CONTINUCARE CORP, SB-2, 1996-11-26

CONTINUCARE CORP
SB-2, 1996-11-26
COMMERCIAL PRINTING

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<PAGE> 1

As filed with the Securities and Exchange Commission on November 26, 1996
Registration No. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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CONTINUCARE CORPORATION
(Exact name of registrant as specified in its charter)

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FLORIDA 59-2716023
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)

100 SOUTHEAST SECOND STREET, 36TH FLOOR
MIAMI, FLORIDA 33131
(305) 350-7515
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)

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CHARLES M. FERNANDEZ
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
CONTINUCARE CORPORATION
100 SOUTHEAST SECOND STREET, 36TH FLOOR
MIAMI, FLORIDA 33131
(305) 350-7515
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

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Copies of communications to:
REBECCA R. ORAND, ESQUIRE
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
TELEPHONE: (305) 579-0557
FACSIMILE: (305) 579-0717

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.

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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

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, other than securities offered in connection with
dividend or interest reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]

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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================================
PROPOSED
AMOUNT MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE (1) PRICE (1) FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.0001 par value 370,000 shares $10.25 $ 3,792,500 $1,149.24
Common Stock, $.0001 par value 80,000 shares $ 7.50 $ 600,000 181.82
Representative Warrants 80,000 $ -- -- --
Common Stock, $.0001 par value 80,000 shares $ 7.50 $ 600,000 181.82
=======================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457(c), based on (i) the exercise price of the particular
derivative securities the underlying securities of which are being
registered herein and, as appropriate, (ii) the closing price for the
Registrant's Common Stock on November 22, 1996, as reported by the American
Stock Exchange.

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> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS

SUBJECT TO COMPLETION
DATED NOVEMBER 26, 1996

530,000 SHARES

[LOGO]

COMMON STOCK

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

This Prospectus relates to an aggregate of 370,000 shares (the "Option
Shares") of Common Stock, par value $.0001 per share (the "Common Stock"), of
Continucare Corporation, a Florida corporation (the "Company" or
"Continucare"), proposed to be sold from time to time by certain option holders
(the "Option Holders") of the Company (the "Option Holders"). See "Selling
Shareholders." The Company will receive an exercise price ranging from $4.00
to $8.25 upon the exercise of options held by the Option Holders but will not
receive any proceeds from the sale of the Option Shares by the Option Holders.

This Prospectus also relates to the issuance by the Company, subsequent
to the exercise of Representative Unit Purchase Options ("RUPOs") by the holders
thereof, of (a) 80,000 Representative Units (the "Units"), (b) 80,000 shares of
Common Stock (the "Representative Shares") and 80,000 Warrants (the
"Representative Warrants") issuable upon exercise of the Units and (c) 80,000
shares of Common Stock (the "Warrant Shares") issuable upon the exercise of the
Representative Warrants. The RUPOs were issued in connection with the
Company's initial public offering which occurred in May 1995 ("May Public
Offering") and may be exercised for nominal consideration for one Unit.
See "Description of Capital Stock-Representative Units". The Company
will receive the exercise price of $7.50 upon the exercise of each of the Units
and the Representative Warrants but will not receive any proceeds from the sale
of the Representative Shares, the Representative Warrants or the Warrant
Shares. No assurance can be given as to when, if ever, the RUPOs, Units or
Representative Warrants will be exercised.

The Common Stock is quoted on the AMEX under the symbol "CNU." On
November 22, 1996, the closing price of the Common Stock on the AMEX was $10.25
per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES
OFFERED HEREBY.

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

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 NOVEMBER __, 1996

<PAGE> 3

SUMMARY

On August 9, 1996, Zanart Entertainment Incorporated, a Florida
corporation ("Zanart"), signed a definitive Agreement and Plan of Merger (the
"Merger Agreement") with Zanart Subsidiary, Inc. ("ZSI"), a wholly-owned
subsidiary of Zanart, and Continucare Corporation, a Florida corporation.
Pursuant to the Merger Agreement, on September 11, 1996 (the "Closing Date"),
ZSI merged (the "Merger") with and into Continucare Corporation. Upon the
consummation of the Merger, and pursuant to the terms of the Merger Agreement,
(i) each issued and outstanding share of common stock of Continucare
Corporation converted into one share of Zanart common stock, par value $.0001
per share (the "Common Stock"), the separate existence of ZSI terminated and
Continucare Corporation became a wholly-owned subsidiary of Zanart, (ii) Zanart
agreed to sell or otherwise dispose of its assets (other than cash) and
discharge all liabilities relating to Zanart's existing licensing business
prior to December 11, 1996 and (iii) Zanart's Board of Directors and management
became comprised of designees of Continucare Corporation. On October 8, 1996,
Zanart changed its corporate name to "Continucare Corporation." All references
herein to Zanart and the Zanart Business refer to the historical licensing
operations of Zanart before giving effect to the Merger, and all references to
Continucare or the Company and the Continucare or the Company Business refer to
the mental and physical rehabilitation health care business of Continucare and
its subsidiaries prior to and after giving effect to the Merger.

CONTINUCARE BUSINESS

Continucare develops and manages mental and physical rehabilitation
health care programs that offer a continuum of mental and physical
rehabilitation health services ranging from partial hospitalization care to day
treatment and outpatient services. Continucare offers a comprehensive mental
health care product line by providing the following types of services to
general acute care and psychiatric hospitals, community mental health centers
("CMHCs") and comprehensive outpatient rehabilitation facilities ("CORFs"):
clinical development, marketing, financial management, operational oversight,
human resources support, quality assurance and outcome measurement. Through
its ability to organize and provide such services Continucare is able to
develop and manage for its clients the series of mental and physical
rehabilitation health care programs that comprise a continuum of mental and
physical rehabilitation health care services.

At November 1, 1996, Continucare had management contracts with five
general acute care hospitals, one free- standing psychiatric hospital, 16 CMHCs
and one CORF. As of such date, 22 of such contracts were in operation covering
various treatment programs.

Continucare's strategy is to (i) continue to develop all elements of
the continuum of mental health and physical rehabilitation services provided to
existing and new clients, (ii) aggressively pursue new management contracts for
the provision of mental and physical health services, (iii) emphasize its
outcome measurement system ("Outcome Measurement System") as an additional
service and (iv) expand the types of services offered by it to include physical
and medical rehabilitation services, home health services and primary care
services.

ZANART BUSINESS

Zanart designs, publishes, packages and markets wall decor and
collectible art which incorporate popular images from motion pictures,
television and animation. Zanart's products include framed art, matted prints,
lithographs and serigraphs, calendars, posters, blueprints, movie and
television card portfolio sets and animation sericels which are produced
pursuant to licensing or other agreements with entertainment companies. The
images for the printed products are provided to Zanart by the licensor or
designed by Zanart, and the products are printed, manufactured and framed for
Zanart by manufacturers according to Zanart's instructions and specifications.
Zanart's product line consists of over 200 individual products. Zanart's
products are sold through retail chain stores, independent retail stores,
catalogs and a television shopping network. The future of Zanart's licensing
business is subject to the terms of the Merger Agreement as described above.

----------------------
Continucare's executive offices are located at 100 Southeast Second
Street, 36th Floor, Miami, Florida 33131. Continucare's telephone number is
(305) 350-7515.

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<PAGE> 4

RISK FACTORS

An investment in the Common Stock offered hereby involves certain
risks. Prospective purchasers should carefully consider the following factors,
in addition to the other information contained in this Prospectus, when
evaluating the Company and its business before making an investment decision.
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth below,
which could cause actual results to differ materially from those indicated by
such forward-looking statements.

Limited Operating History. Continucare has been involved in its
current business since February 1996, and has had limited operations to date.
The Company's prospects must be considered in light of the risks, delays,
expenses and difficulties frequently encountered in connection with an
early-stage business in a highly-regulated, competitive environment. No
assurance can be given that the Company will successfully implement any of its
plans in a timely or effective manner or whether the Company will be able to
generate significant revenues or continue to operate profitably.

Shares Eligible for Future Sale. Future sales of Common Stock in the
public market could adversely affect the market price of the Common Stock.
Continucare currently has 11,202,983 shares of Common Stock outstanding,
assuming no exercise of currently outstanding options and warrants. Pursuant
to the Merger Agreement, in addition to the shares of Common Stock offered
hereby, the Company has registered 920,000 shares of Common Stock issuable upon
exercise of Series A Warrants. Although there is presently a public market for
the Common Stock, there can be no assurance (and it is not presently likely)
that such market will have sufficient trading activity to permit holders of
Common Stock to sell their shares in desired amounts, or at desired prices, or
that such market will be sustained, and sales of substantial amounts of shares
is likely to have a material adverse effect on the market price for the shares
of Common Stock. Pursuant to the Merger Agreement, in addition to the shares
of Common Stock offered hereby, the Company will register an aggregate of
8,500,000 shares of Common Stock previously issued upon the formation of
Continucare and pursuant to a private placement of Common Stock consummated
immediately prior to the closing of the Merger.

Risks Relating to Acquisition Strategy. The Company has expanded and
intends to continue to expand its operations through acquisitions of health
related companies. The Company continually engages in evaluations of potential
acquisitions; however, there are currently no definitive agreements, letters of
intent or agreements in principle with respect to any material acquisition. In
implementing this acquisition strategy, the Company will compete with other
potential acquirors, some of which may have greater financial or operational
resources than the Company. Competition for acquisitions may intensify due to
the ongoing consolidation in the health care industry, which may increase the
costs of capitalizing on such opportunities. Consummation of acquisitions
could result in the incurrence or assumption by the Company of additional
indebtedness and the issuance of additional equity. The issuance of shares of
Common Stock for an acquisition may result in dilution to shareholders. The
financial performance of the Company is and will continue to be subject to
various risks associated with the acquisition of businesses, including the
expenses associated with the integration of the acquired businesses,
difficulties in assimilating the operations of the acquired businesses and
diversion of management resources. Also, as the Company enters into new
geographic markets, the Company will be required to comply with laws and
regulations of states that differ from those in which the Company's operations
are currently conducted. There can be no assurance that the Company will be
able to effectively establish a presence in these new markets. While many of
the expenses arising from the Company's efforts in these areas may have a
negative effect on operating results until such time, if at all, as these
expenses are offset by increased revenues, there can be no assurance that the
Company will be able to implement its acquisition strategy, or that this
strategy will ultimately be successful.

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<PAGE> 5

Potential Volatility. There has been significant volatility in the
market price of securities of health care companies that often has been
unrelated to the operating performance of such companies. The Company believes
that certain factors, such as legislative and regulatory developments,
quarterly fluctuations in the actual or anticipated results of operations of
the Company, lower revenues or earnings in the financial results of the Company
than those anticipated by securities analysts, the overall economy and the
financial markets, could cause the price of the Common Stock to fluctuate
substantially.

Reimbursement Considerations. The Company receives fees for its
services directly from its client hospitals and CMHCs. The Company's clients
receive reimbursement under either the Medicare or Medicaid programs or
payments from insurers, self-funded benefit plans or other third-party payors
for mental health and physical rehabilitation services provided by programs
managed by the Company. As a result, the availability of such reimbursement or
payment could have a significant impact on the decisions of the Company's
existing and prospective clients to offer mental and physical rehabilitation
health services.

The Medicare and Medicaid programs are subject to statutory and
regulatory changes, retroactive and prospective rate adjustments,
administrative rulings and funding restrictions, any of which could have the
effect of limiting or reducing reimbursement levels to hospitals or CMHCs for
mental health and physical rehabilitation services provided by programs managed
by the Company. Because a substantial portion of the patients of the programs
managed by the Company are covered by Medicare, any changes which limit or
reduce Medicare reimbursement levels could have a material adverse effect on
the Company's clients and, in turn, on the Company. The Company cannot predict
whether any changes to such governmental programs will be adopted or, if
adopted, the effect, if any, that such changes will have on the Company. In
addition, a limited number of the Company's management contracts require the
Company to refund a portion of its fee if either Medicare deniesb reimbursement
for an individual patient treatment or if the fee paid to the Company is
disallowed as a reimbursable cost. Also, Medicare retrospectively audits cost
reports of client hospitals, CMHCs and CORF upon which Medicare reimbursement
for services rendered in the programs managed by the Company is based.
Accordingly, at any time, the Company could be subject to refund obligations to
such clients for prior period cost reports that have not been audited and
settled at the date hereof. Any significant decrease in Medicare reimbursement
levels, the imposition of significant restrictions on participation in the
Medicare program, or the disallowance by Medicare of any significant portion of
the client hospitals', CMHCs' and CORF's costs, including the fees paid or
payable to the Company, where the Company has a reimbursement denial repayment
obligation, could adversely affect the Company. There can be no assurance that
hospitals, CMHCs and CORFs, which offer health programs now or hereafter
managed by the Company will satisfy the requirements for participation in the
Medicare or Medicaid programs.

Payors, including Medicare and Medicaid, are attempting to manage
costs, resulting in declining amounts paid or reimbursed to hospitals for the
services provided. As a result, the Company anticipates that the number of
patients served by hospitals on a per diem, episodic or capitated basis will
increase in the future. There can be no assurance that if amounts paid or
reimbursed to hospitals, CMHCs and CORFs decline, it will not adversely affect
the Company.

At November 1, 1996, the Company managed 16 full-service mental health
programs. The Company's clients are reimbursed by Medicare for a substantial
majority of the partial hospitalization services provided by such programs.
The Health Care Financing Administration ("HCFA") has recently advised fiscal
intermediaries who process Medicare reimbursements to review more closely
partial hospitalization mental health programs. As a result, some fiscal
intermediaries have initiated focused medical reviews of partial
hospitalization mental health programs. There can be no assurance as to the
effects of any focused medical review that hereafter may be conducted of
programs managed by the Company.

Reliance on Key Customers; Related Party Issues. At November 1, 1996,
the Company had management contracts with five general acute care hospitals
directly or indirectly owned by ORNDA Healthcorp ("ORNDA").

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Although these hospitals collectively accounted for less than 10% of the
combined net revenues of the Company through June 30, 1996, this percentage is
expected to increase. The termination or non-renewal of all or a substantial
part of the management contracts with hospitals owned by ORNDA could adversely
affect the Company's business, financial condition or results of operations.

Medicare regulations limit reimbursement for mental health and other
health care charges paid to related parties. A party is considered "related"
to a provider if it is deemed to be controlled by the provider. One test for
determining control for this purpose is whether the percentage of the total
revenues of the party received from services rendered to the provider is so
high that it effectively constitutes control. It is possible that such
regulations could limit the number of management contracts that the Company
could have with a particular client.

Increased Scrutiny of Health Care Industry. The health care industry
has in general been the subject of increased government and public scrutiny in
recent years, which has focused on the appropriateness of the care provided,
referral and marketing practices and other matters. Increased media and public
attention has recently been focused on the mental health services industry in
particular as a result of allegations of fraudulent practices related to the
nature and duration of patient treatments, illegal remuneration and certain
marketing, admission and billing practices by certain mental health providers.
The alleged practices have been the subject of federal and state
investigations, as well as other legal proceedings. The Company is unable to
predict the effect that publicity in general about the mental health services
industry might have on the Company. There can be no assurance that the acute
care hospitals, CMHCs and CORFs, which offer health care programs now or
hereafter managed by the Company, will not be subject to federal and state
review or investigation from time to time.

Contract Terms and Renewals. The revenues of the Company are derived
from management contracts with general acute care and psychiatric hospitals,
CMHCs and a CORF. These contracts have initial terms of 3 to 15 years and many
have automatic renewal terms subject to termination by either party.
Substantially all of the Company's management contracts may be terminated by
either party without cause upon advance notice of between 30 and 180 days
depending on the particular contract. In addition, such contracts generally
provide for early termination either by the client hospital, CMHC or CORF for
"cause." The continued success of the Company is subject to its ability to
renew or extend existing management contracts and obtain new management
contracts. Contract renewals and extensions are likely to be subject to
competing proposals from other contract management companies as well as
consideration by certain hospitals to convert their mental health programs from
independently managed programs to programs operated internally or to terminate
their mental health programs in order to reassign patient beds for other health
care purposes. There can be no assurance that any hospital, CMHC or CORF will
continue to do business with the Company following expiration of its management
contract or earlier if the related management contract is terminated either
with or without cause. In addition, any changes in the Medicare program which
have the effect of limiting or reducing reimbursement levels for health
services provided by programs managed by the Company could result in the early
termination of existing management contracts and would adversely affect the
ability of the Company to renew or extend existing management contracts and to
obtain new management contracts. The termination or non-renewal of a material
number of management contracts could result in a significant decrease in the
Company's revenues and could have a material adverse effect on the Company's
business, financial condition or results of operations.

Government Regulation. The federal government and all states in which
the Company operates regulate certain aspects of the mental health and physical
rehabilitation services provided by programs managed by the Company. In
particular, the development and operation of hospital facilities is subject to
federal, state and local licensure and certification laws. Hospital facilities
are subject to periodic inspection by governmental and other authorities to
assure compliance with the standards established for continued licensure under
state law and certification under the Medicare and Medicaid programs. Many
states have adopted certificate of need or similar health planning laws that
generally require state agency approval of certain new health care services or
capital expenditures. A client's failure to obtain or renew any required
regulatory approvals or licenses could prevent

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<PAGE> 7

such hospital, CMHC or CORF from offering mental and physical rehabilitation
health services or receiving Medicare and Medicaid payments.

The Company is subject to federal and state laws that prohibit certain
direct and indirect payments intended to induce or encourage the referral of
patients to, or the recommendation of, a particular provider of items or
services. In addition, certain federal and state laws have recently been
enacted to prohibit physician referrals for certain "designated health
services" rendered to patients by a physician who has certain financial
relationships with the provider. Although the Company believes that its
contractual arrangements with its client hospitals, CMHCs, CORF and medical
directors comply with such laws, there can be no assurance that its activities
will not be challenged by regulatory authorities.

Dependence on Key Personnel. The Company's success is materially
dependent upon its executive officers and members of its management team, the
loss of one or more of whom could adversely affect the Company. The Company
has procured $2 million of "key-man" life insurance on Charles M. Fernandez,
the Company's Chairman, President and Chief Executive Officer. The Company's
success and growth strategy also depend on its ability to attract and retain
qualified clinical, management, marketing and other personnel. The Company
competes with general acute care hospitals and other health care providers for
the services of psychiatrists, psychologists, social workers, therapists and
other clinical personnel. Demand for such clinical personnel is high and they
are often subject to competing offers. There can be no assurance that the
Company will continue to be able to attract and retain the qualified personnel
necessary for its business.

Health Care Reform. Federal and state governments have recently
focused significant attention on health care reform intended to control health
care costs and to improve access to medical services for uninsured individuals.
These proposals include cutbacks to the Medicare and Medicaid programs and
steps to permit greater flexibility in the administration of Medicaid. It is
uncertain at this time what legislation on health care reform may ultimately be
enacted or whether other changes in the administration or interpretation of
governmental health care programs will occur. There can be no assurance that
future health care legislation or other changes in the administration or
interpretation of governmental health care programs will not have a material
adverse effect on the Company's business, prospects, financial condition or
results of operations.

Competition. The mental and physical rehabilitation health contract
management services industry is highly competitive. The Company's competitors
include several national companies as well as many regional and local
companies, some of which have, or may obtain, greater financial and other
resources than the Company. In addition, the Company's current and prospective
clients may choose to operate mental and physical rehabilitation health
programs themselves rather than contract with the Company. Furthermore,
general acute care hospitals, the primary market for the Company's services,
compete for patients with other providers of mental and physical rehabilitation
health services, including freestanding psychiatric hospitals. The inability
of the Company or its client hospitals, CMHCs and CORF to compete effectively
could have a material adverse effect on the Company's business, financial
condition or results of operations.

Insurance. Continucare carries general liability, comprehensive
property damage, malpractice, workers' compensation and other insurance
coverages that management considers adequate for the protection of
Continucare's assets and operations. There can be no assurance, however, that
the coverage limits of such policies will be adequate. A successful claim
against Continucare in excess of its insurance coverage could have a material
adverse effect on Continucare.

Zanart Business. On May 18, 1995, Zanart consummated an initial
public offering of 920,000 units (each comprised of one share of Common Stock
and one warrant exercisable for one share of Common Stock at a price of $6.00)
offered at a price of $6.00 per unit. In connection with the Merger and prior
to December 11, 1996, Zanart has agreed to sell or otherwise dispose of its
assets (other than cash) and discharge all of its

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<PAGE> 8

liabilities relating to Zanart's existing licensing business. Following the
Merger, the Company will continue to be subject to certain business, financial
and legal risks relating to Zanart's activities prior to the Merger.

RECENT DEVELOPMENTS

MERGER TRANSACTION

Pursuant to the Merger, on September 11, 1996, ZSI merged with and
into Continucare Corporation. Each share of pre-Merger Continucare common
stock issued and outstanding immediately prior to the Closing Date was
converted on the Closing Date into one share of Common Stock. Under the terms
of the Merger Agreement, Zanart agreed to sell or otherwise dispose of its
assets (other than cash) and discharge all liabilities relating to Zanart's
existing licensing business prior to December 11, 1996. In addition, upon the
consummation of the Merger (i) Zanart's existing Board of Directors and
management resigned and (ii) Zanart's new Board of Directors and management
became comprised of Continucare designees.

