Services of Ft. Lauderdale, Inc. Both of these
entities are wholly owned by the shareholders of this Company. Intercompany
transactions consist primarily of loans to and from these companies and the
providing of administrative and general services at cost. It is the practice
of the Company to liquidate this balance on a periodic basis.

NOTE 3--Property and Equipment

The majority of the equipment used by the Company has been acquired
through operating leases, and are therefore not capitalized. Property and
equipment purchased is carried at cost. Expenditures for maintenance and
repairs are charged as the expense is incurred.

See Independent Audit Report.

F-159
<PAGE>

FIRSTCHOICE HOME CARE, INC.
BOCA RATON, FLORIDA
NOTES TO FINANCIAL STATEMENTS--(Continued)

Property and equipment are summarized by major classification as follows:

December 31, November 22,
1993 1994
------------ ------------
Computer Equipment ............................. $15,275 $13,795
Allocation of Home Office Property and Equipment 442 1,816
------- -------
15,717 15,611
Less Accumulated Depreciation .................. 1,474 4,374
------- -------
Net Property and Equipment ..................... $14,243 $11,237
======= =======

NOTE 4--Notes Payable

Notes payable consist of notes due to six individuals. The notes are
renewable on an annual basis at the discretion of the lender. Most of the
notes are collateralized by accounts receivable. All of the notes have an
annual interest rate of 15% of principal and were paid as a condition of the
sale described in Note 7.

NOTE 5--Pension Plan

The Company has sponsored a defined contribution pension plan, covering
substantially all of its employees. The plan is a qualified plan under ERISA.
Enrollment for employees is in January and July of each year. If the enrolled
employee was still employed at year end, the Company accrued a contribution
equal to 12% of the employee's current year gross wage. The accrued
contribution must be paid to the plan by September 15 of the following year.
The expense recorded in 1993 was $54,457. The plan has been terminated in
1994 as a result of the sale described in Note 7 and all vested amounts will
be distributed.

NOTE 6--Contingencies

The Company derives a substantial portion of its revenues through cost
reimbursement from Medicare. The reimbursements are based on quarterly
interim reports followed by an annual final cost report submitted to the
intermediary for the Medicare system. These reports are subject to audit and
adjustments for a period of three years following the final cost report
filing date. Should subsequent audits result in adjustment of previously
submitted costs, these adjustments would be made as an offset to future
revenues, which could have an impact on future operation. Future revenues of
the Company, as a contractor with the federal government, could be affected
by future legislation, should the Medicare system be changed in any material
manner.

NOTE 7--Sale of Business Assets

The Company entered into an asset purchase agreement with FC DST-9 Act.
Corp. on August 30, 1994, to sell essentially all of the assets and
liabilities, including the corporate name, of this Company for $900,000. This
sale was completed on November 22, 1994. All accrued amounts due to the
shareholders of this company were paid at that closing. All amounts due on
notes payable to individuals were paid along with interest on November 22,
1994. These statements do not reflect any of the effects of this sale
transaction.

See Independent Audit Report.

F-160
<PAGE>

To the Stockholders of
First Choice Health Care of Ft. Lauderdale, Inc.
Boca Raton, Florida

We have audited the accompanying balance sheet of First Choice Health Care
Services of Ft. Lauderdale, Inc. (an S corporation) as of December 31, 1993,
and November 22, 1994, and the related statements of income, retained
earnings, and cash flows for the year and the interim ten months and 22 days
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
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
audit provides a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of First
Choice Health Care Services of Ft. Lauderdale, Inc. as of December 31, 1993,
and November 22, 1994, and the results of their operations and their cash
flows for the year and interim period then ended in conformity with generally
accepted accounting principles.

Patrick & Associates, P.A.
June 8, 1995

See Independent Audit Report.

F-161
<PAGE>

FIRST CHOICE HEALTH CARE OF FT. LAUDERDALE, INC.
BOCA RATON, FLORIDA
BALANCE SHEETS
December 31, 1993, and November 22, 1994

1993 1994
--------- ---------
ASSETS
Current assets
Cash ............................................. $ 53,445 $ 16,104
Accounts receivable .............................. 409,990 357,135
Due from related parties ......................... 27,917 2,070
--------- ---------
Total current assets ........................... 491,352 375,309
Property & Equipment
Furniture and fixtures ........................... 17,425 23,013
Less accumulated depreciation .................... (3,415) (7,213)
--------- ---------
Total Property & Equipment ..................... 14,010 15,800
Other assets
Deposits ......................................... 4,175 3,913
--------- ---------
Total assets ................................... $ 509,537 $ 395,022
========= =========
LIABILITIES
Current liabilities
Accounts payable--trade .......................... $ 156,345 $ 210,644
Note payable--Medicare ........................... 8,015 57,060
Payroll taxes payable ............................ 14,698 11,260
Accrued payroll .................................. 33,874 14,701
Accrued pension contribution ..................... 145,543 16,217
Other current liabilities ........................ 7,751 205,000
Notes payable--current ........................... 205,000 31,117
--------- ---------
Total Current Liabilities ...................... 571,226 545,999
Long term liabilities
Accrued vacation liabilities ..................... 68,228 78,362
--------- ---------
Total liabilities .............................. $ 639,454 $ 624,361
EQUITY
Common Stock (par value $1, 7,000 shares
authorized,
100 issued) .................................... 100 100
Accumulated deficit .............................. (130,017) (229,439)
--------- ---------
Total equity ................................... (129,917) (229,339)
--------- ---------
Total liabilities and equity ..................... $ 509,537 $ 395,022
========= =========

The accompanying notes are an integral part of these financial statements.
See Independent Audit Report.
F-162
<PAGE>

FIRST CHOICE HEALTH CARE OF FT. LAUDERDALE, INC.
BOCA RATON, FLORIDA
STATEMENTS OF INCOME AND RETAINED EARNINGS
Year Ending December 31, 1993, and Interim Period Ending November 22, 1994

1993 1994
---------- ----------
Net patient service revenue . $4,060,691 $5,343,636
Operating expenses:
Professional care of patients 2,353,134 3,855,465
Administrative and general .. 1,528,149 1,396,519
Depreciation ................ 2,441 4,267
Interest expense ............ 46,716 30,203
Rent expense ................ 103,448 158,716
---------- ----------
Total operating expenses .... 4,033,888 5,445,170
---------- ----------
Net operating income ........ 26,803 (101,534)
Other income ................ 2,569 2,112
---------- ----------
Net income .................. 29,372 (99,422)
Accumulated
deficit--beginning .......... (159,389) (130,017)
---------- ----------
Accumulated deficit--ending . $ (130,017) $ (229,439)
========== ==========

The accompanying notes are an integral part of these statements.
See Independent Audit Report.
F-163
<PAGE>

FIRST CHOICE HEALTH CARE OF FT. LAUDERDALE, INC.
BOCA RATON, FLORIDA
STATEMENTS OF CASH FLOWS
For Year Ending December 31, 1993, and Interim Period
Ending November 22, 1994

1993 1994
--------- ---------
Cash flows from operating activities
Net income .................................... $ 29,372 $ (99,422)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense ......................... 2,441 4,267
(Increase) Decrease in:
Accounts receivable ......................... 121,275 52,855
Due from related parties .................... 0 25,847
Deposits .................................... 4,822 262
Increase (Decrease) in:
Trade accounts & notes payable .............. (73,994) 46,284
Bank Overdraft .............................. 0 57,060
Payroll taxes payable ....................... (21,216) (3,438)
Accrued expenses ............................ (48,647) (164,716)
Other current liabilities ................... 1,398 8,466
Due to related parties ...................... 0 31,117
Accrued vacation liabilities ................ 23,119 10,134
--------- ---------
Total adjustments ......................... 9,198 68,138
--------- ---------
Net cash provided by operating activities ..... 38,570 (31,284)
Cash flows from investing activities:
Purchase of equipment ......................... (8,521) (6,057)
Net cash used by investing activities ......... (8,521) (6,057)
Cash flows from financing activities:
Payment on short term notes ................... (147,278) 0
--------- ---------
Net cash provided by financing activities ..... (147,278) 0
--------- ---------
Net decrease in cash .......................... (117,229) (37,341)
Beginning cash ................................ 170,674 53,445
--------- ---------
Ending cash ................................... $ 53,445 $ 16,104
========= =========
Supplemental Disclosures:
Interest paid ................................. $ 46,716 $ 30,203
Income taxes paid ............................. $ 0 $ 0

The accompanying notes are an integral part of these statements.
See Independent Audit Report.
F-164
<PAGE>

FIRST CHOICE HEALTH CARE SERVICES OF FT. LAUDERDALE, INC.
BOCA RATON, FLORIDA
NOTES TO FINANCIAL STATEMENTS
December 31, 1993, and November 22, 1994

NOTE 1--Summary of Significant Accounting Policies

This summary of significant accounting policies of First Choice Health
Care Services of Ft. Lauderdale, Inc. (the Company) is presented to assist in
the understanding of the Company's financial statements. The financial
statements and notes are the representation of Company's management who are
responsible for their integrity and objectivity. Management's accounting
policies conform with the generally accepted accounting principles and have
been consistently applied in the preparation of these financial statements.

Concentrations of Credit Risk. November 22, 1994, amounts due from Medicare
were $399,819 less an accrued amount of $42,785.

Cash. Cash, for purposes of the statement of cash flows consists of checking
and bank money market accounts.

NOTE 2--Related Party Transactions

Intercompany transactions occur between First Choice Network (Home Office)
and First Choice Home Care, Inc. Both of these entities are wholly owned by
the shareholders of the Company. Intercompany transactions consist primarily
of loans to and from these companies and the providing of administrative and
general services at cost. It is the practice of the Company to liquidate this
balance on a periodic basis.

NOTE 3--Property and Equipment

See Independent Audit Report.