The Merger Agreement contains various customary representations and
warranties of the parties thereto, and includes a post closing adjustment
provision requiring the issuance of a certain number of additional shares (the
"Additional Shares") of Common Stock to the holders of pre-Merger Continucare
common stock immediately prior to the Closing Date in the event that the
Closing Cash Balance (as such term is defined in the Merger Agreement) of
Zanart is less than $2,000,000 on December 12, 1996.

Prior to the Merger, Continucare Corporation effectuated the private
sale of an aggregate of 3,300,000 shares of pre-Merger Continucare common stock
which was completed on August 29, 1996. Further, Zanart agreed to register
under the Securities Act of 1933, as amended, (i) an aggregate of 1,462,500
shares of Common Stock to be issued upon exercise of outstanding warrants and
options, (ii) the 8,300,000 shares of Common Stock issued in connection with
the Merger, and (iii) the Additional Shares.

EXPIRATION OF SERIES A WARRANTS

On November 15, 1996, the Company's Board of Directors accelerated the
expiration date of the Company's currently issued and outstanding Series A
Warrants (the "Warrants") to December 20, 1996 (the "Expiration Date").
Accordingly, each such Warrant not exercised on or before the Expiration Date
shall become void, and all rights thereto and all rights in respect thereof
shall cease on the Expiration Date. The Warrants are exercisable at a price of
$6.00 per share for each underlying share of Common Stock and relate to an
aggregate of 920,000 shares of Common Stock. See "Risk Factors -- Shares
Eligible for Future Sale."

CHANGE IN ACCOUNTANTS

See "Relationship with Independent Accountants."

USE OF PROCEEDS

The number of Units, Representative Warrants and Options exercised will
depend on several factors beyond the control of the Company, including the
market price of the Common Stock. Therefore, the Company cannot estimate with
reasonable accuracy the number of Units, Representative Warrants and Options
which may be exercised and the amount of proceeds to be received therefrom.
Proceeds, if any, received from exercise of the Units, Representative Warrants
and Options will be used for working capital and other general corporate
purposes.

The Company will receive no proceeds from the sale of any or all of
the Option Shares ("Shares") being offered by the Option Holders.

Expenses expected to be incurred by the Company in connection with
this offering are estimated to be approximately $67,000.

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PLAN OF DISTRIBUTION

The shares of Common Stock offered hereby will be issued by the
Company upon the exercise of the Units, Representative Warrants and Options.
Each of such derivative securities are currently exercisable. See "Description
of Capital Stock - Representative Units" for a description of the terms and
manner of exercise of the Units and Representative Warrants. The exercise
price and other terms of the Units, Representative Warrants and Options should
not be considered as any indication of the actual value of the Company and bear
no relationship to the assets or book value of the Company or any generally
accepted criteria of economic valuation thereof.

The Option Holders may from time to time sell all or a portion
of the Option Shares offered hereby in one or more transactions in the
over-the-counter market, on the AMEX, on any exchange on which the Common Stock
may then be listed, in negotiated transactions or otherwise, or a combination
of such methods of sale, at market prices prevailing at the time of sale or
prices related to such prevailing market prices or at negotiated prices. The
Option Holders may effect such transactions by selling the Option Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of underwriting discounts, concessions or commissions from the Option
Holders and/or purchasers of the Option Shares for whom they may act as agent
(which compensation may be in excess of customary commissions). In connection
with such sales, the Option Holders and any broker-dealers or agents
participating in such sales may be deemed to be underwriters as that term is
defined under the Securities Act. Neither the Company nor the Option Holders
can presently estimate the amount of commissions or discounts, if any, that
will be paid by the Option Holders on account of their sales of the Option
Shares from time to time.

Under the securities laws of certain states, the Option Shares may be
sold in such states only through registered or licensed broker-dealers or
pursuant to available exemptions from such requirements. In addition, in
certain states the Option Shares may not be sold therein unless the Option
Shares have been registered or qualified for sale in such state or an exemption
from such requirement is available and satisfied.

Continucare will pay certain expenses in connection with this
offering, estimated to be approximately $67,000 but will not pay for any
underwriting commissions and discounts, if any, or counsel fees or expenses of
the Option Holders.

The Option Holders and other persons participating in the
distribution of the Shares offered hereby are subject to the applicable
requirements of Rule 10b-6 promulgated under the Exchange Act in connection
with sales of the Option Shares.

- 8 -
<PAGE> 10

SELLING SHAREHOLDERS

Unless otherwise indicated, the following table sets forth certain
information concerning each Option Holder as of November 19, 1996, based
on information available to the Company.

<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES OF
NAME AND ADDRESS OF COMMON STOCK SHARES COMMON STOCK
OF SELLING SHAREHOLDER PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING**
- --------------------------------- ------------------------- -------------- ---------------------------
SHARES PERCENTAGE SHARES PERCENTAGE
------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Adelman, Steven (1) 265,575 2.4% 2,500 263,075 2.4%
12100 Wilshire Boulevard
Suite 770
Los Angeles, California 90025

Culpepper, Gary (2) 10,000 * 10,000 0 -
101 Callan Avenue, 3rd Floor
San Leandro, California 94577

Frost Nevada Ltd. Partnership (3) 1,458,333 12.7% 250,000 1,208,333 10.7%
3500 Lakeside Court, Suite 200
Reno, Nevada 89509
</TABLE>

- 9 -

<PAGE> 11

<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES OF
NAME AND ADDRESS OF COMMON STOCK SHARES COMMON STOCK
OF SELLING SHAREHOLDER PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING**
- --------------------------------- ------------------------- -------------- ---------------------------
SHARES PERCENTAGE SHARES PERCENTAGE
------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Massini, Alfred (4) 10,000 * 10,000 0 -
1133 Itena Circle
Honolulu, Hawaii 96821

Politi, Mark (5) 25,000 * 25,000 0 -
452 Smithwood Drive
Beverly Hills, California 90212

Simkin, Jackie (6) 102,500 * 27,500 75,000 *
Simkin Management, Inc.
200 S.E. First Street
Suite 703
Miami, Florida 33131

Slayton, Todd (7) 45,000 * 45,000 0 -
11911 Mayfield Avenue No.6
Los Angeles, California 90049
</TABLE>

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

* Less than 1%.
** Assumes that all Shares held by the Selling Shareholder are sold
pursuant to this offering and that no other shares of Common Stock are
acquired or disposed of by the Selling Shareholders prior to the
termination of this offering. Because the Selling Shareholders may sell
all, some or none of their Shares or may acquire or dispose of other
shares of Common Stock, no reliable estimate can be made of the
aggregate number of Shares that will be sold pursuant to this offering
or the number or percentage of shares of Common Stock that each Selling
Shareholder will own upon completion of this offering.

(1) Steven Adelman served as Vice President and Chief Financial Officer of
the Company from March 1990 through July 1994 and a Director from March
1990 until the consummation of the Merger. Ownership includes currently
exercisable options and/or Series A Warrants to purchase 8,200 shares of
Common Stock.

- 10 -

<PAGE> 12

(2) Gary Culpepper served as a Director of the Company from July 1996
through September 1996. Mr. Culpepper served as a consultant to the
Company from May 1994 through September 1996. Ownership includes
currently exercisable options to purchase 10,000 shares of Common Stock.

(3) Dr. Phillip Frost, who beneficially owns the shares of Common Stock held
of record by Frost Nevada Limited Partnership, has been Vice Chairman of
the Board of the Company since September 1996. Ownership includes
currently exercisable options to purchase 250,000 shares of Common
Stock.

(4) Alfred Massini served as a consultant to the Company from August 1994
through September 1996. Ownership includes currently exercisable
options to purchase 10,000 shares of Common Stock.

(5) Mark Politi served as a Senior Vice President of the Company from July
1992 through April 1996. Ownership includes currently exercisable
options to purchase 25,000 shares of Common Stock (Mr. Politi's options
are cancellable by the Company in accordance with the terms of the
governing option agreement).

(6) Jacqueline Simkin served as a Director of the Company from May 1995
through May 1996. Ownership includes currently exercisable options to
purchase 27,500 shares of Common Stock.

(7) Todd Slayton served as Chief Financial Officer of the Company from
October 1994 through September 1996. Ownership includes currently
exercisable options to purchase 45,000 shares of Common Stock.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The principal U.S. market in which the Company's Common Stock, $.0001
par value, is traded is the American Stock Exchange ("AMEX"). Prior to the
Company's listing of its Common Stock on AMEX, which occurred on September 11,
1996, such shares of Common Stock were traded on the Nasdaq Small-Cap Market.
Prior to the May Public Offering, the Company's shares of Common Stock were not
listed for trading on Nasdaq, and the Company was aware of only one
broker-dealer which acted as a market maker in the Company's Common Stock.
Such broker-dealer informed the Company that the only trade which occurred
within the 12 months prior to May 1995 occurred in September 1994 for 50 shares
of Common Stock at $8.00 per share. The following table shows the high and low
sales prices as reported on Nasdaq, and on AMEX for the period commencing
September 11, 1996, for the Common Stock for the periods indicated below.
These quotations have been obtained from Nasdaq and AMEX. Quotations through
August 14, 1995 reflect last sales prices for the Company's Units sold in the
May Public Offering, each Unit consisting of one share of Common Stock and one
Series A Warrant. Quotations from August 15, 1995 reflect last sales prices
for Common Stock of the Company, exclusive of Series A Warrants.

<TABLE>
<CAPTION>
Transactions in Units High Low
- -------------------------------------- ------------- ------------
<S> <C> <C>
May 11, 1995 - June 30, 1995 $8.125 $6.75

July 1, 1995 - August 14, 1995 $ 8.38 $7.25

<CAPTION>
Transactions in shares of Common Stock
- --------------------------------------
<S> <C> <C>
August 15, 1995 - September 30, 1995 $ 6.63 $3.88

Second Quarter, Fiscal 1996 5.25 3.25
</TABLE>

- 11 -

<PAGE> 13

<TABLE>
<S> <C> <C>
Third Quarter, Fiscal 1996 4.00 1.50

Fourth Quarter, Fiscal 1996 4.81 1.75

First Quarter, Fiscal 1997 13.125 3.312

October 1, 1996 - November 22, 1996 12.00 8.625
</TABLE>

The number of holders of record of the Company's Common Stock, as of
November 1, 1996 was 100, inclusive of those brokerage firms and/or clearing
houses holding the Company's shares of Common Stock for their clientele (with
each such brokerage house and/or clearing house being considered as one
holder).

The Company has not paid or declared any dividends upon its Common
Stock since its inception and, by reason of its present financial status and
its contemplated financial requirements, does not contemplate or anticipate
paying any dividends upon its Common Stock in the foreseeable future.

- 12 -
<PAGE> 14

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

On August 9, 1996, Zanart signed a Merger Agreement with ZSI, a
wholly-owned subsidiary of Zanart, and Continucare Corporation. Pursuant to
the Merger Agreement, on September 11, 1996, ZSI merged with and into
Continucare Corporation. Upon consummation of the Merger, and pursuant to the
terms of the Merger Agreement, (i) each issued and outstanding share of common
stock of Continucare Corporation converted into one share of Zanart Common
Stock, the separate existence of ZSI terminated and Continucare Corporation
became a wholly-owned subsidiary of Zanart, (ii) Zanart agreed to sell or
otherwise dispose of its assets (other than cash) and discharge all liabilities
relating to Zanart's existing licensing business prior to December 11, 1996 and
(iii) Zanart's Board of Directors and management became comprised of designees
of Continucare Corporation.

THE FOLLOWING TABLE AND DISCUSSION RELATE TO THE OPERATIONS OF CONTINUCARE FOR
THE PERIODS INDICATED.

RESULTS OF OPERATION

The discussion in this section relates to the operations of Continucare
for the period from February 12, 1996 (inception) to June 30, 1996 and the
three months ended September 30, 1996, and should be read in conjunction with
the audited consolidated financial statements of Continucare Corporation and
notes thereto and the unaudited pro forma financial statements and notes
thereto appearing elsewhere in this Prospectus.

Overview

Continucare Corporation was incorporated on February 12, 1996 in the
State of Florida. Continucare develops and manages mental and physical
rehabilitation health care programs that offer a continuum of mental and
physical rehabilitation health services ranging from partial hospitalization
care to day treatment and outpatient services. Continucare offers a
comprehensive mental health care product line by providing the following types
of services to general acute care and psychiatric hospitals, CMHCs and CORFs:
clinical development, marketing, financial management, operational oversight,
human resources support, quality assurance and outcome measurement.

Effective May 1, 1996, Continucare, through a subsidiary, acquired
certain assets, contracts and liabilities of a company that provided billing
and collection services and of a company that provided permanent, long-term and
short- term employee leasing to physicians, community hospitals, community
mental health centers and partial hospitalization programs, in return for 25%
ownership in the subsidiary to the common owner of the two acquired companies.
The transactions were accounted for under the purchase method.

- 13 -
<PAGE> 15

<TABLE>
<CAPTION>
PERCENTAGE OF
FOR THE TOTAL REVENUES PERCENTAGE OF
PERIOD FROM FOR THE PERIOD FOR THE TOTAL REVENUES
FEBRUARY 12, FROM FEBRUARY QUARTER FOR THE QUARTER
1996 12, 1996 ENDED ENDED
(INCEPTION) (INCEPTION) TO SEPTEMBER SEPTEMBER 30,
TO JUNE 30, 1996 JUNE 30, 1996 30, 1996 1996
---------------- ---------------- ----------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $2,507,063 100.0% $2,923,446 100.0%
---------- -------- ---------- ---------
Expenses
Payroll and employee benefits 973,412 38.8 1,367,910 46.8
Provision for bad debt 242,664 9.7 226,211 7.7
Professional fees 203,625 8.1 189,740 6.5
General and administrative 54,430 2.2 44,555 1.5
Depreciation and amortization 362 - 7,160 -
---------- -------- ---------- ---------
Total expenses 1,474,493 58.8 1,835,576 6.3
---------- -------- ---------- ---------
Income from operations 1,032,570 41.2 1,087,870 37.2
---------- -------- ---------- ---------
Other income (expenses)
Interest (23,204) (0.9) 17,152 0.6
Minority interest (32,686) (1.3) (79,047) (2.7)
---------- -------- ---------- ---------
Other income (expenses) (55,890) (2.2) (61,895) (2.1)
---------- -------- ---------- ---------
Income before taxes 976,680 39.0 1,025,975 35.1
Provision for income taxes 332,071 13.2 381,717 13.1
---------- -------- ---------- ---------
Net income $ 644,609 25.7% $ 644,258 22.0%
========== ======== ========== =========
Earnings before interest, taxes, depreciation and
amortization (EBITDA) $1,000,245 39.9% 1,016,000 34.8%
==========
</TABLE>

Quarter Ended September 30, 1996

As previously noted, pre-Merger Continucare commenced operations on
February 12, 1996. Accordingly, no comparative data is available for the three
month period ending September 30, 1995. Further, management does not believe
that its results for the quarter ended September 30, 1996 are indicative of the
Company's future performance. Accordingly, the Company has limited its
discussions with respect to this area.

Revenues

Total revenues were approximately $2,923,000 for the quarter ended
September 30, 1996. Revenues from the employee leasing operations and the
billing service, for which certain assets, contracts and liabilities were
acquired effective May 1, 1996, are included in the revenues of the entire
current period. In addition, the current period includes the opening of two
hospital based programs for which the management fees are based on the actual
costs incurred in the management of the programs as well as a markup to cover
overhead and, on August 26, 1996, the Company entered into a letter of intent
to purchase a CORF. The purchase agreement was consummated on November 12,
1996. Under the terms of the letter of intent, the Company provided management
services to the CORF for a fee of $30,000 per month from the date of the letter
of intent until the

- 14 -

<PAGE> 16

Closing Date (as defined in the related purchase agreement). Fees earned under
this arrangement account for approximately 1% of total revenues for the quarter
ended September 30, 1996.

Expenses

Payroll and employee benefits were approximately $1,368,000 for the
three month period ended September 30, 1996, 46.8% of total revenues. Of total
consolidated payroll and employee benefits, approximately $972,000 or 71.0% was
payroll and benefits paid to employees of the employee leasing operation.

Continucare's provision for bad debt for the quarter ended September
30, 1996 was approximately $226,000, or 7.7% of total revenues.

Professional fees were approximately $190,000 in the current quarter.
Total professional fees for the quarter ended September 30, 1996 include
$105,000 under a subcontract agreement with a third-party.

General and administrative expenses ("SG&A") were approximately
$45,000 for the quarter ended September 30, 1996. As a percentage of total
revenues, SG&A was approximately 1.5%. For the quarter ended September 30,
1996, SG&A was comprised of expenses such as rent, utilities and supplies.

Interest

Net interest income for the quarter ended September 30, 1996 was
approximately $17,000 and is primarily attributable to interest earned on the
$6,600,000 raised by the Company as a result of the Private Placement that took
place in August 1996.

Minority Interest

Minority interest, which was approximately $79,000 for the quarter
ended September 30, 1996, represents a 25% interest held by a third party in
the net income of a subsidiary of Continucare.

Provision for Income Taxes

The provision for income taxes was $382,000 as a result of income
before taxes for the quarter ended September 30, 1996 of approximately
$1,026,000. The provision for income taxes was calculated at a rate of
approximately 37% which equals the statutory federal income tax rate.

Net Income

Continucare had net income of approximately $644,000 for the quarter
ended September 30, 1996. As a percentage of total revenues, net income was
22% of total revenues for the quarter ended September 30, 1996.

Earnings Before Interest, Taxes, Depreciation and Amortization

EBITDA is not presented as an alternative to operating results or cash
flow from operations as determined by generally accepted accounting principles
("GAAP"), but rather to provide additional information related to the ability
of Continucare to meet current trade obligations and debt service requirements.
EBITDA should not be considered in isolation from, or construed as having
greater importance than, GAAP operating income or cash flows from operations as
a measure of an entity's performance.

EBITDA was approximately $1,016,000 for the quarter ended September 30,
1996.

- 15 -

<PAGE> 17

February 12, 1996 (inception) to June 30, 1996

Revenues

Continucare derives its revenues primarily from fixed-fee contracts
for the provision of certain management services to client hospitals and
CMHC's. Continucare's revenues for the period from February 12, 1996
(inception) to June 30, 1996 were approximately $2,507,000, of which $1,688,000
were derived from such management agreements.

Continucare also recognizes revenues from its employee leasing
services and its billing services. These operations were obtained by a
subsidiary of Continucare on May 1, 1996 through the acquisition of certain
contracts, assets and liabilities. Revenues received for its employee leasing
services for the period from May 1, 1996 to June 30, 1996 were approximately
$527,000. Revenues from its billing operations for the same period were
approximately $292,000.

Expenses

Payroll and employee benefits for the period from February 12, 1996
(inception) to June 30, 1996 were approximately $973,000, or 38.8% of total
revenues. Of total consolidated payroll and employee benefits, approximately
$542,000 or 56%, was payroll and benefits paid to the employees of the employee
leasing operations.

Continucare's provision for bad debt for the period from February 12,
1996 (inception) to June 30, 1996 was approximately $243,000, or 9.7% of total
revenues.

Professional fees are comprised primarily of legal and audit fees. In
addition, total professional fees for the period from February 12, 1996
(inception) to June 30, 1996 of $204,000 included approximately $70,000 under a
subcontract agreement with a third-party.

General and administrative expenses ("SG&A") were approximately
$54,000, 2.2% of total revenues, for the period from February 12, 1996
(inception) to June 30, 1996 and were comprised primarily of costs such as
rent, public relations and travel.

Interest

Interest expense was approximately $23,000, or less than 1% of total
revenues, for the period from February 12, 1996 (inception) to June 30, 1996
and was comprised primarily of interest on a note payable to a shareholder (the
"Shareholder Note"). The Shareholder Note bears interest at 10% per annum and
is due, in full, on February 12, 1998.

Minority Interest

Minority interest was approximately $33,000, or 1.3% of total revenue.
The minority interest represents a 25% interest held by a third party in the
net income of a subsidiary of Continucare.

Provision for Income Taxes

The provision for income taxes for the period from February 12, 1996
(inception) to June 30, 1996 was approximately $332,000, 13.2% of total
revenues, and was calculated at a rate of approximately 34% which equals the
statutory federal income tax rate.

- 16 -

<PAGE> 18

Net Income

Continucare had net income of approximately $645,000 for the period
from February 12, 1996 (inception) to June 30, 1996.

Earnings Before Interest, Taxes, Depreciation and Amortization

EBITDA is not presented as an alternative to operating results or cash
flow from operations as determined by Generally Accepted Accounting Principles
("GAAP"), but rather to provide additional information related to the ability
of Continucare to meet current trade obligations and debt service requirements.
EBITDA should not be considered in isolation from, or construed as having
greater importance than, GAAP operating income or cash flows from operations as
a measure of an entity's performance.

EBITDA was approximately $1,000,000 for the period from February 12,
1996 (inception) to June 30, 1996, or approximately 39.9% of total revenues.

Liquidity and Capital Resources

The Company has historically financed its operations from operating
cash flow. For the three month period then ended, the Company's operating cash
flow was approximately $570,000.

The Company's working capital was approximately $10,593,000, with a
current ratio of 6.4 to 1, at September 30, 1996. The Company's working
capital and current ratio at June 30, 1996 were $2,019,000 and 3.6 to 1,
respectively. The improvement in working capital and the current ratio are due
to cash generated by the Company from the Private Placement of 3,300,000 shares
in August 1996 (the "Private Placement"), the cash received from pre-Merger
Zanart as a result of the Merger in September 1996, and current assets
generated from operations.