F-165
<PAGE>

FIRST CHOICE HEALTH CARE SERVICES OF FT. LAUDERDALE, INC.
BOCA RATON, FLORIDA
NOTES TO FINANCIAL STATEMENTS--(Continued)

Property and equipment are summarized by major classification as follows:

December 31, November 22,
1993 1994
---------- ------------
Computer and communication equipment ........... $ 7,043 $10,599
Leasehold improvements ......................... 5,661 5,662
Furniture ...................................... 3,648 3,931
Allocation of home office property and equipment 1,073 2,821
------- -------
Total ........................................ 17,425 23,013
Less: accumulated depreciation ............... 3,415 7,213
------- -------
Total ........................................ $14,010 $15,800
======= =======

NOTE 4--Notes Payable

Notes payable consist of notes due to six individuals. These notes are
renewable on an annual basis at the discretion of the lender. Most of the
notes are collateralized by accounts receivable. All of the notes have an
annual interest rate of 15% of principal and were paid as a condition of the
sale described in Note 7.

NOTE 5--Pension Plan

The Company has sponsored a defined contribution pension plan, covering
substantially all of its employees. The plan is a qualified plan under ERISA.
Enrollment for employees is in January and July of each year. If the enrolled
employee was still employed at year end, the Company accrued a contribution
equal to 12% of the employee's current year gross wage. The accrued
contribution must be paid to the plan by September 15 of the following year.
The expense recorded in 1993 was $145,543. The plan has been terminated in
1994 as a result of the sale described in Note 7 and all vested amounts will
be distributed.

NOTE 6--Contingencies

NOTE 7--Sale of Business Assets

The Company entered into an asset purchase agreement with FC DST-10 Acq.
Corp. on August 30, 1994, to sell essentially all of the assets and
liabilities, including the corporate name, of this Company for $1,000,000.
This sale was completed on November 22, 1994. All accrued amounts due to the
shareholders of this company were paid at that closing. All amounts due on
notes payable to individuals were paid along with interest on November 22,
1994. These statements do not reflect any of the effects of this sale
transaction.

See Independent Audit Report.

F-166
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders of
Whittle, Varnell and Bedoya, P.A.:

We have audited the accompanying balance sheets of Whittle, Varnell and
Bedoya, P.A. (a Florida corporation) as of December 31, 1993 and 1994, and
the related statements of operations and retained earnings 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Whittle, Varnell and Bedoya,
P.A. as of December 31, 1993 and 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Miami, Florida,
September 20, 1995.

F-167
<PAGE>

WHITTLE, VARNELL AND BEDOYA, P.A.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------------ September 30,
1993 1994 1995
-------- -------- -------------
ASSETS (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 17,490 $ 85,098 $ 69,858
Accounts receivable, net of allowances of $149,344
in 1993, $185,381 in 1994 and $188,590 (unaudited)
in 1995 .......................................... 271,889 337,497 350,240
Prepaid expenses ................................... 6,872 9,680 --
-------- -------- --------
Total current assets ........................... 296,251 432,275 420,098
PROPERTY AND EQUIPMENT, net ........................ 132,501 112,996 144,792
DUE FROM STOCKHOLDER ............................... 8,020 6,762 8,405
OTHER ASSETS ....................................... 8,317 8,317 8,114
-------- -------- --------
Total assets ................................... $445,089 $560,350 $581,409
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses .............. $ 78,982 $151,973 $ 78,058
Deferred income taxes .............................. 63,400 82,000 115,000
Revolving line of credit ........................... 44,468 35,349 27,455
Current portion of long-term debt .................. 20,382 22,205 26,000
-------- -------- --------
Total current liabilities ...................... 207,232 291,527 246,513
LONG-TERM DEBT, net of current portion ............. 69,078 46,873 27,884
-------- -------- --------
Total liabilities .............................. 276,310 338,400 274,397
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
(Notes 7, 8 and 10)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 1,000 shares authorized,
300 shares issued and outstanding ................ 300 300 300
Additional paid-in capital ......................... 7,200 7,200 7,200
Retained earnings .................................. 161,279 214,450 299,512
-------- -------- --------
Total stockholders' equity ..................... 168,779 221,950 307,012
-------- -------- --------
Total liabilities and stockholders' equity ..... $445,089 $560,350 $581,409
======== ======== ========
</TABLE>

The accompanying notes to financial statements are an integral part of these
balance sheets.

F-168
<PAGE>

WHITTLE, VARNELL AND BEDOYA, P.A.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
For the Nine-Month
For the Years Ended Periods
December 31, Ended September 30,
----------------------- ------------------------
1993 1994 1994 1995
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
NET PATIENT REVENUE ........................ $1,814,696 $2,514,824 $1,882,415 $1,980,965
---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Salaries and benefits ..................... 1,153,467 1,437,648 1,069,520 1,232,025
Physician stockholders' payroll in excess
of base salary .......................... 286,103 513,159 286,136 323,577
Direct facility expenses .................. 299,416 339,182 320,581 246,016
Provision for bad debts ................... 119,475 148,305 81,846 40,285
---------- ---------- ---------- ----------
Total operating costs and expenses ..... 1,858,461 2,438,294 1,758,083 1,841,903
---------- ---------- ---------- ----------
Operating (loss) income ................ (43,765) 76,530 124,332 139,062
OTHER INCOME ............................... 6,502 10,741 -- --
---------- ---------- ---------- ----------
(Loss) income before provision for
income taxes ......................... (37,263) 87,271 124,332 139,062
PROVISION FOR INCOME TAXES ................. -- 34,100 48,000 54,000
---------- ---------- ---------- ----------
Net (loss) income ...................... (37,263) 53,171 76,332 85,062
RETAINED EARNINGS, beginning of year ....... 198,542 161,279 161,279 214,450
---------- ---------- ---------- ----------
RETAINED EARNINGS, end of year ............. $ 161,279 $ 214,450 $ 237,611 $ 299,512
========== ========== ========== ==========
</TABLE>

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

F-169
<PAGE>

WHITTLE, VARNELL AND BEDOYA, P.A.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the Years Ended Nine-Month Periods
December 31, Ended September 30,
--------------------- --------------------
1993 1994 1994 1995
--------- --------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ....................... $ (37,263) $ 53,171 $ 76,332 $ 85,062
--------- --------- -------- --------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation ........................... 44,142 47,845 23,500 33,999
Provision for bad debts ................ 119,475 148,305 81,846 40,285
Deferred tax provision ................. -- 18,600 63,600 33,000
Changes in assets and liabilities:
Accounts receivable ................... (97,874) (213,913) (35,710) (53,028)
Prepaid expenses ...................... 176 (2,808) (68,700) 9,680
Other assets .......................... 7,223 -- (16) 203
Accounts payable and accrued
expenses ............................ (76,045) 72,991 (71,482) (73,915)
--------- --------- -------- --------
Total adjustments .................... (2,903) 71,020 (6,962) (9,776)
--------- --------- -------- --------
Net cash (used in) provided by
operating activities ............... (40,166) 124,191 69,370 75,286
--------- --------- -------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures .................... (99,294) (28,340) (8,646) (62,509)
Due from stockholder .................... (8,020) 1,258 759 (1,643)
--------- --------- -------- --------
Net cash used in investing activities (107,314) (27,082) (7,887) (64,152)
--------- --------- -------- --------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Borrowings on revolving line of credit .. 18,507 -- -- --
Payments on revolving line of credit .... -- (9,119) (5,140) (7,894)
Borrowings on long-term debt ............ 43,753 -- -- --
Payments on long-term debt .............. -- (20,382) (12,446) (18,480)
--------- --------- -------- --------
Net cash provided by (used in)
financing activities ............... 62,260 (29,501) (17,586) (26,374)
--------- --------- -------- --------
Net (decrease) increase in cash and
cash equivalents ................... (85,220) 67,608 43,897 (15,240)
CASH AND CASH EQUIVALENTS, beginning of
year ................................... 102,710 17,490 17,490 85,098
--------- --------- -------- --------
CASH AND CASH EQUIVALENTS,
end of year ............................ $ 17,490 $ 85,098 $ 61,387 $ 69,858
--------- --------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid .......................... $ 12,623 $ 12,606 $ 54 $ 7,342
--------- --------- -------- --------
</TABLE>

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

F-170
<PAGE>

WHITTLE, VARNELL AND BEDOYA, P.A.
NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Business

Whittle, Varnell and Bedoya, P.A. (the "Company") is a Florida corporation
organized on December 31, 1989, to provide medical cardiology services. The
Company operates in area hospitals and maintains one office in Palm Beach
County and another in Martin County.

b. Cash and Cash Equivalents

The Company considers all highly liquid investments with original
maturities of three months or less at the date of purchase to be cash
equivalents. Included in the cash and cash equivalents balance as of December
31, 1993 and 1994, and September 30, 1995, are interest-bearing deposits
$2,306, $2,214 and $43,367 (unaudited), respectively.

c. Property and Equipment

d. Accounts Receivable and Revenues

Accounts receivable are primarily amounts due under fee-for-service
contracts from third-party payors such as insurance companies (50%), patients
(5%) and government-sponsored health care programs (40%). These receivables
are presented net of an estimated allowance for contractual adjustments and
uncollectible receivables. Contractual adjustments result from the difference
between the rates for services performed and reimbursement amounts from the
government-sponsored health care programs and insurance companies for such
services.

e. Income Taxes

f. Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair value
of certain financial instruments. Cash and cash equivalents, accounts
receivable, prepaid expenses, other assets, accounts payable and accrued
expenses and long-term debt are reflected in the accompanying financial
statements at cost which approximates fair value.

g. Interim Financial Data

In the opinion of the management of the Company, the accompanying
unaudited combined financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the
financial position of the Company as of September 30, 1995, and the results
of operations for the nine-month periods ended September 30, 1994 and 1995.
The results of operations and cash flows for the nine-month period ended
September 30, 1995 are not necessarily indicative of the results of
operations or cash flows which may be reported for the remainder of 1995.

F-171
<PAGE>

WHITTLE, VARNELL AND BEDOYA, P.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

December 31,
--------------------- September 30,
1993 1994 1995
--------- --------- ---------
(Unaudited)
Furniture, fixtures and equipment $ 348,350 $ 360,680 $ 379,536
Leasehold improvements .......... 9,061 8,561 16,955
--------- --------- ---------
357,411 369,241 396,491
Less: Accumulated depreciation .. (224,910) (256,245) (251,699)
--------- --------- ---------
$ 132,501 $ 112,996 $ 144,792
========= ========= =========

3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

December 31,
------------------ September 30,
1993 1994 1995
------- -------- -------
(Unaudited)
Accounts payable ....... $ -- $ 11,203 $17,058
Accrued payroll taxes .. 20,081 80,834 --
Accrued pension expenses 58,901 44,436 40,000
Income tax payable ..... -- 15,500 21,000
------- -------- -------
$78,982 $151,973 $78,058
======= ======== =======

4. REVOLVING LINE OF CREDIT

The revolving line of credit bears interest at 8.5%, is unsecured and has
no specified repayment terms. The amount available to borrow against the line
of credit is approximately $65,000 at December 31, 1994 and $73,000
(unaudited) at September 30, 1995.

5. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
December 31,
------------------- September 30,
1993 1994 1995
-------- -------- ------------
(Unaudited)
<S> <C> <C> <C>
Capital lease obligation, bearing interest at 15%,
payable in monthly installments of $1,326 through July
1997 ................................................. $ 46,530 $ 35,748 $ 26,100
Notes payable, bearing interest between 8% and 18%,
payable in average monthly installments of
approximately $1,100 through March 1998 .............. 42,930 33,330 27,784
-------- -------- --------
89,460 69,078 53,884
Less--Current portion .................................. (20,382) (22,205) (26,000)
-------- -------- --------
$ 69,078 $ 46,873 $ 27,884
======== ======== ========
</TABLE>

F-172
<PAGE>

WHITTLE, VARNELL AND BEDOYA, P.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)

Future maturities of long-term debt as of December 31, 1994 are as
follows:

Capital Note
Year Leases Payable Total
- ---- ------ ------ --------
1995 ............................. $15,913 $ 9,105 $25,018
1996 ............................. 15,913 10,083 25,996
1997 ............................. 9,282 11,168 20,450
1998 ............................. -- 2,974 2,974
------- ------- -------
$41,108 $33,330 74,438
======= =======
Less: Amount representing interest (5,360)
-------
$69,078
=======

6. INCOME TAXES

The provision for income taxes consists of the following:

For the Year For the
Ended Nine-Month Periods
December 31, Ended September 30,
-------------- -------------------
1993 1994 1994 1995
---- ------- -------- --------
(Unaudited)
Current .. $-- $15,500 $(15,600) $21,000
Deferred . -- 18,600 63,600 33,000
--- ------- -------- -------
$-- $34,100 $ 48,000 $54,000
--- ------- -------- -------
Federal .. $-- $29,700 $ 42,000 $47,000
State .... -- 4,400 6,000 7,000
--- ------- -------- -------
$-- $34,100 $ 48,000 $54,000
=== ======= ======== =======

A reconciliation of the tax provision at the statutory rate of 34% to the
effective tax rate is as follows:

For the
For the Year Ended Nine-Month Periods
December 31, Ended September 30
------------------ ------------------
1993 1994 1994 1995
-------- ------- ------- -------
(Unaudited)
Tax provision at the
statutory rate ........... $(12,700) $29,700 $42,000 $47,000
State income taxes .......... (1,900) 4,400 6,000 7,000
Net operating loss carried
forward .................. 14,600 -- -- --
-------- ------- ------- -------
$ -- $34,100 $48,000 $54,000
======== ======= ======= =======

F-173
<PAGE>

WHITTLE, VARNELL AND BEDOYA, P.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)

Deferred income taxes consists of the following:

<TABLE>
<CAPTION>
December 31,
------------------ September 30,
1993 1994 1995
-------- -------- --------
(Unaudited)
<S> <C> <C> <C>
Book/tax differences in recording accounts
receivable .................................. $106,000 $132,000 $137,000
Book/tax difference in recording prepaid
expenses ..................................... 3,000 3,000 --
Book/tax difference in recording accounts
payable and accrued expenses ................ (31,000) (53,000) (22,000)
Net operating loss carried forward ............. (14,600) -- --
-------- -------- --------
$ 63,400 $ 82,000 $115,000
======== ======== ========
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

a. Employment Agreements

The Company has an employment agreement with a physician. Future minimum
payments under this agreement as of December 31, 1994 are as follows:

Year Amount
---- --------
1995 ........... $150,000
1996 ........... 87,500
--------
$237,500
========

b. Insurance

The physicians employed by the Company are required to maintain insurance
coverage for their professional malpractice claims as a condition of
employment. Such insurance provides for coverage to the extent individual
claims do not exceed $1,000,000 per incident and $3,000,000 in the aggregate
per year. The Company maintains occurrence-based malpractice insurance
coverage. Accordingly, the Company does not provide reserves for professional
malpractice claims.

c. Operating Leases

The Company leases automobiles for the stockholders and office space under
operating leases which expire through 1998. Future annual minimum payments
under operating leases as of December 31, 1994 are as follows:

Year Amount
---- --------
1995 ........... $ 88,004
1996 ........... 81,910
1997 ........... 65,332
1998 ........... 21,333
--------
$256,579
========

Rent expense of $54,956, $64,849, $42,846 (unaudited) and $47,219
(unaudited) was incurred in the years ended December 31, 1993 and 1994 and
the nine-month periods ended September 30, 1994 and 1995, respectively.

F-174
<PAGE>

WHITTLE, VARNELL AND BEDOYA, P.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)

8. BENEFIT PLAN

The Company provides retirement benefits for substantially all of its
employees under a defined contribution plan. Contributions to the plan
amounted to $70,797 and $94,445 for the years ended December 31, 1993 and
1994, respectively, and $62,000 (unaudited) and $80,763 (unaudited) for the
nine-month periods ended September 30, 1994 and 1995, respectively.

9. RELATED PARTY TRANSACTIONS

"Due from Stockholder" in the accompanying balance sheet at December 31,
1993 and 1994 consists of an advance to a physician stockholder. The amount
is noninterest-bearing and has no specified repayment terms.

10. SUBSEQUENT EVENTS

Subsequent to year-end, the Company began negotiations to enter into an
asset purchase and long-term management service agreement with Continuum Care
Corporation, an unaffiliated entity. As of September 20, 1995, the terms of
this agreement had not been finalized.

F-175
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders of Pinnacle Associates, Inc.:

We have audited the accompanying consolidated balance sheets of Pinnacle
Associates, Inc. as of December 31, 1994 and 1993, and the related
consolidated statements of operations, changes in stockholders' deficit and
cash flows for the year ended December 31, 1994 and for the period from
October 21 (inception) to December 31, 1993. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pinnacle
Associates, Inc. as of December 31, 1994 and 1993 and the consolidated
results of its operations and its cash flows for the year ended December 31,
1994 and for the period from October 21 (inception) to December 31, 1993 in
conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.

Boston, Massachusetts
December 14, 1995

See Independent Audit Report.

F-176
<PAGE>

PINNACLE ASSOCIATES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
September 30, December 31, December 31,
1995 1994 1993
------------ --------- --------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ................................................ $ 13,940 $ 7,666 $ 1,174
Trade accounts receivable, less allowance for
doubtful accounts of $3,358 in 1994 and $0 in 1993 567,127 75,019 --
Inventory ........................................... 45,181 50,718 --
Prepaid expenses .................................... 5,586 -- --
Other assets ........................................ 7,113 13,762 5,285
---------- --------- --------
Total current assets ............................ 638,947 147,165 6,459
Property and equipment, net of accumulated
depreciation ...................................... 73,114 92,924 10,716
Organization costs, net amortization ................ 3,500 4,250 --
---------- --------- --------
Total assets. ................................... $ 715,561 $ 244,339 $ 17,175
========== ========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable .................................... 233,729 71,029 --
Accrued liabilities ................................. 75,561 30,655 --
Interest payable .................................... 7,712 4,718 --
Line of credit ...................................... 400,000 400,000 30,000
Note payable ........................................ 50,000 50,000 --
Loan payable to officers ............................ 250,000 318 32,095
---------- --------- --------
Total current liabilities ....................... 1,017,002 556,720 62,095
Commitments and contingencies (Note 4) .............. -- -- --
Stockholders' deficit:
Common stock, $.01 par 20,000,000; shares authorized;
issued and outstanding, 6,622,500 shares at
September 30, 1995, 6,457,500 shares at December
31, 1994 and 9,000,000 shares at December 31, 1993 66,225 65,475 90,000
Due to from stockholders ............................ (59,400) (59,400) (89,100)
Additional paid-in capital .......................... 616,275 542,025 --
Accumulated deficit ................................. (924,541) (860,481) (45,820)
---------- --------- --------
Total stockholders' deficit. .................... (301,411) (312,381) (44,920)
---------- --------- --------
Total liabilities and stockholders' deficit ..... $ 715,561 $ 244,339 $ 17,175
========== ========= ========
</TABLE>

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

See Independent Audit Report.