The Company anticipates that the funds raised through the Private
Placement and the cash received from pre- Merger Zanart as a result of the
Merger, together with cash flow generated by operations, will be used to make
strategic acquisitions in order to grow its operations and pursue its business
strategy. Based upon current expectations, the Company believes that cash flow
from operations will be sufficient to meet its working capital requirements
through the end of the current fiscal year, although there can be no assurance
that it will be able to do so.

THE FOLLOWING TABLES AND DISCUSSION RELATE ONLY TO THE HISTORICAL
OPERATIONS OF THE ZANART BUSINESS AT AND FOR THE PERIODS INDICATED.

RESULT OF OPERATIONS

Fiscal Year Ended June 30, 1996 vs. Fiscal Year Ended June 30, 1995

Revenues increased 8% to $2,503,506 from $2,325,337 in fiscal year
1995. This increase was due to an increase in sales to the Company's largest
customer Warner Bros. Warner Bros. represented approximately $1,352,000
(compared with approximately $1,080,000 in fiscal year 1995), or approximately
54% of sales in fiscal year 1996, an increase from approximately 47% of sales
in fiscal year 1995. Another significant customer, The Musicland Group,
represented approximately $275,000 or 11% of sales in fiscal year 1996 and
$239,000 or 10% of sales in fiscal year 1995.

Cost of revenues (principally raw material, outside production costs
and licensing royalties) increased 29% to $2,345,238 from $1,818,202 in fiscal
year 1995. The Company's gross margin decreased 69% to $158,268 from $507,135
in fiscal year 1995. As a percentage of revenues, the gross margin decreased
to 6% from 22%

- 17 -

<PAGE> 19

in fiscal year 1995. The decrease in margin resulted from an increase in the
cost of raw materials, an unfavorable shift in the product sales mix, and an
increase in reserves for slower moving inventories.

Selling, general and administrative expense ("SG&A") increased
$554,166 to $1,512,983 from $958,817 in fiscal year 1995. As a percentage of
revenues, SG&A increased to 60% from 41% in fiscal year 1995. A comparison of
SG&A expenses between years is as follows:

<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Payroll/Payroll Related Costs $462,907 $ 645,404
Rent/Utilities 45,030 78,045
Advertising/Selling Materials 47,777 118,660
Freight/Postage 41,324 73,478
Insurance 20,053 64,652
Public/Investor Relations 1,500 32,376
Financial Printing/Filing Fees 1,200 23,212
Provision for Bad Debt 62,457 101,971
Professional & Consulting Services 101,967 137,873
Other 174,602 237,312
-------- ----------
$958,817 $1,512,983
======== ==========
</TABLE>

Interest expense decreased $103,925 to $2,483 from $106,408 in fiscal
year 1995. The Company had no significant debt in fiscal year 1996 as the
Frost-Nevada Note was repaid in full with proceeds from the May 1995 public
offering. Interest income increased $111,730 from $23,149 in fiscal year 1995
and was primarily earned on the proceeds from the May 1995 Public Offering.

The Company's net loss, including the loss on liquidation, for the
fiscal year ended June 30, 1996 was $2,282,050 compared to a net loss of
$573,022 for the prior year. The increase was primarily due to an increase in
SG&A expense, decrease in gross margin and loss on liquidation of $1,058,931.

Fiscal Year Ended June 30, 1995 vs. Fiscal Year Ended June 30, 1994.

Revenues increased 25% to $2,325,337 from $1,863,181 in fiscal year
1994. This increase was due to an increase in the sale of licensed products,
especially the Company's ChromArt Line, and increased sales to the Company's
largest customer Warner Bros. Warner Bros. represented approximately
$1,080,000 (compared with approximately $930,000 during fiscal year 1994), or
approximately 47% of sales in fiscal year 1995, a decrease from approximately
50% of sales in fiscal year 1994. Another significant customer, The Musicland
Group, represented approximately $239,000 or 10% of sales in fiscal year 1995
and 12% of sales in fiscal year 1994.

Cost of revenues (principally raw material, outside production costs
and licensing royalties) increased 27% to $1,818,202 from $1,436,504 in fiscal
year 1994. The Company's gross margin increased 19% to $507,135 from $426,677
in 1994. As a percentage of revenues, the gross margin remained relatively
consistent between years at approximately 22% in fiscal year 1995 and
approximately 23% in fiscal year 1994.

Selling, general and administrative expenses (SG&A) increased 73% to
$958,817 from $554,450 in fiscal year 1994. As a percentage of revenues SG&A
increased to 41% from 30% in fiscal year 1994. This increase

- 18 -

<PAGE> 20

was primarily due to expenditures incurred by the Company in the latter half of
fiscal year 1995 in an effort to position itself for future expansion. A
comparison of significant SG&A expenses between years is as follows:

<TABLE>
<CAPTION>
June 30, 1994 June 30, 1995
------------- -------------
<S> <C> <C>
Payroll/Payroll Related Costs $194,484 $462,907
Trade Shows 12,993 36,694
Advertising/Selling Materials 1,680 47,777
Freight/Postage 4,304 41,324
Professional Fees 91,975 87,254
Provision for Doubtful Accounts 51,000 62,457
Insurance 2,614 20,053
Depreciation 2,831 14,446
Other 192,569 185,905
-------- --------

$554,450 $958,817
======== ========
</TABLE>

Payroll and payroll related costs increased by $268,423, as the
Company hired a Chief Financial Officer, national sales manager, art director
and additional support staff. Increases in existing officers' salaries and
bonuses also occurred with the closing of the May Public Offering. Trade
shows, advertising/selling materials, and freight/postage combined for an
increase of $106,818 as the Company expanded its overall marketing efforts to
enhance market recognition as well as its channels of distribution. Insurance
increased by $17,439 due to the obtaining of additional coverages for property,
casualty, product liability and directors & officers insurance. Depreciation
increased by $11,615 as the Company acquired additional computers, office
equipment, and furniture/fixtures during the year.

Interest expense, increased 71% to $106,408 from $62,200 in fiscal
year 1994. The increase was due almost entirely to approximately $41,000
interest paid in cash at the annualized rate of 10% and approximately $65,000
related to the amortization of deferred financing costs related to the Frost
Nevada Note (as defined below). The Company repaid the Frost Nevada Note with
proceeds from the May Public Offering and does not anticipate incurring
interest on debt in fiscal year 1996 as management believes the proceeds from
the May Public offering will be sufficient to fund all financing, investing and
operating activities in fiscal year 1996. Interest income of approximately
$23,000, compared to approximately $3,000 in fiscal year 1994, was earned
primarily on the proceeds of the May Public Offering.

The Company's net loss before the extraordinary loss from the early
extinguishment of debt was $535,741 compared to a net loss of $195,026 in
fiscal year 1994. The increase in loss was primarily due to an increase in
SG&A expense and net interest expense which were partially offset by an
increase in the gross margin.

- 19 -

<PAGE> 21

BUSINESS

CONTINUCARE BUSINESS

At November 1, 1996, Continucare had management contracts with five
general acute care hospitals, one free- standing psychiatric hospital, 16
CMHCs, and one CORF. As of such date, 22 of such contracts were in operation
covering various treatment programs.

ZANART BUSINESS

- 20 -

<PAGE> 22

RECENT DEVELOPMENTS

The Merger Agreement contains various customary representations and
warranties of the parties thereto, and includes a post closing adjustment
provision requiring the issuance of a certain number of additional shares (the
"Additional Shares") of Common Stock to the holders of pre-Merger Continucare
common stock immediately prior to the Closing Date in the event that the
Closing Cash Balance (as such term is defined in the Merger Agreement) of the
Company is less than $2,000,000 on December 12, 1996.

Prior to the Merger, Continucare effectuated the private sale of an
aggregate of 3,300,000 shares of pre-Merger Continucare common stock which was
completed on August 29, 1996. Further, Zanart agreed to register on Form S-3
(i) an aggregate of 1,462,500 shares of Common Stock to be issued upon exercise
of outstanding warrants and options, (ii) the 8,300,000 shares of Common Stock
issued in connection with the Merger, and (iii) the Additional Shares.

CONTINUCARE STRATEGY

Continucare's strategy is to (i) continue to develop all elements of
the continuum of mental health and physical rehabilitation services provided to
existing and new clients, (ii) aggressively pursue new management contracts for
the provision of mental and physical health services, (iii) emphasize its
Outcome Measurement System as an additional service and (iv) expand its types
of services offered to include physical and medical rehabilitation services,
home health services and primary care services.

Continue to Develop the Continuum of Mental Health Services

Continucare believes that institutional and professional providers of
mental health services must have the ability to offer a complete line of mental
health care services in order to operate mental health care programs that
satisfy the current and anticipated demands of managed care companies and other
third-party payors. The mental health industry is recognizing the need to
provide patients with an organized plan of treatment, from most intensive to
least intensive, in order to properly monitor and treat patients as they
progress. The development of mental health services beyond traditional
inpatient hospitalization has been a key focus in Continucare's efforts to
provide management services covering the full continuum of mental health
services. Prior to August 1996, Continucare focused only on the management of
programs offering outpatient mental health services. Since that time, it has
expanded its management services to cover additional elements of the continuum
of mental health services, including day treatment and intensive as well as
traditional and group oriented outpatient services.

Add New Mental Health Management Contracts

Continucare believes that there is a substantial opportunity to
provide mental health care contract management services to institutional and
professional mental health care providers. Continucare utilizes a systematic
approach to identify potential clients and then offers its services to these
potential clients by emphasizing its expertise in managing the continuum of
mental health services and the benefits to the potential clients of offering
mental health programs. Such benefits typically include increased revenue,
greater opportunity to allocate fixed expenses, expanded influence and outreach
to the community, improvement in the quality of

- 21 -

<PAGE> 23

mental health care programs offered and the ability to attract new physicians.
Continucare's sales efforts also emphasize the value of quality, independently
managed mental health programs to managed care companies and other third- party
payors.

Continucare intends to offer its current line of mental health care
services to individual and group practitioners that provide traditional primary
and specialty health care services. This strategy is based on the results of
studies that have indicated that 70% or more of illnesses are psychosomatic in
nature. By adding mental health services to traditional primary and specialty
care practices, practitioners are able to provide a more coordinated and
comprehensive treatment program that addresses the mental and physical needs of
patients. The types of mental health services typically added to individual
and group practices include psycho-pharmacology, individual therapy, group
therapy and structured outpatient programs for mental health, addiction and
other disease-specific support issues. The professionals delivering these
services include:

. Psychiatrists
. Psychologists
. Licensed Clinical Social Workers
. Licensed Mental Health Counselors
. Advanced Registered Nurse Practitioners

Continucare is also currently expanding its target market to include
non-traditional sources of funding such as state and federal grant programs.

Emphasize Continucare's Outcome Measurement System

Continucare intends to continue to emphasize its Outcome Measurement
System, which provides outcome information regarding the effectiveness of a
provider's mental health and physical rehabilitation programs. The
availability of such information is intended to enable Continucare's clients to
demonstrate to third-party payors whether patients are improving as a result of
the treatment provided. It also provides Continucare and the client with a
valuable tool to compare clinical results and refine clinical treatment
programs. With the growth of managed care and its emphasis on effectiveness,
Continucare believes that its Outcome Measurement System will become a more
important component of the services it provides.

Expand the Types of Services Offered by Continucare

Continucare intends to expand its range of services offered to health
care providers to include physical and medical rehabilitation services, home
health services and primary care services. Such new areas of services share in
common (i) the need to provide a continuum of services that range from most
intensive to least intensive and (ii) the need for a system of development and
management support similar to that required by mental health related services.
Continucare believes that the same types of development and management services
it offers to mental health care providers are needed by providers offering
physical and medical rehabilitation services, home health services and primary
care services. Continucare further believes that its existing relationships
with general acute care hospitals and its medical directors serving clients
under contract with Continucare provide a significant opportunity for the
development of the aforementioned services. Continucare intends to utilize its
marketing, outcome measurement, utilization review and clinical management
expertise to expand its management of such services.

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<PAGE> 24

CONTINUCARE OPERATIONS

General

Clinical Development -- Each health program has a team of
personnel comprised of primary doctors, psychiatrists, therapists and
nurses that are focused on the direct delivery of care to patients.
Administrative personnel comprised of a program director, clinical
coordinators, sales staff and secretaries are responsible for the
management of specific programs as well as the entire continuum of
programs being offered by a particular provider. Continucare offers
the service of recruiting and training such personnel in addition to
designing the particular program structure in which they operate.

Community Outreach -- Health care providers rely almost
exclusively on community service representatives to inform and educate
the public about their respective mental and physical rehabilitation
health programs. Community service representatives are responsible
for identifying and developing patient referral sources in addition to
developing a particular program's community development plan. The
community service representative informs physicians, other
professionals and nursing homes in the particular community of the
treatment programs managed by Continucare in order to promote interest
in such programs. Continucare offers the service of hiring and
training community service representatives to successfully inform and
educate the public about each type of outpatient health care program.

Financial Management -- Providers of mental and physical
rehabilitation health care services must address the same financial
management concerns as any other business. Continucare has the
ability to provide full-service financial management services to each
of its clients. Continucare offers (directly and through leasing
services) the following types of financial management services:

- Physician Billing and Collecting
- Other Outpatient Billing and Collecting
- Partial Hospitalization Billing and Collections
- Internal Auditing and Bill Compliance
- Access to Accounts Receivable Financing

Operational Oversight -- Continucare offers day-to-day
operational oversight to each of the programs offered by mental and
physical rehabilitation health care providers that comprise the
continuum of health care services.

Human Resources -- Continucare offers to its clients full
human resources capabilities which include the recruiting, hiring and
termination of all classes of health care professionals and staff.
Continucare further develops training programs and policy and
procedure manuals specific to the needs of health care providers. In
addition, Continucare offers permanent, long-term and short-term
employee leasing to its managed programs and other clients.
Continucare offers to lease the following types of employees:

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<PAGE> 25

- Psychologists
- Physician Assistants
- Advanced Registered Nurse Practitioners
- Registered Nurses
- Licensed Practical Nurses
- Certified Nurse Assistants
- Licensed Clinical Social Workers
- Licensed Mental Health Counselors
- Master Level Social Workers
- Mental Health Technicians
- Psychiatrists
- Physical Therapists

Quality Assurance -- Continucare offers ongoing training to
each of the professionals and staff under its supervision to maintain
the desired level of effectiveness of its programs. The Company also
monitors the effectiveness of such training on an ongoing basis.

Regulatory Compliance -- As further discussed below, health
care providers are subject to an array of regulatory rules and
guidelines. Continucare assists its clients during the developmental
stage of mental and physical rehabilitation health programs in such
matters as licensing, certificate of need approvals and
Medicare/Medicaid certification. Continucare also provides the
service of reviewing a particular provider's compliance with all
applicable regulations and making recommendations to assure that such
provider remains or becomes in compliance with such regulations.

Outcome Measurement -- Continucare offers a clinical outcome
measurement system that enables health providers to demonstrate
clinical results to third-party payors and that assists clinicians in
evaluating the effectiveness of treatment programs. Continucare began
offering its Outcome Measurement System to health providers in July
1996. The Outcome Measurement System provides a qualitative and
quantitative tool for clinical staff to evaluate the clinical
effectiveness of the treatment programs and to make adjustments in the
programs in order to improve quality and appropriateness of care. It
also assists the client hospitals and health centers in complying with
the increasing demands of regulatory and accrediting bodies for
quality assessment of their outpatient health programs.

The typical key indicators captured and evaluated include:

- Functional level at admission
- Average length of stay
- Return to home or previous setting
- Return to work
- Readmission rates
- Mortality rates

Each of the above-listed types of data is captured on a
diagnosis specific basis. This enables providers to tangibly
differentiate their services from their competitors.

Under the Outcome Management System, sample data is collected
from randomly selected patients at admission, during treatment, at
discharge and 90 to 120 days after discharge. Semiannual outcome
reports include a summary of patient characteristics and outcome
measures. A multi-disciplinary committee reviews and analyzes the
data in order to identify specific areas for program improvement. A
regional clinical consultant then prepares an implementation plan.
Program improvements implemented through this process are evaluated
for use at other treatment programs

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<PAGE> 26

managed by Continucare. Continucare trains and supervises on-site
personnel to ensure the collection of accurate outcome measurement
data.

The services provided by the Outcome Management System enable
the client hospitals to demonstrate to third-party payors the results
of the treatment provided. At October 11, 1996, approximately 20% of
Continucare's management contracts included the Outcome Management
System.

MANAGEMENT CONTRACTS

Continucare provides its development and management services under
contracts with client hospitals and community mental health centers.
Continucare tailors (or customizes) each contract to address the differing
needs of each client and the anticipated needs of such client's patients.
Continucare and the client determine the mental and physical rehabilitation
health programs and services to be offered, which may consist of one or more
treatment programs offering partial hospitalization, day treatment or
outpatient services.

Under each contract, Continucare receives a fee for its services
provided to or on behalf of the client. The fees received by Continucare are
fixed and are often subject to periodic adjustments as a result of changes in
the medical consumer price index.

THE OUTPATIENT HEALTH CARE CONTINUUM

Through its ability to deliver services described above, Continucare
offers mental health care providers the structure and management of a complete
continuum of mental and physical rehabilitation health care services ranging
from partial hospitalization care to day treatment and outpatient services.

Partial Hospitalization

Partial hospitalization services are provided for limited periods per
day at established intervals with the patient returning home at the conclusion
of each day's treatment. Partial hospitalization services are designed to be
both an alternative to inpatient hospitalization services and a key component
of care following inpatient hospitalization. Continucare successfully operates
over twenty partial hospitalization programs in four states. Continucare
operates under two partial hospitalization models. The primary model is a
freestanding program licensed as a full service CMHC. This model enables
Continucare not only to provide partial hospitalization services but also to
provide, manage or contract for the following types of services:

- 24 Hour Crisis Response
- Crisis Stabilization Beds
- Structured/Intensive Outpatient Programs
- Counseling and Education

The second model is a partial hospitalization program operating under
a hospital license. These programs deliver the same services as provided to
CMHCs, but in a hospital or hospital campus location subject to hospital
regulations.

Day Treatment

Continucare has recently expanded beyond the partial hospitalization
business to include day treatment services. These programs serve as step-down
alternatives to patients that no longer require the more extensive treatment
provided under partial hospitalization programs. This treatment model assists
patients in transitioning back into their communities. Additionally, this
treatment model seeks to prevent patients from regressing, thus reducing the
number of expensive inpatient psychiatric hospital admissions. The Company
currently operates two day treatment programs and anticipates opening twelve
day treatment programs in the next twelve months.

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<PAGE> 27

Outpatient Services

Outpatient services consist generally of consultative sessions which
can be rendered in a variety of individual or group settings at various
locations, including hospitals, clinics or the offices of mental health
providers. Outpatient service providers can also serve as gatekeepers for
persons being evaluated for treatment. Once an individual is assessed for
treatment in an outpatient environment, the individual is provided the
appropriate level of service in relation to the diagnosis. Continucare
provides outpatient services to hospitals, physicians, assisted living
facilities, skilled nursing facilities and CMHCs.

Physical Rehabilitation Services

As part of its commitment to the total continuum of outpatient care,
Continucare manages a certified CORF, which provides a wide range of outpatient
rehabilitation services and programs to individuals with disabilities and
illnesses, including orthopedic, neurological and neuromuscular diseases and
other conditions. CORFs provide diagnostic, therapeutic and restorative
services to individuals on an outpatient basis under the direction of a medical
doctor. The multitude of illnesses and injuries capable of being treated at a
CORF include amputation, arthritis, stroke, neck and lower back pain, sports
injuries, neuromuscular disease, orthopedic and neurological conditions and
peripheral nerve injuries.

COMPETITION

The mental and physical rehabilitation health contract management
services industry is highly competitive. Continucare competes with several
national competitors and many regional and local competitors, some of which
have substantially greater resources than Continucare. In addition, providers
may elect to manage their own mental health programs.

Competition among contract managers for mental and physical
rehabilitation health programs is generally based upon reputation, price, the
ability to provide financial and other benefits for the particular provider,
and the management expertise necessary to enable the provider to offer mental
and physical rehabilitation health programs that provide the full continuum of
mental and physical rehabilitation health services in a quality and
cost-effective manner. The pressure to reduce health care expenditures has
emphasized the need to manage the appropriateness of health services provided
to patients. As a result, competitors without management experience covering
the various levels of the continuum of mental and physical rehabilitation
health services may not be able to compete successfully. Continucare believes
that it will be able to compete successfully in this rapidly changing market.

GOVERNMENT REGULATION

General

Continucare's business is affected by federal, state and local laws
and regulations concerning, among other matters, mental health facilities and
reimbursement for mental health services. These regulations impact the
development and operation of mental and physical rehabilitation health programs
managed by Continucare for its clients. Licensing, certification,
reimbursement and other applicable government regulations vary by jurisdiction
and are subject to periodic revision. Continucare is not able to predict the
content or impact of future changes in laws or regulations affecting the mental
and physical rehabilitation health industry.