F-177
<PAGE>

PINNACLE ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
January 1, January 1, October 21,
to to (inception)
September December to
30, 31, December 31,
1995 1994 1993
----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
Operating revenues ................ $1,206,832 $ 303,508 $ --
Costs and expenses:
Operating expenses ................ 484,130 134,636
General and administrative expenses 841,804 953,915 45,820
----------- ----------- ------------
Total costs and expenses ...... 1,325,934 1,088,551 45,820
----------- ----------- ------------
(119,102) (785,043) (45,820)
----------- ----------- ------------
Other income (expense):
Interest expense .................. (36,871) (19,280) --
Interest income ................... -- 1,166 --
Loss on equity investment ......... -- (12,500) --
Proceeds from sale of investment .. 12,500 -- --
Other income, net ................. 79,413 996 --
----------- ----------- ------------
Net loss .......................... $ (64,060) $ (814,661) $(45,820)
=========== =========== ============
</TABLE>

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

See Independent Audit Report.

F-178
<PAGE>

PINNACLE ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

Common Stock Additional Total
-------------------- Due from Paid-In Accumulated Stockholders'
Shares Amount Stockholders Capital Deficit Deficit
--------- -------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 21, 1993
Issuance of common stock . 9,000,000 $ 90,000 $(89,100) $ -- $ 900
Net loss ................. $ (45,820) (45,820)
--------- -------- -------- -------- --------- ---------
Balance, December 31, 1993 9,000,000 90,000 (89,100) -- (45,820) (44,920)
Issuance of common stock . 597,500 5,975 591,525 597,500
Retirement of common stock (3,000,000) (30,000) 29,700 -- (300)
Repurchase of common stock (50,000) (500) (49,500) (50,000)
Net loss ................. (814,661) (814,661)
--------- -------- -------- -------- --------- ---------
Balance, December 31, 1994 6,547,500 65,475 (59,400) 542,025 (860,481) (312,381)
Issuance of common stock . 75,000 750 74,250 75,000
Net loss ................. (64,060) (64,060)
--------- -------- -------- -------- --------- ---------
Balance, September 30,
1995 (unaudited) ....... 6,622,500 $ 66,225 $(59,400) $616,275 $(924,541) $(301,441)
========= ======== ======== ======== ========= =========
</TABLE>

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

See Independent Audit Report.

F-179
<PAGE>

PINNACLE ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
October 21,
January 1, to January 1, to (inception) to
September 30, December 31, December 31,
1995 1994 1993
----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................... $ (64,060) $(814,661) $(45,820)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization ...................... 25,969 22,702 290
Loss on sale of fixed assets ....................... (423)
Change in assets and liabilities:
(Increase) in trade accounts receivable ........... (492,108) (75,019) --
(Increase) decrease in inventory .................. 5,537 (50,718) --
(Increase) decrease in prepaid expenses and
organization costs .............................. 1,063 (13,478) (5,285)
Increase (decrease) in accounts payable ........... 162,700 71,029 --
Increase (decrease) in accrued expenses ........... 44,906 30,655 --
Increase (decrease) in accrued interest ........... 2,994 4,718 --
--------- --------- --------
Net cash used in operating activities .......... (312,999) (825,195) (50,815)
Cash flows used in investing activities:
Additions to property and equipment ................ (5,409) (106,196) (11,006)
Proceeds from sale of fixed assets ................. -- 2,462 --
Net cash provided (used by investing
activities) .................................. (5,409) (103,736) (11,006)
--------- --------- --------
Cash flows provided by financing activities:
Proceeds from issuance of common stock ............. 75,000 547,200 900
Borrowings from officers ........................... 249,682 318 32,095
Borrowings under notes payable ..................... -- 50,000 --
Payments on loans to officers ...................... -- (32,095) --
Borrowings on revolving line of credit ............. -- 370,000 30,000
--------- --------- --------
Net cash provided (used by financing
activities) .................................. 324,682 935,423 62,995
--------- --------- --------
Net change in cash ................................. 6,274 6,492 1,174
Cash, beginning of period. ......................... 7,666 1,174 --
--------- --------- --------
Cash, end of period ................................ $ 13,940 $ 7,666 $ 1,174
========= ========= ========
Supplemental cash flow information:
Cash paid during the year for interest ............. $ 33,876 19,280 --
=========== =========== ============
</TABLE>

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

See Independent Audit Report.

F-180
<PAGE>

PINNACLE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies:

Description of Business

Pinnacle Associates Inc. (the "Company") was incorporated on October 21,
1993 under the laws of Georgia and began treating patients in April 1994. The
Company was formed to provide management and administrative services for
physicians as well as physician directed infusion therapy programs for the
physician's patients while remaining part of the physician's practice. The
Company offers services in Pittsburgh and Atlanta.

Principles of Consolidation

The consolidated financial statements include the accounts of Pinnacle
Associates, Inc. and its related entities. All intercompany transactions and
balances have been eliminated in consolidation.

Inventory

Inventory is stated at the lower of cost, as determined on the first-in
first-out method, or market.

Investments

The equity method of accounting is used for investments when the Company
has a non-controlling ownership interest in another company that is greater
than 20%. Under the equity method of accounting, original investments are
recorded at cost and adjusted by the company's share of undistributed
earnings or losses of such companies and the amortization of underlying
intangibles.

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and
equipment is generally calculated over the estimated useful lives of the
assets using accelerated methods. Routine maintenance and repairs are charged
to expenses as incurred, while costs of betterments and renewals are
capitalized.

Organization Costs

Organization costs are being amortized on a straight-line basis over a
five year period.

Income Taxes

See Independent Audit Report.

F-181
<PAGE>

PINNACLE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

2. Property and Equipment:

December 31,
Depreciable ------------------
Lives 1994 1993
--------------- -------- -------
Furniture and equipment ..... 5-7 years $ 45,949 $ 8,073
Computer and software. ...... 5-7 years 68,619 2,933
-------- -------
114,568 11,006
Less accumulated depreciation (21,644) (290)
-------- -------
Total ....................... $ 92,924 $10,716
======== =======

3. Line of Credit:

On November 24, 1993 the Company obtained a line of credit from a bank in
the amount of $200,000 which is due and payable on demand. On June 14, 1994,
the Company obtained an additional $200,000 line of credit with the same
payment terms. Interest is payable monthly for each line of credit at the
bank's variable prime rate which was 8.5% at December 31, 1994. The amount
outstanding under the line of credit at December 31, 1994 and 1993 was
$400,000 and $30,000, respectively. A former partner and officer of the
Company has personally guaranteed the line of credit.

4. Commitments and Contingencies:

The Company leases various facilities, equipment and vehicles under lease
arrangements. Rent expense under all operating leases was $62,338 and $10,016
at December 31, 1994 and 1993, respectively. Future minimum lease payments
under these leases are as follows:

1995 ...................... $ 39,739
1996 ...................... 40,886
1997 ...................... 33,008
1998 ...................... 33,040
1999 ...................... 5,538
Thereafter ................ --
--------
Total minimum lease
payments .................. $152,211
========

5. Related Party Transactions:

The Company issued a $50,000 note which is payable on demand to a former
stockholder of the Company at 8% interest. Since the Company's inception,
several of the Company's officers and shareholders have provided services to
the Company for which no compensation has been reflected on these financial
statements.

6. Investment:

During 1994, the Company had purchased for $12,500 a 50% investment in an
affiliated company owned by certain stockholders of the Company. The
Company's share of the losses of the investment for 1994 exceeded the
carrying value of the investment. This investment was accounted for using the
equity method. At December 31, 1994, the investment balance was written down
to zero, reflecting the adjusted basis of the investment. Subsequent to
December 31, 1994, the equity investment was sold for $12,500 to a former
stockholder and officer of the Company.

See Independent Audit Report.

F-182
<PAGE>

PINNACLE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7. Subsequent Events:

As of November 30, 1995, the Company opened several new programs in
seventeen locations, increasing the total number of program locations to nine
cities from two cities at December 31, 1994.

During November, the Company was acquired by Continuum Care Corporation.
In connection with the acquisition, the Company may receive up to $5,200,000.
The payment will represent the full purchase price and will be made in the
form of shares of Common Stock of Continuum Care Corporation. The ultimate
purchase price will be allocated to assets, primarily goodwill, at their fair
market value and amortized prospectively over the remainder of the forty year
period.

F-183
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Atlanta Gastroenterology Associates, P.C.
Atlanta, Georgia

We have audited the accompanying balance sheets of Atlanta
Gastroenterology Associates, P.C. as of January 31, 1996 and 1995, and the
related statements of operations and retained earnings, and cash flows for
the years then ended. These financial statements are the responsibility of
the Practice's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Atlanta Gastroenterology
Associates, P.C. as of January 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

Frazier & Deeter, LLC

July 9, 1996

F-184
<PAGE>

ATLANTA GASTROENTEROLOGY ASSOCIATES, P.C.

BALANCE SHEETS

<TABLE>
<CAPTION>
January 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash (Note 8) .............................................................. $ 110,644 $ 219,486
Patient receivables, net of contractual adjustments and allowances for
doubtful accounts (Notes 2 and 8) ........................................ 821,773 801,557
Income taxes receivable .................................................... 4,285 --
---------- ----------
Total current assets ................................................... 936,702 1,021,043
Net property and equipment, at cost (Note 3) ............................... 181,659 187,468
---------- ----------
Total assets ........................................................... $1,118,361 $1,208,511
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 5) ................................. $ 20,000 $ 20,000
Borrowings under line of credit (Note 4) ................................... 155,000 200,000
Current portion of obligation under capital lease (Note 7) ................. 4,099 5,145
Accounts payable ........................................................... 66,574 58,851
Accrued payroll and payroll taxes .......................................... 67,010 63,902
Income taxes payable ....................................................... -- 14,842
Deferred income taxes ...................................................... 281,712 280,734
---------- ----------
Total current liabilities .............................................. 594,395 643,474
---------- ----------
Long-term debt, less current portion included above (Note 5) ............... 53,332 73,332
Obligation under capital lease, less current portion included above (Note 7) -- 4,960
---------- ----------
Total liabilities ...................................................... 647,727 721,766
========== ==========
Commitments (Notes 6, 7 and 9) -- --
Stockholders' Equity:
Common stock, $1 par value; 1,000,000 shares authorized; 500 shares issued
and outstanding .......................................................... 500 500
Retained earnings .......................................................... 470,134 486,245
---------- ----------
Total stockholders' equity ............................................. 470,634 486,745
---------- ----------
Total Liabilities and Stockholders' Equity ............................. $1,118,361 $1,208,511
========== ==========
</TABLE>

See notes to financial statements.

F-185
<PAGE>

ATLANTA GASTROENTEROLOGY ASSOCIATES, P.C.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
For the Year Ended
January 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Professional fees, net .............................. $4,991,267 $4,939,845
---------- ----------
Practice overhead:
Cost of physicians services ......................... 2,795,292 2,748,489
Cost of staff services .............................. 1,085,295 1,038,342
Office and practice expenses ........................ 1,063,121 1,100,945
Depreciation and amortization ....................... 44,548 43,280
---------- ----------
Total practice overhead ......................... 4,988,256 4,931,056
---------- ----------
Practice income 3,011 8,789
---------- ----------
Other income (expense):
Interest expense .................................... (16,905) (11,577)
Miscellaneous income ................................ 750 --
---------- ----------
Total other income (expense) .................... (16,155) (11,577)
---------- ----------
(Loss) before (provision) benefit for income taxes .. (13,144) (2,788)
---------- ----------
(Provision) benefit for federal and state income
taxes:
Current ............................................. (1,989) (14,842)
Deferred ............................................ (978) 4,886
---------- ----------
Total provision for income taxes ................ (2,967) (9,956)
---------- ----------
Net loss (16,111) (12,744)
Retained earnings, beginning of year ................ 486,245 498,989
---------- ----------
Retained earnings, end of year ...................... $ 470,134 $ 486,245
========== ==========
</TABLE>

See notes to financial statements.

F-186
<PAGE>

ATLANTA GASTROENTEROLOGY ASSOCIATES, P.C.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the Year Ended January 31,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
(Decrease) Increase in Cash
Cash flows from operating activities:
Cash received from patients ................................................. $ 4,971,051 $ 4,936,272
Cash paid for physicians services ........................................... (2,795,292) (2,748,489)
Cash paid for staff services ................................................ (1,082,186) (1,036,393)
Cash paid for general and administrative .................................... (1,055,399) (1,090,082)
Other income received ....................................................... 750 --
Interest paid ............................................................... (16,905) (11,577)
Income taxes paid ........................................................... (21,116) --
----------- -----------
Net cash provided by operating activities ................................. 903 49,731
----------- -----------
Cash flows from investing activities:
Capital expenditures ........................................................ (38,739) (53,041)
----------- -----------
Net cash used in investing activities ..................................... (38,739) (53,041)
----------- -----------
Cash flows from financing activities:
Net (repayments) borrowings on line of credit ............................... (45,000) 9,000
Proceeds from issuance of long-term debt .................................... -- 100,000
Principal payments on long-term debt ........................................ (26,006) (11,054)
----------- -----------
Net cash (used in) provided by financing activities ....................... (71,006) 97,946
----------- -----------
Net (decrease) increase in cash ............................................. (108,842) 94,636
Cash, beginning of year ..................................................... 219,486 124,850
Cash, end of year ........................................................... $ 110,644 $ 219,486
=========== ===========
Reconciliation of Net (Loss) to Net Cash Provided by Operating Activities
Net (loss) .................................................................. $ (16,111) $ (12,744)
----------- -----------
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization ............................................... 44,548 43,280
Changes in assets and liabilities:
(Increase) in patient receivables ........................................... (20,216) (3,573)
(Increase) in income taxes receivable ....................................... (4,285) --
Increase in accounts payable ................................................ 7,723 10,862
Increase in accrued payroll and payroll taxes ............................... 3,108 1,950
(Decrease) increase in income taxes payable ................................. (14,842) 14,842
Increase (decrease) in deferred income taxes ................................ 978 (4,886)
----------- -----------
Total adjustments ....................................................... 17,014 62,475
----------- -----------
Net cash provided by operating activities ................................... $ 903 $ 49,731
=========== ===========
</TABLE>

See notes to financial statements.

F-187
<PAGE>

ATLANTA GASTROENTEROLOGY ASSOCIATES, P.C.
Notes to Financial Statements
January 31, 1996 and 1995

1. Description of business and summary of significant accounting policies:

Atlanta Gastroenterology Associates, P.C. (the Practice) was incorporated
on August 13, 1976 for the purpose of providing gastroenterological medical
services for patients in the metropolitan Atlanta area.

The following is a summary of the more important accounting principles and
policies followed by the Practice:

Revenue recognition

These financial statements are prepared on the accrual basis of
accounting. Professional fees for patient services are recognized when
services are performed.

Property and equipment

Property and equipment is recorded at cost less accumulated depreciation.
Depreciation is computed using accelerated methods over the assets' estimated
useful lives.

Expenditures for maintenance and repairs are charged to income as
incurred. Additions and betterments are capitalized. The cost of properties
sold or otherwise disposed of, and the accumulated depreciation thereon is
eliminated from the property and reserve accounts, and resulting gains and
losses are reflected in income.

Income taxes

The Practice adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes," which requires recognition of
deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements or tax returns.
Under this method, deferred tax assets and liabilities are determined based
on the differences between the financial statement and tax bases on assets
and liabilities using enacted tax rates in effect for the current year. These
temporary differences result primarily from differences in the Practice using
cash basis reporting for the income tax return and accrual basis reporting
for the financial statements.

Use of estimates

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

Fair value of financial instruments

At January 31, 1996 and 1995, the carrying value of financial instruments
such as cash, patient receivables, trade payables, other liabilities,
borrowings under line of credit and long-term debt approximated their fair
values.

2. Professional fees:

Professional fees are billed at gross amounts and are adjusted at the time
of payment for contractual adjustments with Medicare and Medicaid, insurance
companies and other paying agents. The patient receivables also include
accounts that eventually will be written-off.

For the year ended January 31, 1996, the amount of contractual adjustments
and bad debts included in patient receivables were $427,579 and $34,669,
respectively.

For the year ended January 31, 1995, the amount of contractual adjustments
and bad debts included in patient receivables were $476,597 and $35,873,
respectively.

F-188
<PAGE>

ATLANTA GASTROENTEROLOGY ASSOCIATES, P.C.
Notes to Financial Statements (Continued)
January 31, 1996 and 1995

3. Property and equipment:

Property and equipment are summarized as follows:

January 31,
----------------------
1996 1995
--------- ---------
Furniture and fixtures ......................... $ 199,841 $ 199,841
Computer equipment ............................. 115,978 111,788
Medical equipment .............................. 144,171 111,296
Office equipment ............................... 34,227 32,554
Leasehold improvements ......................... 96,950 96,950
Equipment under capital lease .................. 22,321 22,321
--------- ---------
Total property and equipment ................. 613,488 574,750
Less: Accumulated depreciation and
amortization ................................. (431,829) (387,282)
--------- ---------
$ 181,659 $ 187,468
========= =========

Accumulated amortization of equipment under capital lease was $16,511 and
$14,187 at January 31, 1996 and 1995, respectively.

4. Borrowings under line of credit:

The Practice has borrowings under a line of credit with a bank bearing
interest at prime plus .50%, payable on demand. At January 31, 1996 and 1995,
the Practice had borrowings under the line of credit of $155,000 and
$200,000, respectively. The prime rate at January 31, 1996 was 8.25%.

5. Long-term debt:

Long-term debt consists of the following:

January 31,
--------------------
1996 1995
------- ---------
Note payable to bank, unsecured, payments due in
monthly installments of $1,667 plus interest at prime
plus 1.00% through September, 1999. ................. $ 73,332 $ 93,332
Less: Current portion ................................. (20,000) (20,000)
-------- --------
Long-term portion ..................................... $ 53,332 $ 73,332
======== ========

The following is a schedule, by years of maturities, of long-term debt:

Year ending January 31,
- --------------------------
1997 ..................... $20,000
1998 ..................... 20,000
1999 ..................... 20,000
2000 ..................... 13,332
-------
$73,332
=======

6. Profit sharing plan:

The Practice adopted a contributory defined contribution 401(k) profit
sharing plan effective January 1, 1994 for all eligible employees. The
Practice matches employee contributions $.25 per employee dollar
contribution,

F-189
<PAGE>

ATLANTA GASTROENTEROLOGY ASSOCIATES, P.C.
Notes to Financial Statements (Continued)
January 31, 1996 and 1995

up to 25% of the maximum statutory employee contribution amount. The Practice
contributed approximately $16,000 to the plan in each of the years ended
January 31, 1996 and 1995. The plan was terminated in May, 1996. (See
Note 9).

7. Capital and operating lease obligations:

Capital lease

The Practice leases certain medical equipment under a capital lease
arrangement which expires September, 1996. The present value of the net
minimum lease payments excluding interest at January 31, 1996 and 1995 is
$4,099 and $10,105, respectively.

Operating leases

The Practice leases office facilities under non-cancellable operating
leases. Rent expense under operating leases for the years ended January 31,
1996 and 1995 was $253,802 and $192,067, respectively.

Total future minimum rentals under operating leases as of January 31, 1996
are as follows:

Year ending January 31,
- --------------------------
1997 ..................... $ 233,974
1998 ..................... 231,874
1999 ..................... 207,070
2000 ..................... 205,006
2001 ..................... 205,006
----------
$1,082,930
==========

8. Concentration of credit risk:

The majority of the Practice's revenues are derived from patients located
in the metropolitan Atlanta area who receive gastroenterological services.
This medical field and geographic concentration of patients sets up a
concentration of credit risk with respect to patient fees.

Credit and insurance evaluations are performed on each patient. Losses
pertaining to those credit and insurance risks, in the aggregate, have not
exceeded managements' expectations.