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<PAGE> 28

Mental and Physical Rehabilitation Health Facility Use and Certification

The facilities of institutional and professional providers are subject
to various federal, state and local regulations, including facilities use,
licensure and inspection requirements, and licensing or certification
requirements of federal, state and local health agencies. Many states also
have certificate of need laws intended to avoid the proliferation of
unnecessary or under-utilized health care services and facilities. The mental
and physical health programs which Continucare manages are also subject to
licensure and certification requirements. Continucare assists its clients in
obtaining and renewing required approvals for its managed programs. Some
approval processes may lengthen the time required for new programs to commence
operations. In granting and renewing a facility's licenses, governmental
agencies generally consider, among other factors, the physical condition of the
facility, the qualifications of administrative and professional staff, the
quality of professional and other services, and the continuing compliance of
such facility with the laws and regulations applicable to its operations.
Continucare believes that the mental and physical health programs it manages
and the facilities used in its operation of such programs comply in all
material respects with applicable licensing and certification requirements.

Reimbursement for Mental and Physical Rehabilitation Health Services

Most of Continucare's clients receive reimbursement under one or more
of the Medicare or Medicaid programs for mental and physical rehabilitation
health services provided in programs managed by Continucare. Continucare is
paid directly by its clients for the management services it provides. While
fees paid to Continucare by its clients are not subject to or based upon
reimbursement under the Medicare or Medicaid programs or from any other
third-party payor, under a limited number of its management contracts
Continucare is obligated to refund a portion of its fee if either Medicare
denies reimbursement for an individual patient treatment or if the fee paid to
Continucare is denied by Medicare as a reimbursable cost (which may result from
retroactive adjustments under such programs). In order to receive
reimbursement under the Medicare or Medicaid programs, each facility must meet
applicable requirements promulgated by the United States Department of Health
and Human Services relating to the type of facility, personnel, standards of
patient care and compliance with all state and local laws, rules and
regulations. Continucare believes that the programs it manages comply in all
material respects with applicable Medicare or Medicaid requirements.

In the mid-1980's, changes in reimbursement rates and procedures
included the creation of the Medicare prospective payment system using
predetermined reimbursement rates for diagnosis related groups ("DRGs"). The
DRG system established fixed payment amounts per discharge for diagnoses
generally provided by acute care hospitals. Mental health services provided by
acute care hospitals which qualify for an exemption are deemed to be distinct
part units ("DPUs") and are not included in the DRG system. Services provided
by DPUs are reimbursed on an actual cost basis, subject to certain limitations.
The Company believes that the mental and physical health programs managed by it
which are eligible for reimbursement under the Medicare program currently meet
the applicable requirements for designation as DPUs and are exempt from the DRG
system. In the future, however, it is possible that Medicare reimbursement for
mental and physical health services, including those provided by programs
managed by Continucare, could be under the DRG system or otherwise altered.
Since a substantial portion of the patients of the programs managed by
Continucare are covered by Medicare, any changes which limit or reduce Medicare
reimbursement levels could have a material adverse effect on Continucare's
clients and, in turn, on Continucare.

Federal law contains certain provisions designed to ensure that
services rendered by providers to Medicare and Medicaid patients are medically
necessary and meet professionally recognized standards. These provisions
include a requirement that treatment of Medicare and Medicaid patients must be
reviewed in a timely manner to determine the medical necessity of such
treatment. In addition, these provisions state that a provider may be required
by the federal government to reimburse the government for the cost of
Medicare-reimbursed services that are determined by a peer review organization
to have been medically unnecessary. Continucare and

- 28 -
<PAGE> 29

its clients have developed and implemented quality assurance programs and
procedures for utilization review and retrospective patient care evaluation
intended to meet these requirements.

Patient Referral Laws

Various federal and state laws regulate the relationships between
health care providers and referral sources, including federal and state fraud
and abuse laws prohibiting individuals and entities from knowingly and
willfully offering, paying, soliciting or receiving remuneration in order to
induce referrals for the furnishing of health care services or items. These
federal laws generally apply only to referrals for items or services reimbursed
under the Medicare or Medicaid programs or any state health care program. The
objective of these laws is generally to ensure that the purpose of a referral
is quality of care and not monetary gain by the referring party.

In addition, federal and some state laws impose restrictions on
referrals for certain designated health services by physicians and, in a few
states, psychologists and other mental health care professionals to entities
with which they have financial relationships. Continucare believes that its
operations comply with these restrictions to the extent applicable, although no
assurances can be given regarding compliance in any particular factual
situation. Federal legislation has been considered to expand current law from
its application to Medicare and Medicaid business to all payors and to
additional health services. Certain states are considering adopting similar
restrictions or expanding the scope of existing restrictions. There can be no
assurance that the federal government or other states in which Continucare
operates will not enact similar or more restrictive legislation or restrictions
that could under certain circumstances adversely impact Continucare's
operations.

Under a significant number of its management contracts, Continucare
receives a flat fee for its services. In addition, Continucare has entered
into agreements with physicians to serve as medical directors at the mental
health programs and facilities managed by Continucare, which generally provide
for payments to such persons by Continucare as compensation for their
administrative services. These medical directors also generally provide
professional services at such mental health programs and facilities. In 1991,
regulations were issued under federal fraud and abuse laws creating certain
"safe harbors" for relationships between health care providers and referral
sources. Any relationship that satisfies the terms of the safe harbor is
considered permitted.

Violations of these laws can result in felony criminal penalties,
civil sanctions and exclusion from participation in the Medicare and Medicaid
programs.

Health Care Reform

Federal and state governments have recently focused significant
attention on health care reform intended to control health care costs and to
improve access to medical services for uninsured individuals. These proposals
include cutbacks to the Medicare and Medicaid programs and steps to permit
greater flexibility in the administration of Medicaid. It is uncertain at this
time what legislation on health care reform may ultimately be enacted or
whether other changes in the administration or interpretation of governmental
health care programs will occur. There can be no assurance that future health
care legislation or other changes in the administration or interpretation of
governmental health care programs will not have a material adverse effect on
Continucare's business, financial condition or results of operations.

FACILITIES

Continucare leases approximately 13,500 square feet of space for its
corporate offices in Miami, Florida under a lease expiring in September 2001
with average annual base rent lease payments of $180,312.

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<PAGE> 30

EMPLOYEES

At November 1, 1996, Continucare employed approximately 200 individuals
and managed approximately 150 individuals providing services on behalf of
Continucare. Continucare has no collective bargaining agreement with any unions
and believes that its overall relations with its employees are good. In
addition, at October 11, 1996, Continucare had administrative contacts with
approximately 45 physicians to serve as medical directors for the mental health
programs managed by Continucare.

INSURANCE

Continucare carries general liability, comprehensive property damage,
malpractice, workers' compensation and other insurance coverages that management
considers adequate for the protection of Continucare's assets and operations.
There can be no assurance, however, that the coverage limits of such policies
will be adequate. A successful claim against Continucare in excess of its
insurance coverage could have a material adverse effect on Continucare.

LEGAL PROCEEDINGS.

The Company is not a party and its property is not subject to any
material litigation, nor, to the knowledge of management, is any such litigation
presently threatened.

MANAGEMENT

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Charles M. Fernandez 34 Chairman of the Board, Chief Executive
Officer and President

Dr. Phillip Frost 61 Vice Chairman of the Board

Susan Tarbe 40 Executive Vice President and General Counsel

Arthur M. Goldberg 54 Director

Richard B. Frost 48 Director

Mark J. Hanna 48 Director

Dr. Michael C. Piercey 51 Director
</TABLE>

CHARLES M. FERNANDEZ co-founded Continucare in February of 1996 and has
been involved in all aspects of its operations since that time serving as its
Chairman of the Board, President and Chief Executive Officer. Prior to founding
Continucare, Mr. Fernandez was the Chief Executive Officer and Chief Operating
Officer of Heftel Broadcasting Corporation, a public company owning a network of
radio stations, since 1985. Mr. Fernandez has also been an officer of Bally
Entertainment Corporation since January 1996.

PHILLIP FROST, M.D. has served as Vice Chairman of Continucare since
September 1996. Dr. Frost has served, since 1987, as Chairman of the Board and
Chief Executive Officer of IVAX Corporation, a Florida

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<PAGE> 31

corporation ("IVAX"), the world's largest generic pharmaceutical manufacturer.
He served as IVAX's President from July 1991 until January 1995. Dr. Frost
also serves as Vice Chairman of the Board of Pan American World Airways, Inc.
He was the Chairman of the Department of Dermatology at Mt. Sinai Medical
Center of Greater Miami, Miami Beach, Florida from 1970 to 1992. Dr. Frost was
Chairman of the Board of Directors of Key Pharmaceutical, Inc. from 1972 to
1986. He is Vice Chairman of the Board of Directors of North American Vaccine,
Inc. ("NAV"), and a Director of American Exploration Company, which is engaged
in oil and gas exploration and production, NaPro BioTherapeutics, Inc., a
biopharmaceutical research and development firm ("NaPro"), Whitman Education
Group, which is engaged in proprietary education ("Whitman") and Northrup
Grumman. He is a trustee of the University of Miami and a member of the Board
of Governors of the American Stock Exchange. Dr. Frost is the uncle of Richard
Frost.

SUSAN TARBE joined Continucare in September 1996 as Executive Vice
President and General Counsel. Prior to joining the Company, Ms. Tarbe was an
Assistant United States Attorney for the Southern District of Florida since
September 1985. During her employment with the United States Attorney's office,
Ms. Tarbe specialized in the area of white-collar criminal offenses, and since
May of 1994 was the Chief of the Economic Crimes Unit. From August 1984 to
August 1985, Ms. Tarbe was a law clerk to the Honorable William M. Hoeveler,
U.S. District Judge for the Southern District of Florida.

ARTHUR M. GOLDBERG has served as a Director of Continucare since
September 1996. Mr. Goldberg for the past five years has been Chairman of the
Board of Directors, Chief Executive Officer and President of Bally
Entertainment Corp, Chairman of the Board of Directors, President and Chief
Executive Officer of Bally's Casino Holdings, Inc., Chairman of the Board of
Directors and Chief Executive Officer of Bally's Park Place, Inc., GNOC, CORP.,
Bally's Grand, Inc. and Bally Total Fitness Holding Corporation. Mr. Goldberg
is also the Chairman of the Board of Directors, President and Chief Executive
Officer of Di Giorgio Corporation and Managing Partner of Arveron Investments
L.P. Mr. Goldberg is also a director of First Union Corporation, a financial
services company.

RICHARD B. FROST has served as a Director of Continucare since
September 1996. Mr. Frost has been Chief Executive Officer and Chairman of the
Board of Directors of Frost Hanna Mergers Group, Inc. ("FH") since its
formation in October 1993. Mr. Frost also serves as a director of Pan American
World Airways, Inc. Mr. Frost was the Chief Executive Officer and Chairman of
the Board of Directors of Frost Hanna Acquisition from April 1993 until January
1996, at which time LFS merged with and into a wholly-owned subsidiary of Frost
Hanna Acquisition (the "LFS Merger"), Frost Hanna Acquisition changed its name
to "Little Folks Shops" and Mr. Frost resigned from the Frost Hanna Acquisition
Board. From June 1992 to May 1994, Mr. Frost held similar positions at Frost
Hanna Halpryn until the merger of Sterling Healthcare, Inc. and Sterling Health
Care Group, Inc. with and into a wholly-owned subsidiary of Frost Hanna
Halpryn, whereby Frost Hanna Halpryn changed its name to Sterling Healthcare,
Inc. (the "Sterling Merger"). From February 1992 through May 1992, Mr. Frost
was Regional Director of GKN Securities Corp., a broker-dealer ("GKN") where
his responsibilities included the recruitment and training of GKN brokerage
personnel located or to be located in Florida. From May 1982 through February
1992, Mr. Frost was a Vice President and Branch Manager of Dean Witter
Reynolds, a broker-dealer, where his responsibilities included the management
and day-to-day operations of the West Boca Raton and Lighthouse Point, Florida,
branch offices of such brokerage firm.

MARK J. HANNA has served as a Director of Continucare since September
1996. Mr. Hanna also serves as a director of Pan American World Airways, Inc.
Mr. Hanna has been the President and a member of the Board of Directors of FH
since its inception. Mr. Hanna was the President and a member of the Board of
Directors of Frost Hanna Acquisition from April 1993 until January 1996,
whereupon Mr. Hanna resigned from the Frost Hanna Acquisition Board following
the LFS Merger. Mr. Hanna held similar positions at Frost Hanna Halpryn from
June 1992 until the Sterling Merger in May 1994. From February 1992 through
May 1992, Mr. Hanna was a registered representative with GKN. From January
1992 through February 1992, Mr. Hanna was a registered representative with
Barron Chase Securities, Inc. From September 1990 through January 1992, Mr.
Hanna was a registered representative with Prudential Bache Securities, Inc.

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<PAGE> 32

MICHAEL C. PIERCEY, M.D. has served as a Director of Continucare since
September 1996. Dr. Piercey has been a Board Member, Executive Vice President
and Medical Director of Health Care America, Inc., a health care management
company which owns and operates acute care hospitals, long-term rehabilitation
hospitals, psychiatric hospitals, community living programs, and a full array of
partial hospital and outpatient services in Texas, Colorado, Florida, Oklahoma,
Tennessee, and Virginia, since 1994. Since 1992, Dr. Piercey has been an Officer
and Director of DHP, Inc. which operates the Rock Creek Center, a psychiatric
hospital and outpatient service system in the Southwestern Chicago suburbs. He
was the Clinical Director at Four Winds, Inc., a psychiatric hospital company
with affiliates in Saratoga Springs, New York and Chicago from 1978 to 1992, and
in 1986 he assumed the additional responsibilities of Executive Director and
Chief Operating Officer.

SUMMARY COMPENSATION TABLE

The following table sets forth the compensation paid to the President
of Zanart during Zanart's last three fiscal years (the "Named Executive
Officer"). No executive officer of Zanart was paid in excess of $100,000 during
each of the Company's last three fiscal years. The Company did not grant any
restricted stock awards or stock appreciation rights or make any long-term
incentive plan payments during each of the Company's last three fiscal years.

EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------ ------------
Name and Principal Position Salary ($) Bonus ($) Options (#)
-------------------------------- --------------- ------ -------
<S> <C> <C> <C> <C>
Thomas Zotos, President(1) 1996 75,000 0 --
1995 51,000 40,000 --
1994 36,000 0 --
</TABLE>

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

(1) Mr. Zotos resigned his position as President on September 11, 1996.

OPTION GRANTS DURING 1995 AND 1996

Thomas Zotos did not receive any option grants from the Company during
fiscal years 1995 and 1996.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Charles M.
Fernandez and Susan Tarbe. Mr. Fernandez's employment agreement is for a term of
three years plus one additional year for each year of service and became
effective on September 11, 1996, and provides for an annual base salary of
$350,000 and a bonus of $100,000 payable in 20 equal installments of $5,000 over
the first five years of such agreement. Pursuant to the terms of Mr. Fernandez's
employment agreement, he may receive additional bonuses at the discretion of the
Board. Mr. Fernandez is prohibited from competing with the Company for the
duration of his employment agreement and for a period of two years thereafter
unless he is terminated without cause, and he is additionally prohibited from
disclosing confidential information. Ms. Tarbe's employment agreement is for a
term of three years commencing September 23, 1996, and provides for an annual
base salary of $130,000 and a bonus equal to at least 10% of her then base
salary plus such other bonus amounts as may be approved by the Board. Under the
terms of Ms. Tarbe's employment agreement, she received an option, which vests
at a rate of 20% per year, to purchase 100,000 shares

- 31 -

<PAGE> 33
of the Company at $5.00 per share. Upon a change in control of the Company, Ms.
Tarbe is entitled to an acceleration of the remainder of her employment
agreement and automatic vesting of any unvested portion of her aforementioned
warrant. Ms. Tarbe is prohibited from competing with the Company for the
duration of his employment agreement and for a period of ninety days thereafter
unless she is terminated without cause, and she is additionally prohibited from
disclosing confidential information.

Effective September 11, 1996, the Company amended each of its
employment agreements with Robert A. Stein, Thomas Zotos and Todd Slayton (the
"Executives"). Pursuant to such amendments, the Executives resigned as officers
of the Company and shall continue as employees through December 11, 1996. On
such date, each Executive shall receive severance compensation equal to six
months salary, the aggregate amount of which for all three Executives shall
equal approximately $107,500.

- 32 -

<PAGE> 34

CERTAIN TRANSACTIONS

The Company has contracted with a company owned in equal interests by
Douglas Miller and Barry Goldstein, each of whom own more than 5% of the
Company's Common Stock, to perform certain managerial and administrative
services on behalf of the Company. The Company reimburses such company for the
actual cost of expenses incurred by it in the direct performance of such
services. For the period ended June 30, 1996, total expenses incurred by the
Company for these services totaled $407,700. In addition, the Company provides
management services for four facilities owned by such company in return for a
management fee which is based on the Company's estimated cost of providing such
services. For the period ended June 30, 1996, management fees charged by
Continucare to such company were $324,700. As of June 30, 1996, the net amount
payable by the Company to such company under these arrangements was $83,000.

The Company has entered into consulting agreements with a company
controlled by Douglas Miller, and a company controlled by Barry Goldstein
(collectively, the "Consulting Agreements"). Messrs. Miller and Goldstein served
as executive officers of Continucare Corporation prior to the Merger. Each of
the Consulting Agreements, which are effective as of the date of the Merger,
contain the following terms: (i) three year term, (ii) annual payments, payable
semi-monthly, of approximately $325,000, (iii) ability of the Company to
terminate the agreement without "cause" (as defined) with 30 days' written
notice, provided that the consultant will receive a termination payment equal to
the amount otherwise payable under the Consulting Agreement through the end of
the term over the period of the remaining term of the agreement, and (iv)
ability of the Company to terminate the agreement for "cause" at any time with
no payment due to the consultant.

The Company is obligated to Charles M. Fernandez for a note payable in
the amount of $599,750 (the "Fernandez Note"). The Fernandez Note, which is
collateralized by substantially all of the Company's assets, bears interest at
10% per annum and is due, in full, on February 12, 1998. Interest is due
semiannually commencing on August 12, 1996. Accrued interest and interest
expense related to this note was $21,662 as of and for the fiscal year ended
June 30, 1996.

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company is authorized to issue 100,000,000 shares of Common Stock,
par value $.0001 per share. As of the date hereof, 11,202,983 shares of Common
Stock are issued and outstanding. Holders of Common Stock are entitled to share
ratably in such dividends and distributions as may from time to time be declared
by the Board of Directors of the Company from funds legally available therefor
and upon liquidation will be entitled to share ratably in any assets of the
Company legally available for distribution to holders of the Common Stock. The
Company's Restated Articles of Incorporation and Restated Bylaws do not confer
any preemptive, subscription, redemption or conversion rights on the holders of
Common Stock. Holders of Common Stock are entitled to cast one vote for each
share held of record on each matter submitted to a vote of shareholders. There
is no cumulative voting, which means that holders of a majority of the voting
power may elect all of the directors.

PREFERRED STOCK

The Company is authorized to issue 1,000,000 shares of Preferred Stock,
par value $.0001 per share (the "Preferred Stock"). As of the date hereof, there
were no shares of Preferred Stock issued and outstanding. Although the Company
has no present plans to issue shares of Preferred Stock, Preferred Stock may be
issued from time to time in one or more classes or series with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions as may be fixed by the Company's Board of Directors. The Board of
Directors, without obtaining shareholder approval, could issue the Preferred
Stock with voting and/or conversion rights and thereby dilute the voting power
and equity of the holders of Common Stock and adversely affect the market price
of such

- 33 -
<PAGE> 35

stock. The issuance of Preferred Stock could also be used as an antitakeover
measure by the Company without any further action by the shareholders.

SERIES A WARRANTS

Each Series A Warrant entitles the holder to purchase one share of
Common Stock for $6.00 during the period ending May 10, 2000. The Series A
Warrants were issued under a Series A Warrant Agreement between the Company and
Fidelity Transfer Company, the Series A Warrant Agent (the "Series A Warrant
Agreement"). The shares of Common Stock underlying the Series A Warrants, when
issued upon exercise of a Series A Warrant and payment of the exercise price,
will be fully paid and nonassessable, and the Company will pay any transfer tax
incurred as a result of issuance of Common Stock to the holder upon its
exercise.

The Company may, at its option, accelerate the expiration period of the
Series A Warrants upon not less than 30 days' prior notice (the "Redemption
Notice") to the registered holders of the Series A Warrants, in the event that
(i) there exists a current prospectus relating to the Common Stock issuable upon
exercise of the Series A Warrants under an effective registration statement
filed with the Commission and qualified for sale or exempt from qualification
under applicable state securities laws; and (ii) the shares of Common Stock of
the Company have had a closing "bid" price of not less than 150% of the then
current exercise price per share for a period of ten consecutive leading days
ending not more than ten calendar days immediately prior to the date of the
Redemption Notice. Notice of acceleration of the expiration period of the Series
A Warrants will be mailed to each registered holder of the Series A Warrants at
the address appearing in the records of the Company, and such notice will be
published in The Wall Street Journal and other newspapers of general circulation
published in New York, New York and Los Angeles, California.

The holders of the Series A Warrants will not have any of the rights or
privileges of shareholders of the Company (except to the extent they own Common
Stock of the Company) prior to the exercise of the Series A Warrants. The
exercise price of the Series A Warrants and the number of shares of Common Stock
issuable upon the exercise thereof are subject to certain anti-dilutive
adjustments upon the occurrence of certain events such as stock splits, stock
dividends or the like, as set forth in the Series A Warrant Agreement. No
adjustment of the exercise price will be required unless it would amount to at
least $6.00 per full share; however, any such adjustment not made will be
carried forward and taken into account in any subsequent adjustment.