The Practice maintains its cash in accounts which, at times, may exceed
federally insured limits. The Practice has not experienced any losses in such
accounts. The Practice believes it is not exposed to any significant credit
risk on cash.

9. Subsequent event:

On May 15, 1996, the shareholders of the Practice sold all of their stock
in the Practice to another unrelated entity. Subsequent to this transaction,
the Practice terminated its existing physicians' employment agreements,
restructured various employee benefit plans, and entered into a management
services agreement with a new entity formed by the Practice's physicians for
the delivery of medical services.

F-190
<PAGE>

INDEPENDENT AUDITOR'S REPORT

The Managing Members
Physician's Choice Management, LLC.
Ridgefield, Connecticut

We have audited the accompanying balance sheet of Physician's Choice
Management, LLC. (a limited liability company) as of December 31, 1995, and
the related statement of operations and members' equity, and cash flows for
the period August 11, 1995 (inception) to December 31, 1995. 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 audit.

We conducted our audit 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 also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit 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 audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Physician's Choice
Management, LLC. as of December 31, 1995 and the results of its operations
and its cash flows for the period August 11, 1995 to December 31, 1995 in
conformity with generally accepted accounting principles.

Friedberg, Smith & Co., P.C.

January 16, 1996

F-191
<PAGE>

PHYSICIAN'S CHOICE MANAGEMENT, LLC.
(a limited liability company)

BALANCE SHEET
December 31, 1995

ASSETS
Current Assets
Cash (Note 2) ................................ $1,607,597
----------
Equipment and Improvements (Note 1) ............
Furniture and Office Equipment ................ 36,928
Leasehold Improvements ........................ 2,319
----------
Total ........................................ 39,247
Less: Accumulated Depreciation and
Amortization ................................. 1,003
----------
Equipment and Improvements, Net .............. 38,244
Other Asset--Security Deposit (Note 6) ......... 8,307
----------
TOTAL ASSETS ................................... $1,654,148
==========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities ............................
Accrued Expenses and Taxes .................... $ 20,076
Non-Current Liabilities ........................
Deferred Unit Option Advance (Note 4) ......... 175,000
----------
Total Liabilities ............................ 195,076
Members' Equity (Notes 1, 3 and 6) ............. 1,459,072
----------
TOTAL LIABILITIES AND MEMBERS' EQUITY .......... $1,654,148
==========

See notes to financial statements.

F-192
<PAGE>

PHYSICIAN'S CHOICE MANAGEMENT, LLC.
(a limited liability company)

STATEMENT OF OPERATIONS AND MEMBERS' EQUITY
Period August 11, 1995 (inception)
to December 31, 1995

Revenue
Fee Income .......................... $ 8,315
----------
Operating Expenses ...................
Wages ............................... 58,716
Payroll Taxes ....................... 6,755
Office Expenses ..................... 6,608
Rent (Note 6) ....................... 4,153
Consulting .......................... 3,118
Education ........................... 2,285
Data Processing ..................... 1,152
Insurance ........................... 604
Telephone ........................... 951
Advertising ......................... 398
Bank Charges ........................ 809
Dues and Fees ....................... 195
Entertainment ....................... 733
Allocation of Administrative Costs
to Physician's Choice, LLC. (Note
5) ................................. (27,185)
Depreciation (Note 1) ............... 1,003
----------
Total Operating Expenses ......... 60,295
----------
Loss before Other Income ............. (51,980)
Other Income--Interest ............... 9,952
----------
Net Loss ............................. (42,028)
Members' Equity--Beginning (Note 1) .. --
Contributions from Members ........... 2,001,100
Member Subscription Receivable (Note 3) (500,000)
----------
Members' Equity--Ending .............. $1,459,072
==========

See notes to financial statements.

F-193
<PAGE>

PHYSICIAN'S CHOICE MANAGEMENT, LLC.
(a limited liability company)

STATEMENT OF CASH FLOWS
Period August 11, 1995 (inception)
to December 31, 1995
Increase (Decrease In Cash)

<TABLE>
<S> <C>
Cash Flows from Operating Activities
Net Loss ............................................................... $ (42,028)
----------
Adjustments to Reconcile Net Loss to Net Cash Provided (Used) By
Operating Activities:
Depreciation .......................................................... 1,003
Change in Assets and Liabilities:
Accrued Expenses and Taxes ........................................... 20,076
----------
Total Adjustments ................................................... 21,079
----------
Net Cash Used by Operating Activities ............................... (20,949)
----------
Cash Flows from Investing Activities ....................................
Acquisition of Equipment and Improvements .............................. (39,247)
Increase in Security Deposit ........................................... (8,307)
----------
Net Cash Used by Investing Activities ............................... (47,554)
----------
Cash Flows from Financing Activities
Contributions from Members ............................................. 1,501,100
Proceeds from Deferred Unit Option Advance ............................. 175,000
----------
Net Cash Provided by Financing Activities ........................... 1,676,100
----------
Net Increase in Cash .................................................... 1,607,597
Cash - Beginning of Period .............................................. --
----------
Cash - Ending of Period ................................................. $1,607,597
==========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Members' Subscription Receivable ........................................ $ 500,000
==========
</TABLE>

See notes to financial statements.

F-194
<PAGE>

PHYSICIAN'S CHOICE MANAGEMENT, LLC.
(a limited liability company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995

NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Physician's Choice Management, LLC. (a limited liability company)
(Company) provides services to physician networks and medical groups.

Form of Ownership

On August 11, 1995, the Company was organized as a limited liability
company under the laws of the State of Connecticut. A limited liability
company is treated as a partnership for federal income tax purposes and
provides all of its members with limited liability attributes of a
corporation.

Basis of Accounting

The Company uses the accrual method of accounting for financial reporting
purposes and the cash basis of accounting for income tax reporting.

Profits and losses are allocated equally for 1995 based upon unit
ownership in the Company. Commencing in 1996 profits and losses will be
allocated using a predetermined formula as defined in the Company's operating
agreement based upon type of ownership.

Equipment and Improvements

Equipment and improvements are stated at cost. Depreciation and
amortization are computed by the straight-line method for financial
reporting purposes and by accelerated methods for income tax reporting
purposes over the estimated useful lives of the assets ranging from 5 to 39
years.

Use of Estimates

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

NOTE 2 - CONCENTRATION OF CASH CREDIT RISK AND DISCLOSURE OF FINANCIAL
INSTRUMENTS

The Company maintains its cash accounts in one commercial bank. The
accounts at the bank are guaranteed by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000. In addition, the Company maintains an
uninsured money market account at the bank. A summary of the total insured
and uninsured cash balances at December 31, 1995 is as follows:

Total Cash in Bank ....... $1,628,101
Portion Insured by FDIC .. 41,671
----------
Uninsured Cash Balances .. $1,586,430
==========

The carrying amount of cash is a reasonable estimate of fair value.

F-195
<PAGE>

PHYSICIAN'S CHOICE MANAGEMENT, LLC.
(a limited liability company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995

NOTE 3 - MEMBER SUBSCRIPTION RECEIVABLE

One of the Company's members made an initial capital contribution of
$2,000,000 of which $1,500,000 was paid in 1995 with the balance of $500,000
required to be paid prior to June 1996 without interest.

NOTE 4 - DEFERRED UNIT OPTION ADVANCE

During 1995, the Company granted an option to one of its members to
acquire an additional 4 units of ownership in the Company for $1,000,000 in
consideration for a nonrefundable deposit of $175,000. The option expires in
May 1998. The exercise of the option for the above units must occur
simultaneously with the simultaneous exercise of a similar option with an
affiliated company, Physician's Choice, LLC.

If the option is not exercised the $175,000 deposit will be reflected as
income.

NOTE 5 - ALLOCATION OF ADMINISTRATIVE COSTS TO PHYSICIAN'S CHOICE, LLC.

During 1995, the Company charged an affiliate $27,185 for administrative
costs.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Lease
The Company leases its office space under an operating lease extending to
November 1997 at $4,153 per month plus utilities.

Rent expense charged to operations for the period August 11, 1995
(inception) to December 31, 1995 was $4,153.

Future minimum annual rentals at December 31, 1995, under this lease are:

Years Ending December 31, Amount
----------------------------------- --------
1996 .............................. $49,840
1997 .............................. 45,687
-------
Total ............................. $95,527
=======

Employment Agreements
The Company has entered into employment agreements with its three managing
members. The agreements extend through November 1999 and provide two of the
managing members with compensation commencing in the second year of the
agreements to be 25% of net income as defined, not to exceed $300,000,
$350,000 and $375,000, during the second, third and fourth years of the
agreement, respectively. The third managing member will receive annual
compensation of $150,000.

The agreement automatically terminates upon death, disability or by cause
as defined therein and the Company may terminate the agreements without
cause. The third managing member is entitled to receive severance in the
amount of $150,000 if the Company terminates the agreement without cause.

F-196

<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

The Company is a Delaware corporation. Reference is made to Section 145 of
the Delaware General Corporation Law, as amended, which provides that a
corporation may indemnify any person who was or is a party to or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe his conduct was unlawful. Section 145 further provides that a
corporation similarly may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite an adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
The Company's Certificate of Incorporation further provides that the Company
shall indemnify its directors and officers to the full extent permitted by
the law of the State of Delaware.

The Company's Certificate of Incorporation provides that the Company's
directors shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent that
exculpation from liability is not permitted under the Delaware General
Corporation Law as in effect at the time such liability is determined.

The Company maintains an indemnification insurance policy covering all
directors and officers of the Company and its subsidiaries.

Item 21. Exhibits and Financial Statements

(a) Exhibits. The following is a list of exhibits which are incorporated
as part of the Registration Statement by reference.

<TABLE>

<CAPTION>
Exhibit No. Exhibit
- -------------- ------------------------------------------------------------------------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company.
3.2 By-laws of the Company.
+4.1 Indenture with respect to the Company's 6 3/4% Convertible Subordinated
Debentures.
*5.1 Opinion of Nutter, McClennen & Fish, LLP as to the legality of the
securities registered hereunder.
10.1 Asset Purchase Agreement dated September 13, 1995 by and between
Oncology and Radiation Associates, P.A. and Oncology Therapies, Inc.
10.2 Agreement for Purchase and Sale of Assets dated September 11, 1995 by
and among Osler Medical, Osler Medical, Inc., Professional
Associations named herein and PhyChoice, Inc.
10.3 Purchase and Sale Agreement dated August 15, 1995 by and among Cancer
Specialists of Georgia, P.C., Temple Associates, Wolverine Associates,
Pembroke Group, LLC and PhyChoice, Inc.
10.4 Agreement for Purchase and Sale of Assets dated April 12, 1995 by and
between Aegis Health Systems, Inc. and CCC National Lithotripsy, Inc.

II-1
<PAGE>

Exhibit No. Exhibit
- -------------- ------------------------------------------------------------------------
10.5 Agreement and Plan of Merger dated November 21, 1994 among Oncology
Therapies, Inc., Radiation Care Acquisition Corp., Radiation Care,
Inc., A.M.A. Financial Corporation and Thomas E. Haire.
10.6 Stock and Asset Purchase Agreement dated October 27, 1994 by and among
Nutrichem, Inc., The Health Link Group, Inc., John Chay, Raj Mantena
and CCC-Infusion, Inc.
10.7 Stock Purchase Agreement dated May 31, 1995 by and among Dasco
Development Corporation, Dasco Development West, Inc., Donald A.
Sands, Bruce A. Rendina and Abraham D. Gosman.
10.8 Management Services Agreement dated August 15, 1995 by and between
Georgia Cancer Specialists I, P.C. and PhyChoice, Inc.
10.9 Management Services Agreement dated September 11, 1995 by and between
Osler Medical, Inc. and PhyChoice, Inc.
10.10 Employment Agreement dated as of January 1, 1995 between DASCO and Bruce
A. Rendina
10.11 Employment Agreement dated as of January 1, 1995 between DASCO and
Donald A. Sands
+10.12 Employment Agreement dated July 27, 1994 between Continuum Care of
Massachusetts, Inc. and William A. Sanger
+10.13 First Amendment to Employment Agreement dated March 13, 1996 between
PhyMatrix Corp. and William A. Sanger
+10.14 Employment Agreement dated January 29, 1996 between PhyMatrix Corp. and
Robert A. Miller
10.15 Employment Agreement dated September 22, 1994 between Continuum Care of
Massachusetts, Inc. and Edward E. Goldman, M.D.
10.16 1995 Equity Incentive Plan
10.17 Registration Agreement dated January 29, 1996 between PhyMatrix Corp.
and various stockholders of PhyMatrix Corp.
+10.18 Registration Agreement dated June 21, 1996 between PhyMatrix Corp. and
the Initial Purchasers of the Company's debentures.
10.19 Shareholders' Agreement dated as of May 31, 1995 by and among Donald A.
Sands, Bruce A. Rendina, Abraham D. Gosman, DASCO Development
Corporation and DASCO Development West, Inc.
21.1 Subsidiaries of the registrant
*23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Coopers & Lybrand L.L.P.
*23.3 Consent of Bober, Markey & Company
*23.4 Consent of Coopers & Lybrand L.L.P.
*23.5 Consent of Coopers & Lybrand L.L.P.
*23.6 Consent of Arthur Andersen LLP
*23.7 Consent of Hoyman, Dobson & Company
*23.8 Consent of Babush, Neiman, Kornman & Johnson
*23.9 Consent of Weil, Akman, Baylin & Coleman
*23.10 Consent of Coopers & Lybrand L.L.P.
*23.11 Consent of Katz, Sapper & Miller, LLP
*23.12 Consent of Roy Cline, CPA, PA
*23.13 Consent of Regan, Russell, Schickner & Shah, P.A.
*23.14 Consent of Patrick & Associates, P.A.
*23.15 Consent of Patrick & Associates, P.A.
*23.16 Consent of Coopers & Lybrand L.L.P.
*23.17 Consent of Frazier & Deeter, LLC
*23.18 Consent of Friedberg, Smith & Co., P.C.
*23.19 Consent of Nutter, McClennen & Fish, LLP (contained in Exhibit 5)
*24.1 Power of Attorney (Contained on Page II-5)
</TABLE>

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

* Filed herewith.

+ Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 333-08269)

II-2
<PAGE>

All other exhibits are hereby incorporated by reference to the Company's
Registration Statement on Form S-1 (Registration No. 33-97854).

Item 22. Undertakings

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement.

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

Provided, however, that paragraphs (1)(i) and (1)(ii) of this section do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

(4) The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of l934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.

(6) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceeding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a apart of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each

II-3
<PAGE>

such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(7) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

(8) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 19th day of
September 1996.

PHYMATRIX CORP.

By: /s/ Abraham D. Gosman
------------------------------------
Abraham D. Gosman
Chairman of the Board of Directors,
President and Chief Executive Officer

The registrant and each person whose signature appears below on this
Registration Statement hereby constitutes and appoints Frederick R. Leathers and
Michael J. Bohnen, and each of them, with full power to act without the other,
his true and lawful, attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (until revoked in writing) to sign any and all
amendments (including post-effective amendments and amendments thereto) to
this Registration Statement on Form S-4 of the registrant, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary fully to
all intents and purposes as he might or could do in person thereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.

/s/ Abraham D. Gosman September 19, 1996
- -------------------------------
Abraham D. Gosman
Chairman of the Board of
Directors, President
and Chief Executive Officer
(Principal Executive Officer)

/s/ Frederick R. Leathers September 19, 1996
- -------------------------------
Frederick R. Leathers
Chief Financial Officer
(Principal Financial and
Accounting Officer)

/s/ Joseph N. Cassese September 19, 1996
- -------------------------------
Joseph N. Cassese
Director

/s/ David Livingston, M.D. September 9, 1996
- -------------------------------
David Livingston, M.D.
Director

/s/ Bruce Rendina September 10, 1996
- -------------------------------
Bruce Rendina
Director

II-4
<PAGE>

- ------------------------------- , 1996
Stephen E. Ronai, Esq.
Director

/s/ Hugh L. Carey September 19, 1996
- -------------------------------
Governor Hugh L. Carey
Director

/s/ John Chay September 9, 1996
- -------------------------------
John Chay
Director

II-5

EXHIBIT 5.1
PhyMatrix Corp.
September 20, 1996
Page 1

NUTTER, McCLENNEN & FISH, LLP

ATTORNEYS AT LAW

ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2699

TELEPHONE: 617-439-2000 FACSIMILE: 617-973-9748

CAPE COD OFFICE DIRECT DIAL NUMBER
HYANNIS, MASSACHUSETTS (617) 439-2623

September 20, 1996
72462-18

PhyMatrix Corp.
777 South Flagler Drive
West Palm Beach, FL 33401

Gentlemen:

Reference is made to that certain Registration Statement on Form S-4,
Reg. No 333- 09187, (the "Registration Statement") which PhyMatrix Corp.,
a Delaware corporation (the "Company"), has filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), relating to an aggregate of 5,000,000 shares of Common Stock,
$.01 par value, of the Company (the "Shares"). We understand that the Shares may
be offered and issued by the Company from time to time in connection with
acquisitions of other businesses or properties by the Company.

We have acted as counsel for the Company in connection with the
Registration Statement. We have examined original or certified copies of
the Restated Certificate of Incorporation of the Company, the Company's By-laws,
the corporate records of the Company to the date hereof, certificates of public
officials and such other documents, records and materials as we have deemed
necessary in connection with this opinion letter. Based upon the foregoing, and
in reliance upon information from time to time furnished to us by the Company's
officers, directors and agents, we are of the opinion that the Shares, or any
portion thereof, when duly authorized, issued and delivered by the Company in
connection with each acquisition will be legally issued, fully paid and
non-assessable.

<PAGE>

PhyMatrix Corp.
September 20, 1996
Page 2

We understand that this opinion letter is to be used in connection
with the Registration Statement, as finally amended, and hereby consent to
the filing of this opinion letter with and as a part of the Registration
Statement as so amended, and to the reference to our firm in the Prospectus
under the heading "Validity of Common Stock." It is understood that this opinion
letter is to be used in connection with the offering and sale of the Shares only
while the Registration Statement, as amended from time to time, is effective
under the Securities Act.

Very truly yours,

/s/ NUTTER, MCCLENNEN & FISH, LLP

NUTTER, McCLENNEN & FISH, LLP

JED/MRD

284562_1.WP6

[Letterhead]
EXHIBIT 23.1

Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Registration Statement of PhyMatrix Corp. on
Form S-4 (File No. 333-09187) of our report dated March 27, 1996, on our audits
of the combined financial statements and financial statement schedule of
PhyMatrix Corp. We also consent to the reference to our firm under the caption
"Experts."

/s/ Coopers & Lybrand L.L.P.

Boston, Massachusetts
September 18, 1996

[Letterhead]

EXHIBIT 23.2

Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement of PhyMatrix Corp. on
Form S-4 (File No. 333-09187) of our report dated November 6, 1995, on our
audits of the financial statements of DASCO Development Corporation and
Affiliate. We also consent to the reference to our firm under the caption
"Experts."

/s/ Coopers & Lybrand L.L.P.

Miami, Florida
September 18, 1996

EXHIBIT 23.3

Stanley M. Bober, CPA BOBER, Mark B. Bober, CPA
Richard C. Fedorovich, CPA MARKEY Cindy S. Johnson, CPA
Alan Markey, CPA & Company Michael R. Lee, CPA
Dale A. Ruther, CPA Theresa M. Petit, CPA
==============
Certified Public Accountants
A Professional Corporation

INDEPENDENT AUDITORS' CONSENT

As independent auditors, we hereby consent to the inclusion of our report dated
July 31, 1995 with respect to DASCO Development Corporation and Affiliate in
this Registration Statement on Form S-4 filed by PhyMatrix Corp.