In the event of a capital reorganization of the Company,
reclassification of the Common Stock or a consolidation or merger of the Company
with or into, or a disposition of substantially all of the Company's properties
and assets to any other corporation, the Series A Warrants then outstanding will
thereafter be exercisable into the kind and amount of shares of stock or other
securities or property (including cash) to which the holders thereof would have
been entitled if they had exercised such Series A Warrants and received shares
of Common Stock immediately prior to such reorganization, reclassification,
consolidation, merger or disposition, consistent with the requirements for
exercise set forth in the Series A Warrant Agreement.

The foregoing statements are summaries of the rights and privileges of
the holders of the Company's securities. They do not purport to be complete and
are qualified in their entirety by reference to the Company's Restated Articles
of Incorporation and the Series A Warrant Agreement covering the Series A
Warrants.

REPRESENTATIVE UNITS

Each Unit is comprised of one share of Common Stock and one
Representative Warrant, each such security being received upon the exercise of
a Unit. The Units are exercisable for a four-year term having commenced May
11, 1996, at an exercise price of $7.50. Each Representative Warrant is
exercisable at a price of $7.50 per underlying share of Common Stock and has
the same term of exercisability as the Units. All other terms of the
Representative Warrant are the same as those governing the Series A Warrants as
set forth above.

- 34 -
<PAGE> 36

DIVIDEND POLICY

Holders of Common Stock are entitled to receive such dividends as may
be declared and paid from time to time by the Board of Directors out of funds
legally available therefor. The Company intends to retain any earnings for the
operation and expansion of its business and does not anticipate paying cash
dividends in the foreseeable future. Any future determination as to the payment
of cash dividends will depend upon future earnings, results of operations,
capital requirements, the Company's financial condition and such other factors
as the Board of Directors may consider.

CERTAIN FLORIDA LEGISLATION

The State of Florida has enacted legislation that may deter or
frustrate takeovers of Florida corporations. The Florida Control Share Act
generally provides that shares acquired in excess of certain specified
thresholds will not possess any voting rights unless such voting rights are
approved by a majority of a corporation's disinterested shareholders. The
Florida Affiliated Transactions Act generally requires supermajority approval by
disinterested shareholders of certain specified transactions between a public
corporation and holders of more than 10% of the outstanding voting shares of the
corporation (or their affiliates). Florida law and the Company's Articles of
Incorporation also authorize the Company to indemnify the Company's directors,
officers, employees and agents. In addition, Florida law and the Company's
Articles of Incorporation presently limit the personal liability of corporate
directors for monetary damages, except where the directors (i) breach their
fiduciary duties and (ii) such breach constitutes or includes certain violations
of criminal law, a transaction from which the directors derived an improper
personal benefit, certain unlawful distributions or certain other reckless,
wanton or willful acts or misconduct. The Company may also indemnify any person
who was or is a party to any proceeding by reason of the fact that he is or was
a director, officer, employee or agent of such corporation (or is or was serving
at the request of such corporation in such a position for another entity)
against liability to be in the best interests of such corporation and, with
respect to criminal proceedings, had no reasonable cause to believe his conduct
was unlawful.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

The authorized but unissued shares of Common Stock are available for
future issuance without shareholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future public offerings
to raise additional capital, corporate acquisitions and employee benefit plans.

The existence of authorized but unissued and unreserved shares of
Common Stock may enable the Board of Directors to issue shares to persons
friendly to current management which would render more difficult or discourage
an attempt to obtain control of the Company by means of a proxy contest, tender
offer, merger or otherwise, and thereby protect the continuity of the Company's
management.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock and
Representative Warrants is the American Stock Transfer and Trust Company, New
York, New York.

LEGAL MATTERS

The validity of the Shares being offered hereby is being passed upon
for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.,
1221 Brickell Avenue, Miami, Florida 33131.

- 35 -
<PAGE> 37

RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS

The accounting firm of Arthur Andersen LLP ("Arthur Andersen")
represented the Company as its independent accountants during fiscal years 1995
and 1996 and was dismissed by the Company's Board of Directors on November 15,
1996. During the Company's two most recent fiscal years and subsequent interim
period, there were no disagreements between the Company and Arthur Andersen on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Arthur Andersen, would have caused it to make reference
to the subject matter of the disagreement in connection with its reports. Arthur
Andersen's reports on the financial statements of the Company for the two most
recent fiscal years did not contain an adverse opinion or disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit scope, or accounting
principles. The Company's Board of Directors has appointed Deloitte & Touche LLP
as the Company's independent accountants for fiscal year 1997.

EXPERTS

Zanart's financial statements included in this Prospectus and elsewhere
in the 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 giving said report.

The financial statements of the Company included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and are included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied (at prescribed rates) at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the following regional offices of the Commission: Seven World Trade Center,
Suite 1300, New York, New York 10048; 3475 Lenox Road, N.E., Suite 1000,
Atlanta, Georgia 30326-7232; and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Quotations relating to the Company's Common Stock and Series A
Warrants appear on the American Stock Exchange ("AMEX") and reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the AMEX, 86 Trinity Place, New York, New York 10006.

The Company has filed with the Commission a Registration Statement on
Form SB-2 (the "Registration Statement") under the Securities Act with respect
to the Shares offered hereby. This Prospectus, which is a part of the
Registration Statement, does not contain all the information set forth in, or
annexed as exhibits to, such Registration Statement, certain portions of which
have been omitted pursuant to rules and regulations of the Commission. For
further information with respect to the Company and the Shares, reference is
hereby made to such Registration Statement, including the exhibits thereto.
Copies of the Registration Statement, including exhibits, may be obtained from
the aforementioned public reference facilities of the Commission upon payment of
the fees prescribed by the Commission, or may be examined without charge at such
facilities. The Registration Statement may also be obtained through the
Commission's Internet address at "http://www.sec.gov." Statements contained
herein concerning any document filed as an exhibit are not necessarily complete
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement. Each such statement is qualified in
its entirety by such reference.

- 36 -
<PAGE> 38

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONTINUCARE CORPORATION - HISTORICAL

Consolidated Balance Sheet as of September 30, 1996 (Unaudited) and June 30, 1996 . . . . . . . . . . . . . . . . . . F-

Consolidated Statement of Income for the Quarter Ended September 30, 1996 (Unaudited) . . . . . . . . . . . . . . . . F-

Consolidated Statement of Cash Flow for the Three Months Ended September 30, 1996 (Unaudited) . . . . . . . . . . . . F-

Notes to (Unaudited) Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-

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

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

Consolidated Statement of Income for the Period from February 12, 1996 (inception) to June 30, 1996 . . . . . . . . . F-

Consolidated Statement of Shareholders' Equity for the Period from February 12, 1996 (inception) to June 30,
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-

Consolidated Statement of Cash Flows for the Period from February 12, 1996 (inception) to June 30, 1996 . . . . . . . F-

Notes to Consolidated Financial Statements for the Period from February 12, 1996 (inception) to June 30, 1996 . . . . F-

ZANART ENTERTAINMENT INCORPORATED - PRO FORMA

Unaudited Pro Forma Condensed Consolidated Balance Sheet for Zanart Entertainment Incorporated . . . . . . . . . . . F-

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . F-

ZANART ENTERTAINMENT INCORPORATED - HISTORICAL

Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-

Statement of Net Assets in Process of Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-

Statement of Changes in Net Assets in Process of Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-

Statement of Shareholders' Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-

Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-

Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-

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

</TABLE>

F-1
<PAGE> 39

CONTINUCARE CORPORATION
CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, JUNE 30,
1996 1996
-----------------------------
(UNAUDITED)

ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 9,326,633 $ 819,066
Accounts receivable, net of allowance
for doubtful accounts of $372,903 and $146,692, respectively 3,147,757 1,967,978
Prepaid expenses and other current assets 77,871 800
------------------------------
Total current assets 12,552,261 2,787,844
Property and equipment, net 256,555 4,806
Intangible assets, net 46,186 1,499
Net assets held for sale 500,000
Other assets, net 63,645 70,747
------------------------------
Total assets $ 13,418,647 $2,864,896
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 322,081 $ 270,374
Accrued expenses 791,694 44,210
Accrued interest payable 6,422 23,161
Unearned revenue 51,301 18,301
Income and other taxes payable 787,681 412,686
------------------------------
Total current liabilities 1,959,179 768,732
Notes payable 599,000 655,000
------------------------------
Total liabilities 2,558,179 1,423,732
------------------------------
Minority interest 111,732 32,686
------------------------------
Commitments and contingencies
Shareholders' equity
Common stock; $.0001 par value; 100,000,000 shares
authorized, 11,202,983 issued and outstanding 1,120 100
Additional paid-in capital 9,833,499 763,769
Retained earnings 914,117 644,609
------------------------------
Total shareholders' equity 10,748,736 1,408,478
------------------------------
Total liabilities and shareholders' equity $ 13,418,647 $2,864,896
==============================
</TABLE>

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

F-2
<PAGE> 40

CONTINUCARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME

FOR THE
QUARTER ENDED
SEPTEMBER 30, 1996
------------------------------
(UNAUDITED)

<S> <C>
Revenues $2,923,446
Expenses
Payroll and employee benefits 1,367,910
Provision for bad debt 226,211
Professional fees 189,740
General and administrative 44,555
Depreciation and amortization 7,160
------------------------------
Total expenses 1,835,576
------------------------------
Income from operations 1,087,870
------------------------------
Other income (expenses)
Interest income 17,152
Minority interest (79,047)
------------------------------
Other expenses (61,895)
Income before taxes 1,025,975
Provision for income taxes 381,717
------------------------------
Net income $ 644,258
==============================
Earnings per common share and common equivalent share $ 0.09
==============================
Earnings per common share and common equivalent
share assuming full dilution $ 0.09
==============================

</TABLE>

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

F-3
<PAGE> 41
CONTINUCARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW

THREE MONTHS ENDED
SEPTEMBER 30, 1996
------------------
(UNAUDITED)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 644,258
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 7,160
Bad debt expense 226,211
Income applicable to minority interest 79,047
Changes in assets and liabilities, excluding the effect of acquisitions:
(Increase) in accounts receivable (1,405,990)
(Increase) in prepaid expenses and other current assets (77,072)
(Increase) in intangible assets (45,329)
Decrease in other assets 7,102
Increase in accounts payable and accrued expenses 743,191
(Decrease) in accrued interest payable (16,739)
Increase in unearned revenue 33,000
Increase in income and other taxes payable 374,995
------------------
Net cash provided by operating activities 569,834
------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions 258,267
------------------
Net cash used by investing activities (258,267)
------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Beechwood Repurchase (375,000)
Cash received from pre-Merger Zanart 6,600,000
Costs incurred associated with Private Placement & Merger (225,000)
Proceeds from issuance of common stock 2,196,000
------------------
Net cash provided by financing activities 8,196,000
------------------
Net increase in cash and cash equivalents 8,507,567
Cash and cash equivalents at beginning of period 819,066
------------------
Cash and cash equivalents at end of period $ 9,326,633
==================
</TABLE>

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

F-4
<PAGE> 42

CONTINUCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)

NOTE 1 - UNAUDITED INTERIM INFORMATION

The accompanying interim consolidated financial data for Continucare
Corporation ("Continucare" or the "Company") are unaudited; however, in the
opinion of management, the interim data include all adjustments necessary for a
fair presentation of the results for the interim period. 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 at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

The results of operations for the three months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the year ending June
30, 1997.

The interim unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto for the period from February 12, 1996 (inception) to June 30, 1996 as
set forth in the Company's Form 10-KSB/A.

NOTE 2 - MERGER

On August 9, 1996, the Company signed a definitive Agreement and Plan of Merger
(the "Merger Agreement") with Zanart Subsidiary, Inc. ("ZSI"), a wholly-owned
subsidiary of the Company, and Continucare Acquisition Corp. (formerly known as
Continucare Corporation), a Florida corporation ("CAC"). The Merger Agreement
provided for the merger (the "Merger") of ZSI with and into CAC. Upon the
consummation of the Merger, which occurred on September 11, 1996 (the "Closing
Date"), the separate existence of ZSI terminated, CAC became a wholly-owned
subsidiary of the Company, the Company agreed to sell or otherwise dispose of
its assets (other than cash) and discharge all liabilities relating to its
existing licensing business prior to December 11, 1996 and the Company's Board
of Directors and management became comprised of designees of CAC. On October
8, 1996, the Company changed its corporate name to Continucare Corporation.
Prior to the Merger, CAC was a development stage company established for the
purpose of managing mental and physical rehabilitation health care programs.

NOTE 3 - INTANGIBLE ASSETS

As a result of the Merger and the listing of shares of the Company's common
stock, $.0001 par value (the "Common Stock"), issued to the former shareholders
of pre-merger Continucare Corporation on the American Stock Exchange, the
Company incurred certain costs which were capitalized as organization costs.
These are being amortized using the straight line method over ten years.

NOTE 4 - EARNINGS PER SHARE

The treasury stock method was used to determine the dilutive effect of the
options and warrants on earnings per share data.

Earnings per share and the weighted average number of shares outstanding used
in the computation are summarized elsewhere herein.

NOTE 5 - NET ASSETS HELD FOR SALE

Pursuant to the Merger, the operations of the licensing business of pre-merger
Zanart Entertainment, Inc. ("Zanart") are in the process of being terminated.
As a result, the estimated net assets of Zanart's operations, other than cash,
are reflected as Assets Held for Sale in the accompanying consolidated balance
sheet.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

The Company entered into new employment agreements with two of its executive
officers which became effective in September 1996. The agreements are for
terms of three years (with one agreement

F-5
<PAGE> 43

providing for one additional year term for each year of service by such
executive). The agreements also provide for payment of bonuses and one
agreement provides for a one-time grant of stock options to purchase 100,000
shares of Common Stock at $5.00 per share, vesting at a rate of 20% per year.

As provided for in the management contracts with the Company's providers, the
Company maintains annual claims made policies for general and professional
liability insurance jointly with each of the providers. Coverage under the
policies are $1,000,000 per incident and $3,000,000 aggregate. It is the
Company's intention to renew such coverage on an on-going basis.

NOTE 7 - RECENT DEVELOPMENTS

On August 26, 1996, the Company entered into a letter of intent to purchase a
certain comprehensive outpatient rehabilitation facility (the "CORF"). The
purchase agreement was consummated on November 12, 1996. Under the terms of the
letter of intent, the Company provided management services to the CORF for a
fee of $30,000 per month from the date of the letter of intent until the
Closing Date (as defined in the related purchase agreement). This fee is
included as revenue in the accompanying unaudited consolidated financial
statements.

NOTE 8 - SUBSEQUENT EVENTS

On October 1, 1996, the Company began managing a partial hospitalization and an
inpatient program under its agreement with an ORNDA Healthcorp. subsidiary.
The management fees for each of the two new programs are expected to be
approximately $32,500 per month and are based on the actual costs of the
program and a markup percentage to cover the Company's overhead.

The Company has entered into consulting agreements with a company controlled by
Mr. Douglas Miller and a company controlled by Mr. Barry Goldstein
(collectively, the "Consulting Agreements"). Messrs. Miller and Goldstein
served as executive officers of CAC prior to the Merger. Each of the
Consulting Agreements, which are effective as of the date of the Merger,
contain the following terms: (i) three year term, (ii) annual payments,
payable semi-monthly, of approximately $325,000, (iii) ability of the Company
to terminate the agreement without "cause" (as defined) with 30 days' notice,
provided that the consultant will receive a termination payment equal to the
amount otherwise payable under the Consulting Agreement through the end of the
term over the period of the remaining term of the agreement, and (iv) ability
of the Company to terminate the agreement for "cause" at any time with no
payment due to the consultant.

F-6
<PAGE> 44

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Continucare Corporation
and Subsidiaries:

We have audited the accompanying consolidated balance sheet of Continucare
Corporation and subsidiaries (the "Company") as of June 30, 1996 and the related
consolidated statements of income, shareholders' equity and cash flows for the
period February 12, 1996 (inception) to June 30, 1996. 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 the Company as of June 30,
1996 and the results of its operations and its cash flows for the period
February 12, 1996 (inception) to June 30, 1996 in conformity with generally
accepted accounting principles.

Deloitte & Touche, LLP

August 9, 1996, except for
paragraphs six through eleven of Note 11,
as to which the date is October 2, 1996.

F-7
<PAGE> 45
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS

<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 819,066
Accounts receivable, net of allowance for doubtful accounts
of $146,692 1,967,978
Prepaid expenses and other current assets 800
-----------
Total current assets 2,787,844

PROPERTY AND EQUIPMENT, net 4,806

INTANGIBLE ASSETS, net 1,499

OTHER ASSETS, net 70,747
-----------

TOTAL ASSETS $ 2,864,896
-----------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 270,374
Accrued expenses 44,210
Accrued interest payable 23,161
Unearned revenue 18,301
Income and other taxes payable 412,686
-----------

Total current liabilities 768,732

NOTES PAYABLE 655,000
-----------

Total liabilities 1,423,732
-----------

MINORITY INTEREST 32,686
-----------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Common stock; $1.00 par value; 100 shares
authorized, issued and outstanding 100
Additional paid-in capital 763,769
Retained earnings 644,609
-----------

Total shareholders' equity 1,408,478
-----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,864,896
===========
</TABLE>

See notes to consolidated financial statements.

F-8
<PAGE> 46

CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD FROM FEBRUARY 12, 1996 (INCEPTION) TO JUNE 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

<S> <C>
REVENUES $ 2,507,063
-----------

EXPENSES:
Payroll and employee benefits 973,412
Provision for bad debts 242,664
Professional fees 203,625
General and administrative 54,430
Depreciation and amortization 362
-----------

Total expenses 1,474,493
-----------

INCOME FROM OPERATIONS 1,032,570
-----------

OTHER EXPENSES:
Interest 23,204
Minority interest 32,686
-----------

Other expenses 55,890
-----------

INCOME BEFORE INCOME TAXES 976,680

PROVISION FOR INCOME TAXES 332,071
-----------

NET INCOME $ 644,609
===========
</TABLE>

See notes to consolidated financial statements.

F-9
<PAGE> 47

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 12, 1996 (INCEPTION) TO JUNE 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Shareholders'
Stock Capital Earnings Equity

<S> <C> <C> <C> <C>
Issuance of 100 shares
for initial capitalization of Company $ 100 $ 900 $ 1,000

Issuance of stock in subsidiary
to purchase net assets 762,869 762,869

Net income $ 644,609 644,609
---------- ---------- ---------- -------------
$ 100 $ 763,769 $ 644,609 $ 1,408,478
========== ========== ========== =============

</TABLE>

See notes to consolidated financial statements.

F-10
<PAGE> 48

CONTINUCARE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 12, 1996 (INCEPTION) TO JUNE 30, 1996
- -------------------------------------------------------------------------------

<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 644,609
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 362
Provision for bad debts 242,664
Income applicable to minority interest 32,686
Changes in assets and liabilities, excluding the effect of acquisitions:
Increase in accounts receivable (1,445,590)
Increase in prepaid expenses and other current assets (800)
Increase in intangible assets (1,579)
Increase in other assets (67,221)
Increase in accounts payable and accrued expenses 314,584
Increase in accrued interest payable 23,161
Increase in unearned revenue 18,301
Increase in income and other taxes payable 406,976
-----------

Net cash provided by operating activities 168,153
-----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (5,087)
-----------

Net cash used by investing activities (5,087)
-----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of related shareholders notes payable 655,000
Proceeds from issuance of common stock 1,000
-----------

Net cash provided by financing activities 656,000
-----------

NET INCREASE IN CASH AND CASH EQUIVALENTS, END OF YEAR $ 819,066
-----------

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 43
-----------
Cash payments for income taxes $
-----------

NON CASH INVESTING AND FINANCING ACTIVITIES:
Purchase of assets and liabilities in exchange for subsidiary stock $ 762,869
-----------
</TABLE>

See notes to consolidated financial statements.

F-11

<PAGE> 49

CONTINUCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 12, 1996 (INCEPTION) TO JUNE 30, 1996
- --------------------------------------------------------------------------------

1. GENERAL

DESCRIPTION OF BUSINESS - Continucare Corporation (the "Company") was
incorporated on February 12, 1996 in the State of Florida. Together with
its subsidiaries, the Company is a full-service healthcare management
organization that creates and implements operational, marketing,
administrative, staffing and financial programs for specialized
outpatient institutional and professional providers (collectively, the
"Providers"). The Company, which specializes in mental and physical
rehabilitative programs, offers an expanded healthcare product line,
including setting up and managing partial hospitalization and
full-service community-based outpatient healthcare centers. The Company
manages nineteen partial hospitalization programs in three states and two
day-treatment programs which serve as a step-down alternative to patients
that no longer require partial hospitalization in order to assist the
patients in transitioning back into their communities. Of the nineteen
programs, four are also owned by shareholders of the Company. See Note 4.

As of May 1, 1996, the Company, through Continucare Medical Care Network,
Inc. ("CMCN"), a majority-owned subsidiary, provides full-service
financial management including billing and collection services and
various employee leasing options. See further discussion below.