/s/ Bober, Markey & Company

BOBER, MARKEY & COMPANY
Akron, Ohio
September 13, 1996

[Letterhead]

EXHIBIT 23.4

Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement of PhyMatrix Corp. on
Form S-4 (File No. 333-09187) of our report dated October 5, 1995, on our audits
of the financial statements of Radiation Care, Inc. and Subsidiaries. We also
consent to the reference to our firm under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.

Boston, Massachusetts
September 18, 1996

EXHIBIT 23.5

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Registration Statement on Form S-4 (File
No.333-09187) of our report dated August 24, 1995, on our audits of the
financial statements of Aegis Health Systems, Inc. as of December 31, 1994, and
1993, and for each of the three years in the period ended December 31, 1994. We
also consent to the reference to our firm under the caption "Expert."

/s/ Coopers & Lybrand L.L.P.

Oklahoma City, Oklahoma
September 13, 1996

EXHIBIT 23.6

ARTHUR ANDERSEN LLP

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

West Palm Beach, Florida,
September 19, 1996.

EXHIBIT 23.7

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Registration Statement on Form S-4 (File No.
333-09187) of our report dated July 27, 1995, on or audits of the financial
statements of Osler Medical as of and for the years ended December 31, 1994 and
1993. We also consent to the reference to our firm under the captions "Experts".

/s/ Hoyman, Dobson & Company, P.A.

HOYMAN, DOBSON & COMPANY, P.A.

Melbourne, Florida
September 13, 1996

EXHIBIT 23.8

Babush, Neiman, Kornman & Johnson, LLP
Certified Public Accountants
Eight Piedmont Center, Suite 500
3525 Piedmont Road, Atlanta, Georgia 30305
404/266-1900 FAX 404/266-3436
Internet: http://www.proi.com/bnkj/

INDEPENDENT AUDITOR'S CONSENT

As independent auditors, we hereby consent to the inclusion of our report dated
June 26, 1995 with respect to Georgia Oncology-Hematology Clinic, P.C. in this
Registration Statement on Form S-4 filed by PhyMatrix Corp.

/s/ Babush, Neiman, Kornman & Johnson, LLP

Babush, Neiman, Kornman & Johnson, LLP
September 13, 1996
Atlanta, Georgia

EXHIBIT 23.9

(410) 561-4411 FAX: (410) 561-4586

WABC
WEIL, AKMAN, BAYLIN & COLEMAN, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
201 West Padonia Road, Suite 600
Timonium, Maryland 21093-2186

INDEPENDENT AUDITOR'S CONSENT

As independent auditors, we hereby consent to the inclusion of our report dated
August 4, 1995 with respect to Oncology-Hematology Associates, P.A. and
Oncology-Hematology Infusion Therapy, Inc. in this Registration Statement on
Form S-4 filed by PhyMatrix Corp.

/s/ Weil, Akman, Baylin & Coleman, P.A.

WEIL, AKMAN, BAYLIN & COLEMAN, P.A.
Timonium, Maryland
September 13, 1996

[Letterhead]

EXHIBIT 23.10

Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement of PhyMatrix Corp. on
Form S-4 (File No. 333-09187) of our report dated January 9, 1996, on our audit
of the financial statements of Cancer Specialists of Georgia, P.C. We also
consent to the reference to our firm under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
September 18, 1996

EXHIBIT 23.11

INDEPENDENT AUDITOR'S CONSENT

As independent auditors, we hereby consent to the use of our report
dated October 25, 1995, with respect to Mobile Lithotripter of Indiana Partners
in this Registration Statement on Form S-4 filed by PhyMatrix Corp. We also
consent to the reference to us under the heading "Independent Accountants" in
the Prospectus, which is part of such Registration Statement.

/s/ Katz, Sapper & Miller, LLP

KATZ, SAPPER & MILLER, LLP

Indianapolis, Indiana
September 13, 1996

EXHIBIT 23.12

INDEPENDENT AUDITORS' CONSENT

As independent auditors, we hereby consent to the inclusion of our report dated
June 22, 1995 with respect to UroMed Technologies, Inc. in this Registration
Statement on Form S-4 filed by PhyMatrix Corp.

/s/ Roy Cline, CPA

Roy Cline, CPA, PA
Altamonte Springs, Florida
September 13, 1996

[Letterhead]
EXHIBIT 23.13

REGAN, RUSSELL, SCHICKNER & SHAH, P.A.

CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' CONSENT

As independent auditors, we hereby consent to the inclusion of our report dated
September 13, 1995 with respect to the Financial Statements of Nutrichem, Inc.
for periods ended December 31, 1993 and November 17, 1994 in this Registration
Statement on Form S-4 filed by PhyMatrix Corporation.

/s/ Regan, Russell, Schickner & Shah, P.A.

Regan, Russell, Schickner & Shah, P.A.
Columbia, Maryland
September 13, 1996

[Letterhead]
EXHIBIT 23.14

4040 Woodcock Drive, Suite 230
Patrick & Jacksonville, Florida 32207
Associates, P.A. (904)396-9510 o (904)396-5400 o fax (904)396-9226

Certified Public Accountants

INDEPENDENT AUDITORS' CONSENT

As independent auditors, we hereby consent to the inclusion of our report dated
June 8, 1995, with respect to First Choice Home Care, Inc. in this Registration
Statement on Form S-4 filed by PhyMatrix Corp.

/s/ Patrick & Associates, P.A.

Patrick & Associates, P.A.
Jacksonville, Florida
September 13, 1996

[Letterhead]
EXHIBIT 23.15

4040 Woodcock Drive, Suite 230
Patrick & Jacksonville, Florida 32207
Associates, P.A. (904)396-9510 o (904)396-5400 o fax (904)396-9226

Certified Public Accountants

INDEPENDENT AUDITORS' CONSENT

As independent auditors, we hereby consent to the inclusion of our report dated
June 8, 1995, with respect to First Choice Health Care Services of Ft.
Lauderdale, Inc. in this Registration Statement on Form S-4 filed by PhyMatrix
Corp.

/s/ Patrick & Associates, P.A.

Patrick & Associates, P.A.
Jacksonville, Florida
September 13, 1996

[Letterhead]

EXHIBIT 23.16

Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional service firm

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement of PhyMatrix Corp. on
Form S-4 (File No. 333-09187) of our report dated December 14, 1995, on our
audits of the financial statements of Pinnacle Associates, Inc. We also consent
to the reference to our firm under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
September 18, 1996

[Letterhead]

[Logo] Frazier & Deeter, LLC
C E R T I F I E D P U B L I C A C C O U N T A N T S

James F. Frazier, Jr., C.P.A., C.F.E.
1100 Harris Tower David A. Deeter, C.P.A.
233 Peachtree Street, N.E. Robert H. Woosley, C.P.A.
Atlanta, Georgia 30303-1507 Roger W. Lusby, III, C.P.A., C.M.A.
404 659-2213 Ruth A. Bartlett, C.P.A.
404 659-4741 FAX

INDEPENDENT AUDITOR'S CONSENT

As independent auditors, we hereby consent to the use of our report dated July
9, 1996, with respect to Atlanta Gastroenterology Associates, P.C. in this
Registration Statement on Form S-4 filed by PhyMatrix Corp. We also consent to
the reference to us under the heading "Experts" in the Prospectus, which is part
of such Registration Statement.

/s/ Frazier & Deeter, LLC

FRAZIER & DEETER, LLC

Atlanta, Georgia
September 13, 1996

Friedberg, Smith & Co., P.C.

CERTIFIED PUBLIC ACCOUNTANTS

<TABLE>

<S> <C> <C>
HENRY L. KATZ, C.P.A. 855 MAIN STREET MILTON H. FRIEDBERG, C.P.A., 1922-1955
CLAYTON A. FRIEDBERG, C.P.A. BRIDGEPORT, CONN. 06604 HARRY W. BABINEAU, C.P.A., 1939-1960
MURRAY R. GLASS, C.P.A. PHONE (203) 366-5876 FREDERICK R. NEWPORT, C.P.A., 1942-1966
LOUIS G. STRASSER, C.P.A. FAX (203) 366-1924 GEORGE W. MEDER, C.P.A., 1926-1967
DAVID M. ZIEFF, C.P.A. JOSEPH Y. SMITH, C.P.A., 1967-1985
LARRY M. HEILWEIL, C.P.A. -----------------
JOSEPH F. KUBIK, C.P.A. 1250 SUMMER STREET MEMBERS
THOMAS R. DURAND, C.P.A. STAMFORD, CONN. 06905 AMERICAN INSTITUTE OF
ROBERT J. SCHLESS, C.P.A. PHONE (203) 359-1100 CERTIFIED PUBLIC ACCOUNTANTS
EDWARD BACKER, C.P.A. FAX (203) 359-8145
JOSEPH ROSENMAN, C.P.A. CONNECTICUT SOCIETY OF
JOHN P. MCCARTHY, C.P.A. CERTIFIED PUBLIC ACCOUNTANTS
RICHARD P. OFFENBACH, C.P.A.
CIRO J. PIRONE, C.P.A.
WILLIAM H. VAN ALSTYNE, C.P.A.
</TABLE>

Independent Auditor's Consent
-----------------------------

As independent auditors, we hereby consent to the use of our report dated
January 16, 1996, with respect to Physician's Choice Management, LLC in this
Registration Statement on Form S-4 filed by PhyMatrix Corp. We also consent to
the reference to use under the heading "Experts" in the Prospectus, which is
part of such Registration Statement.

/s/ Friedberg, Smith & Co.

September 13, 1996