BUSINESS COMBINATIONS - On May 1, 1996, the Company, through CMCN, a then
wholly-owned subsidiary, acquired certain contracts, assets, and
liabilities of Joanne Telmosse Consulting, Inc. ("Consulting"), based in
Coral Springs, Florida, which provides billing and collection services.
Concurrently, the Company acquired certain contracts, assets and
liabilities of ProCare Staffing, Inc. (a related company of Consulting by
common ownership), which offers permanent, long-term and short-term
employee leasing to physicians, community hospitals, community mental
health centers and partial hospitalization programs. In exchange for the
net assets acquired, the Company issued 25 shares of CMCN's common stock
(representing a 25% interest) to the common owner of the acquired
companies. The Company recorded as additional paid-in capital $762,869,
which the Company estimates is the fair value of the net assets acquired.
The transaction was accounted for under the purchase method. The income
generated from the net assets acquired are incorporated in the
Consolidated Income Statement for the period from May 1, 1996, the
effective date of the transaction, to June 30, 1996.

In conjunction with these transactions, the Company entered into a
subcontract agreement with Medical Billing Service Systems, Inc., which
is a related company of Consulting by common ownership (the "Subcontract
Agreement"), whereby Medical Billing Service Systems, Inc. is to provide
the billing and collection services for the contracts acquired by the
Company from Consulting in return for a $35,000 monthly fee. The
Subcontract Agreement is cancelable without cause by either party with
180 days notice.

F-12

<PAGE> 50

The following unaudited consolidated pro forma combined condensed
statement of income for the period from February 12, 1996 (inception) to
June 30, 1996 has been prepared to reflect these acquisitions as if they
were consummated as of February 12, 1996 (inception), after giving effect
to certain pro forma adjustments as described below.

Total Revenues $ 4,043,100
-----------
Net income $ 893,700
-----------

Pro forma adjustments reflect minority interest, provision for bad debt,
the recording of the monthly fee under the Subcontract Agreement and an
accrual for income taxes.

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned and
majority-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.

2. SIGNIFICANT ACCOUNTING POLICIES

REVENUE - The Company derives its revenues based on contracts with
Providers. The contracts have terms ranging from one to fifteen years,
with the majority in the fifteen-year category, and are cancelable
without cause by either party with 180 days notice. Revenue is recognized
in the period earned. The Company also recognizes revenues from its
employee leasing services at the time services are rendered. Revenues for
billing services are recognized upon billing of services to the payors.
The Providers receive reimbursement under either the Medicare or
Medicaid programs or payments from insurers, self-funded benefit plans or
other third-party payors for services provided by programs managed by the
Company. The Medicare and Medicaid programs are subject to statutory and
regulatory changes, retroactive and prospective rate adjustments,
administrative rulings and funding restrictions, any of which could have
the effect of limiting or reducing reimbursement levels to the Company's
clients which in return could affect the Company. A majority of the
patients utilizing the Provider programs managed by the Company are
covered by Medicare.

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 - The estimated fair values of
financial instruments have been determined by the Company using available
market information and appropriate valuation methods. Considerable
judgment is required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methods may have a material effect on the estimated fair value
amounts. The Company has used the following market assumptions and/or
estimation methods:

CASH AND CASH EQUIVALENTS - The carrying amount reported in the
balance sheet is a reasonable estimate of fair value.

NOTES PAYABLE - The carrying value at June 30, 1996 approximates fair
value based on the terms of the note.

CASH AND CASH EQUIVALENTS - The Company defines cash and cash equivalents
as those highly liquid investments purchased with an original maturity of
three months or less.

ACCOUNTS RECEIVABLE - In the normal course of business, the Company
extends credit to its customers. The Company performs ongoing credit
evaluations of its customers, and records allowances for potential losses
based on management's expectations of their ultimate collection.

F-13

<PAGE> 51

OTHER ASSETS - Other assets include primarily long-term deposits and the
deferred tax assets.

INCOME TAXES - Deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect for the year in which
the differences are expected to reverse. Current income taxes are based
on the current year's income taxable for federal and state reporting
purposes.

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost of
acquisition. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the related
assets, which range from three to five years. Repairs and maintenance
costs are expensed as incurred. Improvements and replacements are
capitalized.

3. INCOME TAXES

The components of the provision for income taxes for the period from
February 12, 1996 (inception) to June 30, 1996 are as follows:

<TABLE>
<S> <C>
Current income taxes:
Federal $ 337,776
State 49,170
-----------

Total current 386,946
-----------

Deferred income taxes:
Federal (46,855)
State (8,020)
-----------

Total deferred (54,875)
-----------

Total provision for income taxes $ 332,071
===========
</TABLE>

The total income tax provision is at a rate of approximately 34% which
equals the statutory federal income tax rate.

The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at June 30, 1996 are as follows:

<TABLE>
<S> <C>
Deferred tax assets:
Bad debt reserve $ 55,170
-----------
Gross deferred tax assets 55,170
-----------

Deferred tax liabilities:
Depreciation and amortization (295)
-----------
Gross deferred tax liabilities (295)
-----------

Net deferred tax asset $ 54,875
===========
</TABLE>

F-14

<PAGE> 52
4. RELATED PARTY TRANSACTIONS

The Company subleases office space from Community Behavioral Services
("CBS"). As of June 30, 1996, three of the four shareholders of the
Company are one third owners of CBS. The lease is a month-to-month
agreement with monthly lease payments of $3,805.

The Company has contracted with CBS to perform certain managerial and
administrative services on behalf of the Company. The Company reimburses
CBS for the actual cost of expenses incurred by CBS in the direct
performance of such services. For the period ended June 30, 1996, total
expenses incurred by the Company for these services totaled $407,700 and
are recorded in the appropriate expense categories in the Consolidated
Statement of Income. In addition, the Company provides management
services for four facilities owned by CBS in return for a management fee
which is based on the Company's estimated cost of providing such
services. The management fee charged by the Company is calculated based
on the ratio of patient volume represented by CBS to total Company
patient volume at other Provider facilities, applied to certain of the
Company's expenses. This management fee is recorded by the Company as a
reduction of the related expense. For the period, management fees charged
by the Company to CBS were $324,700. As of June 30, 1996, the net payable
by the Company to CBS under these arrangements was $83,000 which is
reflected in accounts payable and accrued expenses in the Consolidated
Balance Sheet.

The Company, as of late May 1996, also provides management services to
Interphase, Inc. ("Interphase"), a related Company which is partially
owned by three of the Company's shareholders at June 30, 1996. The
Company receives a management fee for the services provided based on the
Company's cost of providing such services. The management fee charged by
the Company is calculated based on the ratio of patient volume
represented by Interphase to total Company patient volume at other
Provider facilities, applied to certain of the Company's expenses. The
management fee charged is recorded as a reduction of the Company's
related expenses. As of and for the period from February 12, 1996
(inception) to June 30, 1996, the balance receivable from and the
revenues earned under this arrangement was $19,100.

The Company is obligated to a shareholder (the "Shareholder Note"), for a
note payable in the amount of $599,750 and is reflected in notes payable
in the accompanying Consolidated Financial Statements. The Shareholder
Note, which is collateralized by substantially all of the Company's
assets, bears interest at 10% per annum and is due, in full, on February
12, 1998. Interest is due semiannually commencing on August 12, 1996.
Accrued interest and interest expense related to this note was $21,662 as
of and for the fiscal year ended June 30, 1996.

The Company is obligated to Health Care Management Partners, Inc., a
company which is owned jointly by three of the four shareholders of the
Company, for a note payable in the amount of $55,250 as of June 30, 1996
(the "HCMP Note") and is reflected in notes payable in the accompanying
Consolidated Financial Statements. The HCMP Note, which is subordinate to
the Shareholder Note, bears interest at 10% and is due, in full, on
February 12, 1998. Interest expense related to this note was $1,500 for
the fiscal year ended June 30, 1996.

5. LONG-TERM DEBT

Long-term debt is comprised entirely of the Shareholder Note and the HCMP
Note as described in Note 4.

F-15

<PAGE> 53

6. COMMITMENTS AND CONTINGENCIES

The Company has employment contracts with its four executives. These
contracts have indefinite terms and are cancelable at the option of the
Company or employee. The contracts provide for increases in annual base
salary, a flat bonus and an additional bonus at the discretion of the
Company's Board of Directors based upon the Company's operating results,
financial condition, prospects and intended utilization of earnings, if
any. Subsequent to year-end, one of the executives resigned. See
discussion at Note 7.

As provided for in the management contracts with the Providers, the
Company maintains annual claims made policies for general and
professional liability insurance jointly with each of the Providers.
Coverage under the policies are $1,000,000 per incident and $3,000,000
aggregate. It is the Company's intention to renew such coverage on an
on-going basis.

7. SUBSEQUENT EVENTS AND OTHER MATTERS

On July 3, 1996, the Company entered into a Letter of Intent with a
large, national hospital chain (the "Chain") to develop, staff and manage
outpatient psychiatric treatment and physical rehabilitation programs
(the "Programs") for hospitals affiliated with the Chain. The Programs
are to be initiated in seventeen treatment facilities and may be expanded
to cover additional facilities upon the mutual agreement of the parties.
The scope and duration of the services to be provided by the Company, as
well as the management fee to be paid to the Company, will be determined
upon the mutual agreement of the parties depending upon the specific
requirements of each Program. The Company estimates that such management
fees shall range from $25,000 to $35,000 per month, per Program.
Management also anticipates additional operating costs will be incurred
in providing such services.

On July 8, 1996, the Company entered into a management contract with an
ORNDA Healthcorp. subsidiary to perform certain management services for
certain partial hospitalization programs. The contract, which is for an
initial term of five years, is expected to generate a total of
approximately $4,080,000 ($816,000 annually) in revenue over the initial
term. The contract may be renewed for additional periods of one year each
upon the mutual consent of the parties and may be terminated upon certain
conditions as defined in the agreement. Management also anticipates
additional operating costs will be incurred in providing such services.

On July 15, 1996, the Company entered into a Stock Purchase and
Redemption Agreement with Beechwood Partners, Ltd., a limited partnership
("Beechwood"), to repurchase Beechwood's 25% investment in the Company's
common stock for $375,000 which will be accounted for as treasury stock.
In connection with this transaction, one of the executives resigned from
his position with the Company. Certain provisions of the Stock Purchase
and Redemption Agreement require the Company to make an additional
payment to Beechwood upon the occurrence of certain events. The
additional payment is comprised of a flat amount not to exceed $600,000
and a variable portion payable only if the remaining executives receive
new employment agreements providing for "excessive compensation" as
defined in the Stock Purchase and Redemption Agreement.

On August 9, 1996, the Company has entered into contracts to provide
certain staffing services with a not-for-profit corporation which
operates a community mental health center and a partial hospitalization
program from its facilities. The contracts have an initial term of one
year and is automatically renewable unless terminated in accordance with
the provisions in the contract, such contracts are expected to

F-16
<PAGE> 54

generate approximately $600,000 of revenue over the initial term. Management
also anticipates additional costs will be incurred in providing such services.

Effective August 6, 1996, the Company amended its Articles of Incorporation to
increase its authorized common shares to 10,000,000, par value $1.
Concurrently, the Company authorized each issued and outstanding share be
converted to 66,666.666 shares reflecting a 66,666.666 for one stock split.
The stock split has not been reflected in the accompanying financial
statements. The par value was subsequently amended to $.0001.

On August 9, 1996, the Company signed a merger agreement (the "Merger
Agreement") with Zanart Entertainment, Inc. ("Zanart") and Zanart Subsidiary,
Inc. ("ZSI"). Pursuant to the Merger Agreement, on September 11, 1996 (the
"Closing Date") ZSI merged with and into the Company (the "Merger"). Each
share of pre-Merger Company common stock issued and outstanding prior to the
Closing Date was converted on the Closing Date into one share of Zanart common
stock. Under the terms of the Merger Agreement, Zanart agreed to sell or
otherwise dispose of its assets (other than cash) and discharge all liabilities
relating to Zanart's existing business, which is to design, publish, package
and market wall decor and collectible art which incorporates popular images
from motion pictures, television and animation, prior to December 11, 1996. In
addition, upon the consummation of the Merger (i) Zanart's existing Board of
Directors and management resigned and (ii) Zanart's new Board of Directors and
management became comprised of Continucare designees.

The Merger Agreement contains various customary representations and warrantees
of the parties thereto, and includes a post closing adjustment provision
requiring the issuance of a certain number of additional shares (the
"Additional Shares") of Zanart common stock to the holders of pre-Merger
Company common stock immediately prior to the Closing Date in the event that
the Closing Cash Balance (as such term is defined in the Merger Agreement) of
Zanart is less than $2,000,000 on December 12, 1996.

Prior to the Merger, the Company effectuated the private sale of an aggregate
of 3,300,000 shares of pre-Merger Company common stock at $2.00 a share which
was completed on August 29, 1996.

On August 29, 1996, the Company entered into a lease agreement for
approximately 13,500 square feet of space for its corporate offices in Miami,
Florida. The lease, which is for an initial term of five years, provides for
annual lease payments of approximately $172,000 in the first year, $176,000 in
the second year, $180,000 in the third year, $184,000 in the fourth year, and
$189,000 in the fifth year. The Company's previous sub-lease for office space
with CBS as discussed in Note 4 was terminated as of October 2, 1996.

The Company has entered into new employment agreements with two executives of
the Company effective in September 1996. The agreements are for terms of three
years and one provides for additional years based on each year of service. The
agreements have provisions for bonuses, vesting and stock options.

The Company intends to enter into consulting agreements with a company
controlled by Mr. Douglas Miller and a company controlled by Mr. Barry
Goldstein (collectively, the "Consulting Agreements"). Messrs. Miller and
Goldstein served as executive officers of Continucare Corporation prior to the
Merger.

* * * * * *

F-17
<PAGE> 55
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

On August 9, 1996, Zanart Entertainment Incorporated ("Zanart") entered into
an Agreement and Plan of Merger (the "Agreement") with Continucare Corporation
("Continucare"). Pursuant to the Agreement, Zanart Subsidiary, Inc., a
wholly-owned subsidiary of Zanart, will merge with and into Continucare (the
"Merger") and each issued and outstanding share of Continucare common stock
will be converted into the right to receive one share of Zanart common stock.
For accounting purposes the Merger will be treated as a recapitalization of
Continucare with Continucare as the acquiror (i.e., a "reverse acquisition").
The operations of Zanart will be permanently discontinued at the effective date
of the Merger, and Zanart will dispose of all its assets and liabilities.
Therefore, the historical balance sheet presented in the accompanying unaudited
financial statements is that of Continucare.

The following unaudited pro forma condensed consolidated balance sheet as of
June 30, 1996 has been prepared by adjusting Continucare's historical condensed
consolidated balance sheet as of June 30, 1996. As Zanart's operations will be
discontinued, no pro forma statement of income is presented as the Merger would
have no effect on the historical operations of Continucare had the Merger
occurred on February 12, 1996 (inception). The historical balance sheet has
been adjusted to give effect to the Merger as if the Merger had occurred as of
June 30, 1996. Such pro forma adjustments are described in the accompanying
notes to the pro forma unaudited condensed consolidated balance sheet which
should be read in conjunction with the pro forma unaudited condensed
consolidated balance sheet.

The pro forma unaudited condensed consolidated balance sheet presented herein
does not purport to be indicative of the actual financial position of the
Continucare had the Merger actually been consummated on June 30, 1996, or of
the future financial position of the Continucare which will result from the
consummation of the Merger.

F-18
<PAGE> 56
ZANART ENTERTAINMENT INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996

<TABLE>
<CAPTION> HISTORICAL PRO FORMA
CONTINUCARE ADJUSTMENTS PRO FORMA
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 819,000 $ (375,000)(1) $ 9,140,000
6,500,000 (3)
2,196,000 (4)
Accounts receivable 1,968,000 1,968,000
Prepaid expenses and other current assets 1,000 1,000
Net assets held for sale 500,000 (4) 500,000
---------- ---------- -----------
Total current assets 2,788,000 8,821,000 11,609,000
---------- ---------- -----------
PROPERTY AND EQUIPMENT 5,000 5,000

OTHER ASSETS 72,000 72,000
---------- ---------- -----------
TOTAL ASSETS $2,865,000 $8,821,000 $11,686,000
========== ========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 356,000 $ 356,000
Income and other taxes payable 413,000 413,000
---------- ---------- -----------
Total current liabilities 769,000 769,000

NOTES PAYABLE 655,000 655,000
---------- ---------- -----------
Total liabilities 1,424,000 1,424,000
---------- ---------- -----------
MINORITY INTEREST 33,000 33,000
---------- ---------- -----------
SHAREHOLDERS' EQUITY:
Common stock 100 (25)(1) 1,120
425 (2)
330 (3)
290 (4)
Additional paid-in-capital 764,000 (374,975)(1) 9,583,980
(425)(2)
6,499,670 (3)
5,805,676 (4)
(3,109,966)(4)
Retained earnings 644,000 644,000
---------- ---------- -----------
Total shareholders' equity 1,408,000 8,821,000 10,229,000
---------- ---------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,865,000 $8,821,000 $11,686,000
========== ========== ===========
</TABLE>

SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

F-19
<PAGE> 57
Zanart Entertainment Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

(1) To record the repurchase of the common stock of a 25% (25 shares)
shareholder of Continucare during August 1996 for $375,000.

(2) To record the issuance of 4,250,000 shares, par value $.0001 of Continucare
common stock in connection with a 66,667 to one stock split effected during
August 1996. Prior to the stock split, Continucare amended its Articles of
Incorporation to increase its authorized common shares to 10,000,000, par
value $.0001.

(3) To record the proceeds from a private placement of 3,300,000 shares of
Continucare common stock at $2.00 a share completed during August 1996, net
of estimated costs of $100,000.

(4) To record Zanart's net assets acquired in the Merger consisting of
$2,196,000 in cash and an estimated $500,000 in net assets held for sale.
The fair value assigned to Zanart's assets and liabilities are based on
Continucare's management best estimates of the realizable values. Fair
values assigned to Zanart's assets and liabilities may differ from the
actual amounts realized or paid.

(5) To record (i) the cancellation 8,300,000 shares of Continucare common stock
issued and outstanding; (ii) the issuance of 8,300,000 shares of Zanart
common stock to Continucare shareholders, representing the conversion of
each share of Continucare into one share of Zanart common stock, based on
the Merger Agreement; and (iii) 2,902,983 shares of Zanart common stock
issued and outstanding as of the date of the Merger Agreement.

As Zanart has no significant assets other than cash, the excess amount
resulting from this exchange by Continucare is considered a Merger premium
($3,109,966) paid in order to obtain the public corporate shell of Zanart.
Accordingly, such merger premium is considered a cost associated with the
issuance of its common stock with no goodwill recorded as a result of the
Merger.

(6) Historical and pro forma earnings per share are calculated as follows:

Historical Pro Forma
June 30, 1996 June 30, 1996
------------- -------------

Net Income $644,609 $644,609
============= ============

Number of shares outstanding:
Continucare (after considering
repurchase, stock split and
private placement) 8,300,000 8,300,000
Zanart 2,902,983
------------- ------------
8,300,000 11,202,983
============= ============

Earnings per share $0.08 $0.06
============= ============

F-20

<PAGE> 58

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Zanart Entertainment Incorporated:

We have audited the accompanying statement of net assets in process of
liquidation of ZANART ENTERTAINMENT INCORPORATED (a Florida corporation) as of
June 30, 1996, and the related statement of changes in net assets in process of
liquidation for the year then ended. In addition, we have audited the statement
of operations, shareholders' equity (deficit) and cash flows for the year ended
June 30, 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.

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.

As described in Note 1 to the financial statements, the Company entered
into an Agreement and Plan of Merger (the Agreement) with Continucare
Corporation on August 9, 1996. Pursuant to the Agreement, the Company shall take
such steps as are necessary to effectuate the sale or other disposition of the
assets and the discharge of all liabilities relating to the Company's existing
licensing business. As a result, the Company has changed its basis of accounting
for 1996 from the going-concern basis to the liquidation basis. Accordingly, the
carrying value of the remaining assets as of June 30, 1996 are presented at
estimated realizable values and all liabilities are presented at estimated
settlement amounts.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets in process of liquidation of Zanart
Entertainment Incorporated as of June 30, 1996, the changes in net assets in
process of liquidation for the year then ended and for the year ended June 30,
1995, the statement of operations, shareholders' equity (deficit) and cash flows
in conformity with generally accepted accounting principles applied on the bases
described in the preceding paragraph.

/s/ ARTHUR ANDERSEN LLP
--------------------------------------
ARTHUR ANDERSEN LLP

Los Angeles, California
September 17, 1996

F-21
<PAGE> 59

ZANART ENTERTAINMENT INCORPORATED

STATEMENT OF NET ASSETS IN PROCESS OF LIQUIDATION
AS OF JUNE 30, 1996

<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents........................................................ $2,196,266
Accounts receivable, net of allowance for doubtful accounts of $75,000........... 382,258
Inventories...................................................................... 275,031
Officer advances................................................................. 3,649
----------
Total.......................................................................... 2,857,204
----------
LIABILITIES
Accounts payable and accrued liabilities......................................... 172,811
Trade payable to vendor/shareholder.............................................. 207,990
Professional fees payable........................................................ 50,500
Accrued payroll.................................................................. 19,743
Royalties payable................................................................ 145,668
Reserve for loss on liquidation.................................................. 660,492
----------
Total.......................................................................... 1,257,204
----------
NET ASSETS IN PROCESS OF LIQUIDATION............................................. $1,600,000
==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-22
<PAGE> 60

ZANART ENTERTAINMENT INCORPORATED

STATEMENT OF CHANGES IN NET ASSETS IN PROCESS OF LIQUIDATION
FOR THE YEAR ENDED JUNE 30, 1996

<TABLE>
<S> <C>
REVENUES........................................................................ $ 2,503,506
COST OF REVENUES................................................................ 2,345,238
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................................... 1,512,983
-----------
Decrease from operations...................................................... (1,354,715)
INTEREST INCOME................................................................. 134,879
INTEREST EXPENSE................................................................ (2,483)
LOSS ON LIQUIDATION............................................................. (1,058,931)
-----------
Decrease before provision for state income taxes.............................. (2,281,250)
PROVISION FOR STATE INCOME TAXES................................................ 800
-----------
Net decrease.................................................................. (2,282,050)
NET ASSETS, beginning of year................................................... 3,882,050
-----------
NET ASSETS IN PROCESS OF LIQUIDATION, end of year............................... $ 1,600,000
===========
PRO FORMA EARNING PER SHARE INFORMATION (see Note 10):
Earnings per common share..................................................... $ 0.06
===========
Weighted average number of shares outstanding................................. 11,402,983
===========
</TABLE>

The accompanying notes are an integral part of this statement.

F-23
<PAGE> 61

ZANART ENTERTAINMENT INCORPORATED

STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 1995

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, June 30, 1994.................. 1,924,650 $192 $ 321,920 $ (458,961) $ (136,849)
Issuance of common stock for cash..... 25,000 3 99,997 -- 100,000
Issuance of common stock for early
extinguishment of debt............. 33,333 3 133,330 -- 133,333
Proceeds from public offering net of
offering expenses of $1,161,572.... 920,000 92 4,358,496 -- 4,358,588
Net loss.............................. -- -- -- (573,022) (573,022)
--------- ---- ---------- ----------- ----------
BALANCE, June 30, 1995.................. 2,902,983 $290 $4,913,743 $(1,031,983) $3,882,050
========= ==== ========== =========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-24
<PAGE> 62

ZANART ENTERTAINMENT INCORPORATED

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1995

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................................... $ (573,022)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................... 121,838
Provision for doubtful accounts............................................. 62,437
Amortization of deferred financing costs.................................... 65,268
Loss from early extinguishment of debt...................................... 37,281
Changes in assets and liabilities:
Accounts receivable....................................................... (327,282)
Income tax refund receivable.............................................. 7,446
Inventories............................................................... (305,156)
Prepaid expenses.......................................................... (43,486)
Other assets.............................................................. (20,000)
Accounts payable and accrued liabilities.................................. 188,456
Trade payable to vendor/shareholder....................................... (170,263)
Professional fees payable................................................. (23,792)
Accrued payroll........................................................... (19,544)
Royalties payable......................................................... 24,405
----------
Net cash used in operating activities.................................. (975,414)
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture and equipment........................................... (48,637)
Advances on licensing fees..................................................... (95,000)
Officer advances, net.......................................................... 1,051
----------
Net cash used in investing activities.................................. (142,586)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes.............................................................. (410,000)
Proceeds from the issuance of common stock..................................... 4,458,588
----------
Net cash provided by financing activities.............................. 4,048,588
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ 2,930,588
CASH AND CASH EQUIVALENTS, beginning of year..................................... 339,982
----------
CASH AND CASH EQUIVALENTS, end of year........................................... $3,270,570
==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-25
<PAGE> 63

ZANART ENTERTAINMENT INCORPORATED

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995

<TABLE>
<S> <C>
REVENUES......................................................................... $2,325,337
COST OF REVENUES................................................................. 1,818,202
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..................................... 958,817
----------
Loss from operations........................................................... (451,682)
INTEREST INCOME.................................................................. 23,149
INTEREST EXPENSE................................................................. (106,408)
----------
Loss before provision for state income taxes and extraordinary item............ (534,941)
PROVISION FOR STATE INCOME TAXES................................................. 800
----------
Loss before extraordinary item................................................. (535,741)
EXTRAORDINARY ITEM -- LOSS FROM EARLY EXTINGUISHMENT OF DEBT..................... (37,281)
----------
Net loss.................................................................... $ (573,022)
==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-26
<PAGE> 64

ZANART ENTERTAINMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION AND LINE OF BUSINESS

Zanart Publishing Incorporated (Zanart) was formed in March 1990 and merged
with Xuma Corporation (Xuma), which was incorporated under the laws of the state
of Florida in August 1986. In March 1994, the name was changed to Zanart
Entertainment Incorporated (the Company).

The Company designs, develops, markets and sells a variety of printed
products based upon characters from entertainment properties licensed by the
Company from television and motion picture studios. The Company's products are
sold through retail chain stores, individual retail stores, direct mail catalogs
and a television shopping network.

During May 1995, the Company completed a public offering whereby 800,000
units were sold. Each unit was comprised of one share of common stock and one
warrant to purchase one share of common stock at a price of $6.00. Warrants are
fully exercisable when issued and will expire five years after they are issued.
No warrants have been exercised as of June 30, 1996.

During June 1995, the Company sold another 120,000 units as over-allotments
related to the initial public offering. Total proceeds received, after related
offering costs of $1,161,572, from the above sales were $4,358,588. Total
proceeds include $160 received related to representative units issued to the
underwriters. Offering costs consisted of direct costs incurred related to the
public offering. These costs mainly consist of legal, accounting and printing
fees, underwriter's commissions, as well as marketing costs incurred in
connection with the offering.

On August 9, 1996, the Company entered into an Agreement and Plan of Merger
(the Agreement) with Continucare Corporation (Continucare). Pursuant to the
Agreement, the Company will merge with and into Continucare (the Merger) and
each issued and outstanding share of Continucare common stock (8,300,000 shares)
will be converted into the right to receive one share of the Company's common
stock. Thereafter, the present shareholders of Continucare will own
approximately 74 percent of the issued and outstanding common stock of the
Company. In connection therewith, although from a legal standpoint the Company
will be the surviving Company, the acquiring company for accounting purposes
will be Continucare. The transaction will be accounted for as a recapitalization
of Continucare with Continucare as the acquiror (a reverse merger). Continucare
was incorporated on February 12, 1996 in the State of Florida. Together with its
subsidiaries, Continucare is a full-service healthcare management organization
that creates and implements operational, marketing, administrative, staffing and
financial programs for specialized outpatient institutional and professional
providers. Continucare, which specializes in mental and physical rehabilitative
programs, offers an expanded healthcare product line, including setting up and
managing partial hospitalization and full-service community-based outpatient
healthcare centers. Continucare manages nineteen partial hospitalization
programs in three states and two day-treatment programs which serve as a
step-down alternative to patients that no longer require partial hospitalization
in order to assist the patients in transitioning back into their communities. Of
the nineteen programs, four are also owned by shareholders of Continucare. See
Note 10 for unaudited pro forma information related to the Merger.

Within three months from the closing of the Merger (September 11, 1996, the
Closing Date), the Company shall take such steps as are necessary to effectuate
the sale or other disposition of the assets and the discharge of all liabilities
relating to the Company's existing licensing business (the Liquidation). At the
end of the three months, the Company's closing cash balance is to be at least
$2,000,000. In the event that the closing cash balance is less than the
$2,000,000, then the holders of Continucare common stock shall receive one-half
share of the Company's common stock for each dollar of difference. The Company
estimates that its closing cash balance will be approximately $1,600,000,
resulting in an additional 200,000 shares being issued to the holders of
Continucare.

As a result of the merger, the Company has changed its basis of accounting
for 1996 from the going-concern basis to the liquidation basis. Accordingly, the
carrying values of the remaining net assets as of June 30, 1996 are presented at
estimated realizable values and settlement amounts as determined by the Company.
The final realizable values and settlement amounts may be different from the
amounts estimated in the accompanying financial statements.

The $660,492 reserve for loss on liquidation represents merger related
costs incurred by the Company of approximately $247,000, cash operating losses
incurred from July 1, 1996 to the Closing Date of approximately $178,000,
estimated costs to be incurred during the three month liquidation period of
approximately $105,000, and severance pay of approximately $130,000. The amount
has been included in loss on liquidation in the accompanying statements of
activities in liquidation. The loss on liquidation also includes certain
provisions made to restate the net assets as of June 30, 1996 at their estimated
realizable values. These provisions primarily include adjustments to
inventories, prepaid expenses, furniture and equipment, and licensing fees.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. CASH AND CASH EQUIVALENTS

The Company considers cash equivalents to be short-term, highly liquid
investments that are both readily convertible to known amounts of cash, and are
so near their maturity that they present insignificant risk of changes in value
because of changes in interest rates. Cash equivalents include money market
funds and are carried at market which equals cost.

Cash and cash equivalents are exposed to concentrations of credit risk. The
Company has placed approximately $2,109,000 in high quality securities within
one institution and one account.

B. INVENTORIES

Inventories are carried at the lower of invoiced cost (first-in, first-out)
or market and consist of finished goods and raw materials/supplies of $110,012
and $165,019, respectively.

C. REVENUE RECOGNITION

The Company recognizes revenue upon shipment of goods.

D. STATEMENT OF CASH FLOWS

The Company prepares its 1995 statement of cash flows using the indirect
method as defined under Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows." Required cash and non-cash transaction disclosures
are as follows:

During fiscal year 1995, the Company made cash payments of $40,444 and $800
for interest and income taxes, respectively.

In December 1994, the Company issued 33,333 shares of its common stock in
exchange for a $100,000 reduction in debt.

E. SHAREHOLDER NOTE PAYABLE AND DEFERRED FINANCING COSTS

In February 1994, the Company borrowed $500,000 from Frost Nevada Limited
Partnership. On December 30, 1994, the Company issued 33,333 shares of its
common stock valued at $133,333 ($4.00 per share) in exchange for a $100,000
reduction in the principal amount. The exchange resulted in an extraordinary
loss of $37,281. The loss includes amortization of deferred financing costs of
$3,948. During

F-27
<PAGE> 65

ZANART ENTERTAINMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

fiscal year 1995, the Company incurred interest expense of $40,444 in connection
with the above shareholder note payable.

In connection with the original $500,000 loan above and certain related
consulting services rendered, 762,500 shares of the Company's common stock was
issued in 1994. The market value of the shares were $111,782 and were recorded
as deferred financing costs. During fiscal year 1995, the then remaining
unamortized deferred financing costs of $69,216 were amortized with $65,268
included in interest expense and $3,948 included in the extraordinary loss from
early extinguishment of debt in the accompanying statement of operations.

F. USE OF ESTIMATES

The preparation of financial statements requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the recorded amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

G. FAIR VALUE OF FINANCIAL INSTRUMENTS

All financial instrument carrying amounts approximate fair value because of
their short maturity or they bear interest at a reasonable rate.

H. LOSS PER COMMON SHARE

Loss per common share is based upon the pro forma weighted average number
of common shares outstanding assuming the Merger with Continucare (see Note 1)
had been completed as of February 12, 1996, the date Continucare began
operations. Loss per common share information for 1995 has not been provided
because the historical financial statement after the Merger are exclusively
those of Continucare.

Common stock equivalents have not been included as the Company's average
market common share price for 1996, as of June 30, 1996, and for the three
months ended June 30, 1996 have all been below the exercise price of all issued
and outstanding options and warrants.

I. NEW FINANCIAL ACCOUNTING PRONOUNCEMENTS

The requirements of the Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, issued in October 1995 and Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation, issued
in October 1995, are effective for financial statements for years that begin
after December 15, 1995. These new standards will be implemented in fiscal year
1997 and the effect of the new financial accounting pronouncements are expected
to be immaterial.

3. SIGNIFICANT CUSTOMERS

The Company's largest customer (Warner Bros. Inc.) represents approximately
54 and 47 percent of sales for fiscal year 1996 and 1995, respectively. The
Company's second largest customer (Musicland Group, Inc.) represents
approximately 11 and 10 percent of sales for fiscal year 1996 and 1995. No other
customers represented 10 percent or more of sales in fiscal years 1996 and 1995.
The Company's sales are primarily distributed throughout the United States to a
diversified customer base. However, a substantial portion of its debtors'
abilities to honor their contracts is dependent on the entertainment economic
sector.

F-28

<PAGE> 66

ZANART ENTERTAINMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. RELATED PARTY TRANSACTIONS

The Company rents space from one of its suppliers (the Supplier, who is
also a minority shareholder) under a month-to-month operating lease agreement.
For the fiscal years ended June 30, 1996 and 1995, rent expense was
approximately $10,000 and $17,000, respectively.

Company net purchases from the above Supplier/Shareholder totaled
$1,018,815 and $472,088 for the years ended June 30, 1996 and 1995,
respectively. Accounts payable due to the Supplier was $207,990 at June 30,
1996.

5. INCOME TAXES

The Company accounts for income taxes under the Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes". Under
SFAS 109, deferred income tax assets or liabilities are computed based on the
temporary difference between the financial statement and income tax basis of
assets and liabilities using the enacted marginal income tax rate in effect for
the year in which the difference are expected to reverse. Deferred income tax
expenses or credits are based on the changes in the deferred income tax asset or
liabilities from period to period.

As of June 30, 1996 the Company had approximately $1,748,000 and $1,690,000
of federal and state net operating loss carryforwards, respectively. Other
deferred tax assets primarily related to certain allowances made for doubtful
accounts and inventories, and the provision recorded (totaling $1,058,931) to
restate net assets at their net realizable value (see Note 1).

Pursuant to Internal Revenue Service code section 382 (Section 382(c)), a
company that is acquired must maintain operations for two years after the
purchase. Otherwise the acquired company's previously existing net operating
loss carryforwards, and deferred assets and liabilities are unavailable to the
acquiring company.

Based on Section 382(c), the Liquidation, and SFAS 109, the Company has
recorded valuation allowances against the realization of its deferred tax
assets. It is this valuation allowance that is primarily the reconciling
difference between the expected income tax provision at the statutory federal
income tax rate and the actual provision incurred.

The provision for state income taxes of $800 for the fiscal years ended
June 30, 1996 and 1995, respectively, consist only of the current state
provision.

6. CONSULTING AGREEMENT

During May and August 1994, the Company entered into consulting agreements
with two unrelated individuals. Under the agreements, the Company has granted
each individual an option to acquire 10,000 shares of the Company's common stock
at a price of $6.00 per share. These options vest and are exercisable at the
rate of 2,500 shares per year and are conditioned upon, among other things, the
individuals continuing as a consultant to the Company. During July 1996, one of
the above consultants was appointed to the Board of Directors. As a result, an
additional 2,500 shares are to vest on the Closing Date. The exercise period was
extended to October 31, 1998 for the above options in connection with the
Merger.

7. EMPLOYMENT AGREEMENTS

During fiscal year 1995, the Company entered into three year employment
agreements with four of its executive officers (Thomas Zotos, Robert Stein, Mark
Politi and Todd Slayton). In April 1996, Mark Politi resigned. Pursuant to the
employment agreements, each individual will receive an annual base salary
ranging from $60,000 to $75,000. A signing bonus of $20,000 was paid to Mr.
Zotos in July 1994. Upon the completion of the public offering, the executives
received additional compensation totaling $70,000. Additionally, these

F-29
<PAGE> 67

ZANART ENTERTAINMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

individuals agree not to compete with the Company and solicit employees and
customers from the Company during the term of the agreements and for one year
thereafter. If at any time during the term of the agreements, a change of
ownership of at least more than 50 percent of the outstanding voting shares of
the Company occurs along with other defined events, the employee has the option
to terminate his agreement at which time the Company is obligated to pay to the
employee a lump sum equal to two times the present value of his remaining
financial entitlements under the agreement.

Pursuant to the employee agreements entered into during fiscal year 1995,
the Company granted two executives an option to acquire a total of 62,500 shares
of the Company's common stock at a purchase price of $6.00 per share. Option
shares vest and are exercisable over a three year period. Due to the resignation
of an officer above, an option to acquire a total of 37,500 shares was
terminated. Pursuant to an amendment to the employment agreements in connection
with the Merger, the other option has been extended to October 31, 1998 and the
remaining unvested portion of 8,333 shares is to vest on October 31, 1996. The
amendment also provides for an additional option to acquire 20,000 shares of the
Company's common stock at the closing market price at the day before the Closing
Date ($8.25). The option is fully vested and expires October 31, 1998.

As a result of the Merger, the officers entered into amendments to their
employment agreements. Pursuant to the amendments, the executives resigned as
officers and are to continue as employees through the three month liquidation
period. At the end of which, each former officer is to receive severance
compensation equal to six months of salary. The not to compete clauses and the
compensation due upon the change in control provisions have been waived. The
Company's rights (prior to the Merger) in its fixed assets, a licensing
agreement, and the Company's name, logo and trademarks are to be jointly
assigned to two of the former officers at no cost to the officers. The carrying
values as of June 30, 1996 of the assets to be assigned of approximately $49,000
have been charged to loss on liquidation in the accompanying statement of
activities in liquidation.

Minimum payments required in fiscal 1997 under the three remaining
employment agreements are approximately $207,000.

8. OPTIONS AND WARRANTS

The Company entered into an agreement on December 7, 1994 to sell 25,000
shares of its common stock for $4.00 per share to an unrelated party. The
purchaser also receives an option to acquire an additional 25,000 shares of
common stock, subject to an anti-dilution covenant as defined in the agreement,
at a purchase price of $4.00 per share. The option shares may be exercised in
whole or in part at any time or from time to time for five years ending December
1999.

In connection with the public offering, the underwriters were issued 80,000
representative units. Each representative unit entitles the holder to purchase
one share of common stock and a warrant to purchase a share of common stock each
for $7.50. The warrants vest and are exercisable over a four year period
starting one year from the public offering. The representative units were issued
for $160.

In December 1995, the Company's shareholders approved the 1995 Stock Option
Plan (the Plan). Under the Plan, a maximum of 360,000 shares of the Company's
common stock may be issued at an exercise price equal to not less than the fair
market value of the Company's common stock on the date of the grant. The Plan
provides for the issuance of incentive stock options to employees of the Company
and non-qualified stock options to employees, directors, independent contractors
and agents of the Company. In December 1995, two options to purchase 2,500
common shares each at $5.25 a share was granted to the non-employer directors of
the Company. The options vest immediately and are exercisable with no expiration
date. The Plan was terminated subsequent to year end as a condition to the
Merger.

F-30
<PAGE> 68

ZANART ENTERTAINMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of all options and warrants granted to acquire
the Company's common stock as of June 30, 1996.

<TABLE>
<CAPTION>
SHARES SHARES SHARES
GRANTED VESTED EXERCISED
- --------- --------- ---------
<S> <C> <C>
1,405,000 1,389,167 --
</TABLE>

The following is a summary of all options and warrants granted to acquire
the Company's common stock as of the Closing Date.

<TABLE>
<CAPTION>
SHARES SHARES SHARES
GRANTED VESTED EXERCISED
- --------- --------- ---------
<S> <C> <C>
1,425,000 1,414,167 --
</TABLE>

Of the 10,833 unvested shares as of the Closing Date, 8,333 shares will
vest on October 31, 1996 and the remainder will be canceled in accordance with
the Agreement.

9. COMMITMENTS AND CONTINGENCIES

The Xuma registration statement declared effective by the U.S. Securities
and Exchange Commission on March 31, 1988 contained disclosures that management
of the Company would not consider acquiring a business opportunity in which its
management had a five percent or greater equity interest unless the Company
first received from an independent, qualified business appraiser an opinion that
the acquisition was fair and reasonable to the shareholders. At the time Xuma
merged with Zanart in March 1990, Zanart was controlled by a member of Xuma's
management. Neither an affiliation notice nor a business appraisal were obtained
and delivered to the shareholders. Management of Xuma determined a business
appraisal was not needed as there were no significant operating or intangible
assets in Zanart at the date of the merger. However, Zanart was in the process
of obtaining license agreements to commence principal operations and securing
the services of its current Chief Executive Officer, Mr. Zotos (who has
significant experience in the entertainment licensing properties business) to
become an employee of the Company to manage the Company's operations. The shares
of common stock outstanding as of the date of the Zanart merger, net of shares
held by current and past officers and directors, totaled 51,400 or 6 percent of
the total outstanding shares after the merger (11 percent of pre-merger
outstanding shares).

Additionally, due to a ministerial error, the Xuma registration statement
contained as an exhibit Articles of Incorporation (Disclosed Articles) that were
different from the actual Articles of Incorporation (Actual Articles) filed by
the Company on August 4, 1986. The primary difference between the two sets of
articles was that the Actual Articles contained provisions granting shareholders
preemptive rights. Accordingly, it is possible that certain shareholders of the
Company could assert that they had preemptive rights to acquire certain
Company's securities and that certain issuance's of the Company's securities
were made in violation of such rights. In February 1994, the Company restated
its Articles of Incorporation eliminating preemptive rights originally granted
to shareholders. Accordingly, shareholders dissenting to this action can enforce
recession rights thereby requiring the Company to pay them the fair value of
their shares at the date of the restatement of the articles. The number of
shares of common stock which may still assert either preemptive or dissenters
rights as a result of these actions, net of shares held by current and past
officers and directors, totaled 63,400 shares.

Based upon the closely controlled nature of the Company, the passage of
time and lack of damages incurred relating to the merger as well as the limited
number of securities issuance's and shareholders possessing either preemptive or
rescission rights, Company management is of the belief, based in part on
discussions with legal counsel, that these items would not, individually or in
the aggregate, have a material adverse effect on the Company.

F-31

<PAGE> 69

ZANART ENTERTAINMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. PRO FORMA INFORMATION (UNAUDITED)

The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 1996 has been prepared by adjusting Continucare's historical
condensed consolidated balance sheet as of June 30, 1996. As Zanart's operations
will be discontinued, no pro forma statement of income is presented as the
Merger would have no material effect on the historical operations of Continucare
had the Merger occurred on February 12, 1996 (Inception). The historical balance
sheet has been adjusted to give effect to the merger as if the Merger had
occurred as of June 30, 1996.

The pro forma unaudited condensed consolidated balance sheet presented
herein does not purport to be indicative of the actual financial position of the
Continucare had the Merger actually been consummated on June 30, 1996, or of the
future financial position of Continucare which will result from the consummation
of the Merger.

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
CONTINUCARE ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................ $ 819,000 $ (375,000)(1) $ 8,544,000
6,500,000(3)
1,600,000(4)
Accounts receivable.................................. 1,968,100 -- 1,968,100
Prepaid expenses and other current assets............ 1,000 -- 1,000
---------- ---------- -----------
Total current assets......................... 2,788,100 7,725,000 10,513,100
---------- ---------- -----------
PROPERTY AND EQUIPMENT................................. 5,000 -- 5,000
OTHER ASSETS........................................... 72,000 -- 72,000
---------- ---------- -----------
TOTAL ASSETS........................................... $ 2,865,100 $ 7,725,000 $10,950,100
========== ========== ===========
CURRENT LIABILITIES:
Accounts payable and accrued expenses................ $ 356,000 -- $ 356,000
Income and other taxes payable....................... 413,000 -- 413,000
---------- ---------- -----------
Total current liabilities.................... 769,000 -- 769,000
NOTES PAYABLE.......................................... 655,000 -- 655,000
---------- ---------- -----------
TOTAL LIABILITIES...................................... 1,424,000 -- 1,424,000
MINORITY INTEREST...................................... 33,000 -- 33,000
---------- ---------- -----------
SHAREHOLDERS' EQUITY(6):
Common stock......................................... 100 (25)(1) 1,140
425(2)
330(3)
290(4)
20(5)
Additional paid-in capital........................... 764,000 (374,975)(1) 8,488,250
(425)(2)
6,499,670(3)
1,599,710(4)
(20)(5)
Retained earnings...................................... 644,000 -- 644,000
---------- ---------- -----------
Total shareholders' equity................... 1,408,100 7,725,000 9,133,100
---------- ---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY... $ 2,865,100 $ 7,725,000 $10,590,100
========== ========== ===========
</TABLE>

F-32
<PAGE> 70

ZANART ENTERTAINMENT INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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

(1) To record the repurchase of the common stock of a 25 percent former
shareholder of Continucare during August 1996 for $375,000.
(2) To record the issuance of 4,999,925 shares of Continucare common stock in
connection with a 66,667 to one stock split effected during August 1996.
Prior to the stock split, Continucare amended its Articles of Incorporation
to increase its authorized common shares to 10,000,000 par value $.0001.
(3) To record the proceeds from a private placement of 3,300,000 shares of
Continucare common stock at $2.00 a share completed during August 1996, net
of estimated costs of $100,000.
(4) To record (i) the cancellation 8,300,000 shares of Continucare common stock
issued and outstanding; (ii) the issuance of 8,300,000 shares of Zanart
common stock to Continucare shareholders, representing the conversion of
each share of Continucare into one share of Zanart common stock, based on
the Agreement; (iii) 2,902,983 shares of Zanart common stock issued and
outstanding as of the date of the Agreement; and (iv) Zanart's net assets
acquired in the Merger consisting of $1,600,000 in cash.
(5) To record the issuance of an additional 200,000 shares at $.0001 par value
(see Note 1).
(6) Historical and pro forma earnings per share for Continucare for the period
from February 12, 1996 (Inception) through June 30, 1996 are calculated as
follows:

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
JUNE 30, 1996 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Income from Continucare operations.................. $ 1,033,000 $ 1,033,000
========== ===========
Net income.......................................... $ 644,609 $ 644,609
========== ===========
Number of shares outstanding:
Continucare:
Historical -- (giving effect to stock split)... 6,666,667 6,666,667
Net increase after stock repurchase and private
placement.................................... -- 1,633,333
Zanart merger (after the issuance of additional
200,000 shares)................................ -- 3,102,983
---------- -----------
6,666,667 11,402,983
========== ===========
Earnings per share (EPS)............................ $ 0.10 $ 0.06
========== ===========
</TABLE>

As discussed in Note 1, the above pro forma earnings per share (EPS)
calculation excludes issued and outstanding options and warrants. However,
assuming that the Merger took place at Continucare's inception, the pro
forma weighted average number of shares outstanding (including options and
warrants under the treasure stock method) would increase by approximately
420,000 shares resulting in a reduction in EPS to $0.05 per share.

F-33

<PAGE> 71

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

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND
ANY INFORMATION OR REPRESENTATION NOT CONTAINED OR INCORPORATED HEREIN 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 AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SHARES DESCRIBED IN THE COVER PAGE HEREOF, OR AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

-------------------------
===============================================================================

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

530,000 SHARES

CONTINUCARE CORPORATION

COMMON STOCK

-------------------------
PROSPECTUS
-------------------------

November __, 1996

==============================================================================
<PAGE> 72

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided for in such statute. The Registrant's Amended and Restated Articles of
Incorporation provide that the Registrant shall indemnify and may insure its
officers and directors to the fullest extent permitted by law.

The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of criminal
laws, unless the director had reasonable cause to believe his conduct was lawful
or had no reasonable cause to believe his conduct was unlawful, (b) deriving an
improper personal benefit from a transaction, (c) voting for or assenting to an
unlawful distribution and (d) willful misconduct or conscious disregard for the
best interests of the Registrant in a proceeding by or in the right of the
Registrant to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the federal securities laws. The
effect of the foregoing is to require the Registrant to indemnify the officers
and directors of the Registrant for any claim arising against such persons in
their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed 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 suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered
hereunder, 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.

Item 25. Other Expenses of Issuance and Distribution.

The Registrant estimates that its expenses in connection with the
offering described in this registration statement will be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee . . . . . . . . . . . . . . . . . . . . $ 1,149
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$66,149
=======
</TABLE>

II-1
<PAGE> 73

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

Prior to the Merger, Continucare Corporation effectuated the private
sale of an aggregate of 3,300,000 shares of pre-Merger Continucare common stock
which was completed on August 29, 1996 (the "Private Offering"). Such shares
were issued in accordance with the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, as a transaction not involving a public
offering. The aggregate dollar amount raised from the Private Offering was
$6,600,000. No commissions or discounts were given in connection with the
Private Offering.

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 The Registrant's Articles of Incorporation (Exhibit 3.1) (1)

3.2 The Registrant's Bylaws (incorporated by reference from the
Registrant's Registration Statement on Form SB-2, Securities Act File
No. 33-88580, filed with the Commission on January 17, 1995).

4.1 Form of certificate evidencing shares of Common Stock (Exhibit 4.1) (1)

4.2 Form of Series A Warrant (Exhibit 4.2) (1)

5 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.

10.1 Employment Agreement between the Company and Charles M. Fernandez
dated as of September 11, 1996.
(Incorporated by reference from the Registrant's Form 10-KSB filed
with the Commission on September 30, 1996)

10.2 Employment Agreement between the Company and Susan Tarbe dated as of
September 23, 1996. (Incorporated by reference from the Registrant's
Form 10-KSB/A filed with the Commission on October 17, 1996)

10.3 Consulting Agreement between the Registrant and Barry Goldstein dated
September 11, 1996

10.4 Consulting Agreement between the Registrant and Douglas Miller dated
September 11, 1996

23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
(included in its opinion in Exhibit 5)

23.2 Consent of Deloitte & Touche LLP

23.3 Consent of Arthur Andersen LLP

24 Reference is made to the Signatures section of this Registration
Statement for the Power of Attorney contained therein
</TABLE>

(1) Incorporated by reference from the indicated exhibit to the
Registrant's Post Effective Amendment No. 1 to Registration
Statement on Form SB-2 on Form S-3 filed with the Commission
on October 29, 1996.

ITEM 28. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the
Securities Act 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 by such
director, officer or controlling person in connection with the securities being

II-2
<PAGE> 74

registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of 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.

II-3
<PAGE> 75

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Miami, State of Florida on this 22nd day of November,
1996.

CONTINUCARE CORPORATION

By:/s/Charles M. Fernandez
--------------------------------------------------
Charles M. Fernandez,
Chairman, Chief Executive Officer and President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Charles M. Fernandez his true and
lawful attorney-in-fact, who acting alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments, including any post-effective
amendments, to this Registration Statement, and to file the same, with exhibits
thereto, and other documents to be filed in connection therewith, including any
registration statement pursuant to Rule 462 under the Securities Act, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney- in-fact or his substitute, acting alone, may lawfully do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles M. Fernandez Chairman, Chief Executive November 22, 1996
------------------------------------- Officer and President (Principal
Charles M. Fernandez Executive Officer)

/s/ Phillip Frost, M.D. Vice Chairman November 22, 1996
-------------------------------------
Phillip Frost, M.D.

/s/ Susan Tarbe Executive Vice President and November 22, 1996
------------------------------------- General Counsel
Susan Tarbe

/s/ Maria T. Sosa Chief Accounting Officer November 22, 1996
------------------------------------- (Principal Accounting Officer)
Maria T. Sosa

/s/ Arthur M. Goldberg Director November 22, 1996
-------------------------------------
Arthur M. Goldberg

/s/ Richard Frost Director November 22, 1996
-------------------------------------
Richard Frost

/s/ Mark Hanna Director November 22, 1996
-------------------------------------
Mark Hanna

/s/ Michael Piercey, M.D. Director November 22, 1996
-------------------------------------
Michael Piercey, M.D.
</TABLE>

II-3

<PAGE> 1
EXHIBIT 5

November 25, 1996

Continucare Corporation
100 Southeast Second Street
Miami, Florida 33131

Re: Registration Statement on Form SB-2

Ladies and Gentlemen:

On the date hereof, Continucare Corporation, a Florida corporation (the
"Company"), sent for filing with the Securities and Exchange Commission a
Registration Statement on Form SB-2 (the "Registration Statement"), under the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to (i) the sale by the Company of up to 80,000 Representative Units (the
"Representative Units") upon the exercise of those certain Representative Unit
Purchase Options (the "RUPOs"), (ii) the sale by the Company of up to 80,000
shares of Common Stock, par value $.0001 per share (the "Common Stock"), and up
to 80,000 Representative Warrants (the "Representative Warrants") upon the
exercise of the Representative Units, (iii) the sale by the Company of up to
80,000 shares of Common Stock upon the exercise of the Representative Warrants
and (iv) the sale by certain selling shareholders of up to 370,000 shares of
Common Stock subsequent to the exercise of those certain outstanding options
identified in the Registration Statement (the "Options"). We have acted as
special counsel to the Company in connection with the preparation and filing of
the Registration Statement.

In connection therewith, we have examined and relied upon the original
or a copy, certified to our satisfaction, of (i) the Articles of Incorporation
and the Bylaws of the Company; (ii) actions of the Board of Directors of the
Company authorizing the offering and the preparation of the Registration
Statement and related matters; (iii) the Registration Statement and exhibits
thereto; and (iv) such other documents and instruments as we have deemed
necessary for the expression of opinions herein contained. In making the
foregoing examinations, we have assumed the genuineness of all signatures and
the authenticity of all documents submitted to us as originals, and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies. As to various questions of fact material to this opinion,
we have relied, to the extent we deem reasonably appropriate, upon
representations or certificates of officers or directors of the Company and upon
documents, records and instruments furnished to us by the Company, without
independently checking or verifying the accuracy of such

<PAGE> 2

Continucare Corporation
November 25, 1996
Page 2
- ------------------------------

documents, records and instruments.

Based upon the foregoing examination, we are of the opinion that the
Company presently has available (i) at least 80,000 authorized and unissued
Representative Units to be sold pursuant to the RUPOs, (ii) at least 530,000
shares of authorized and unissued shares of Common Stock from which the 530,000
shares of Common Stock proposed to be sold pursuant to the exercise of the
Representative Units, Representative Warrants and/or Options may be issued and
(iii) at least 80,000 authorized and unissued Representative Warrants to be sold
pursuant to the Representative Units. In addition, assuming that the Company
maintains an adequate number of authorized but unissued Representative Units,
shares of Common Stock and Representative Warrants available for issuance to
those persons who exercise their RUPOs, Representative Units, Representative
Warrants and/or Options, and that the consideration for the underlying
Representative Units, shares of Common Stock and/or Representative Warrants
issued pursuant to such securities is actually received by the Company, we are
of the opinion that the Representative Units, Common Stock and Representative
Warrants issued pursuant to the exercise of the RUPOs, Representative Units,
Representative Warrants and/or Options will be duly authorized and validly
issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
of the Commission thereunder.

Sincerely,

GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.

<PAGE> 1
EXHIBIT 10.4

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as of
the 11th day of September, 1996, to be effective as of September 11, 1996,
(the "effective" date) by and between Continucare Corporation, a Florida
corporation ("Company"), and Business Development Resources, Inc., a Florida
corporation (the "Consultant").

RECITALS

A. The Board of Directors of the Company (the "Board") believes
that the Consultant can contribute its expertise and services to the growth and
success of the Company.

B. The Board has determined that this Consulting Agreement will
reinforce and encourage the Consultant's devotion of its expertise and services
to the Company.

C. The Consultant is willing to make its services and expertise
available to the Company on the terms and conditions hereinafter set forth.

D. In consideration for this Agreement, and as a material
inducement for the Company to enter into this Agreement, and as part of the
merger of the Company, Consultant is willing to enter into certain restrictions
regarding the ownership of stock in the Company as hereinafter set forth.

AGREEMENT

NOW, THEREFORE, it is agreed as follows:

1. Appointment of Consultant; Supervision. The Company appoints
the Consultant and the Consultant accepts appointment upon the terms and
subject to the conditions provided in this Agreement as a consultant to the
Company's business, including any other corporations or other entities
hereafter formed or acquired by the Company to engage in such business. The
activities of the Consultant to be performed under this Agreement shall be
subject to the supervision of the Chairman of the Board and the Board and the
policies of the Board in effect from time to time.

2. Duties of Consultant. The Consultant shall render consulting
services to the Company as reasonably requested by the Company and as agreed to
by the Consultant from time to time with respect to business development and
acquisitions. The Consultant shall render its services in adherence to the
Compliance Program of the Company and all applicable state and federal laws.
The Consultant shall make periodic reports to the Board and senior management
of the Company with respect to the consulting services provided hereunder. The
Consultant shall (i) give the Company the benefit of its special knowledge,
skill, contacts and business expertise, (ii) keep reasonably informed as to the
operations of the Company's business, and (iii) promote the Company's financial
welfare.

2.1 Performance of Duties of Consultant. All services performed by
Consultant shall be performed by Barry Goldstein, or a designee approved in
writing by the Company, prior to the appointment of such designee.

have the right to be employed by or render consulting services to other
persons, or engage in the business of consulting for its own account, so long
as it does not compete with the business of the Company.

4. Reimbursement of Expenses; Independent Contractor. The
Company agrees to provide appropriate office space to the Consultant at a
location in South Florida chosen by the Company. All expenses incurred by the
Consultant in the performance of its duties under and during the term of this
Agreement shall be for the account of, on behalf of, and at the expense of, the
Company only if approved in writing by the Company prior to the time that the
expenses are incurred. The Consultant shall not be obligated to make any
advances to or for the account of the Company or to pay any sums nor shall the
Consultant be obligated to incur any liability or obligation for the account of
the Company. The Consultant shall be an independent contractor, and nothing
contained in this Agreement shall be deemed or construed to (i) create a
partnership or joint venture between the Company or any of its Affiliates and
the Consultant or any of his Affiliates, or (ii) constitute the Consultant as
an employee, officer or agent of the Company or any other entity. The
Consultant agrees to file all tax returns and pay all taxes arising out of his
payments pursuant to this Agreement and to indemnify the Company for any
failure on his part to do so.

5. Consulting Fee. As compensation for the services to be
performed hereunder, the Company shall pay the Consultant, semi-monthly, at a
rate of Three Hundred Thirty-Two Thousand and No/Cents Dollars [$332,000.00]
per annum.

5.1 Cost of Living Increase. Commencing September 11, 1997, and
each Anniversary Date thereafter during the Term, the Consulting Fee shall be
increased, but shall not be decreased, by that percentage by which the Consumer
price Index (All Items less Shelter), Urban Wage earners and Clerical Workers,
for the Miami, Florida area published by the United States government (the
"Index") for the immediately preceding calendar year exceeds such Index for the
next preceding calendar year. If publication of the Index is discontinued, the
parties hereto shall accept comparable statistics on the cost of living for the
Miami, Florida area as computed and published by an agency of the United States
government or, if no such agency computes and publishes such statistics, by any
regularly published national financial periodical that does compute and publish
such statistics.

6. Term. This Agreement shall commence as of the Effective Date
and shall remain in effect for a period of three (3) years from the Initial
Term. Upon termination of this Agreement, all materials in the Consultant's
possession which contain Confidential Information (as defined in Section 7
below), and all other materials or equipment of the Consultant, shall be
returned to the Company, whether or not such Confidential Information or other
materials or equipment were developed by the Company or by the Consultant in
connection with the performance of his services hereunder.

6.1 Renewal. The Company agrees to give Consultant ninety (90)
days notice prior to renewal of this agreement.

7. Protection of Confidential Information; Non-Competition. The
Consultant agrees that his services hereunder are of a special, unique,
extraordinary and intellectual character, and his position with the Company
places the Consultant in a position of confidence and trust with partners,
customers, suppliers and consultants of the Company. The Consultant further
acknowledges that the performance of the Consultant's duties and
responsibilities under this Agreement may require the disclosure to the
Consultant of confidential information and trade secrets of the Company (such
as, without limitation, strategies, projections, marketing plans, budgets and
policies). The Consultant and the Company agree that, in the course of
engagement hereunder, the Consultant will continue to develop a personal
relationship with the Company's partners, suppliers and customers and a
knowledge of such partners', suppliers' and customers' affairs and requirements
which may constitute the Company's primary and only contact with such partners,
suppliers or

-2-
<PAGE> 3

customers. The Consultant consequently agrees that it is reasonable and
necessary for the protection of the goodwill and business of the Company that
the Consultant make the covenants contained herein and that the covenants are
given as an integral part of and incident to the transactions contemplated by
this Agreement. Accordingly, the Consultant agrees as follows:

(a) Trade Secrets. The Consultant agrees not to reveal
to any person, association or company, or use or otherwise exploit for the
Consultant's own benefit or for the benefit of anyone other than the Company,
whether during or after the termination of the Consultant's duties as a
Consultant, any of the Confidential Information (as defined below) concerning
the organization, business or finances of the Company or any of its affiliates
so far as they have come or may come to the Consultant's knowledge at any time,
except as may be required in the ordinary course of performing the Consultant's
duties as a consultant of the Company, and the Consultant shall keep secret all
matters entrusted or known to the Consultant and shall not use or attempt to
use any such Confidential Information in any manner which may injure or cause
loss or may be calculated to injure or cause loss whether directly or
indirectly to the Company or its affiliates. "Confidential Information" shall
include, without limitation, any patent applications, "know-how," trade
secrets, customer lists, details of the Company's financial or other
information, consulting contracts, pricing policies, operational methods
specific to the Company, marketing plans or strategies specific to the Company,
product development techniques or plans, procurement and sales activities,
promotion and pricing techniques, credit, financial and other data concerning
customers, business acquisition plans or any portion or phase of any scientific
or technical information, ideas, discoveries, designs, computer programs
(including source or object codes), processes, procedures, formulas or
improvements of the Company, whether or not in written or tangible form, and
whether or not registered, and including all memoranda, notes, plans, reports,
records, documents and other evidence thereof.

(b) Non-Competition. While providing services as
described in this Agreement to the Company, and for a period of two years
following the termination of Consultant's Agreement hereunder, (other than a
termination without cause, as contemplated in Section 8.1 hereof), the
Consultant shall not, directly or indirectly, engage in or have any interest in
any sole proprietorship, partnership, corporation or business or any other
person or entity (whether as an employee, officer director, partner, agent
security holder, creditor, consultant or otherwise) that directly or indirectly
engages primarily in the healthcare business (the "Business") in competition
with the Company or its "affiliates" (as such term is defined in Rule 12b-2 as
promulgated under the Securities Exchange Act of 1934, as amended) or
otherwise similar to the business of the Company and its affiliates in Florida
or in any other state in which the Company and/or its affiliates are conducting
business at the time of termination.

(c) Equitable Relief. The Consultant agrees that the
restrictions contained in this Agreement, including this Section 7, are
reasonable and necessary protections of the legitimate interests of the
Company, that any breach of this Agreement by the Consultant could cause
irreparable damage to that in the event of such breach the Company shall have,
in addition to any and all remedies of law, the right to an injunction,
specific performance or other equitable relief to prevent the violation of the
Consultant's obligations hereunder without the necessity of posting a bond.

(d) Independent Covenant. The provisions of this Section
7 are deemed an independent agreement, valid consideration for which is
acknowledged and received by the Consultant, and will be enforceable regardless
of any breach by the Company of the provisions of this Agreement.

(e) Survival. The obligations of the Consultant under
this Section 7 shall survive the termination of this Agreement.

8. Termination.

8.1 Termination Without Cause By The Company. The Company shall
at all times have the right to terminate the Consultant's engagement without
cause upon 30 days' prior written notice to the Consultant; however, the
Company agrees to pay to the Consultant the remainder of its Consulting Fee,
consisting of the Initial Term, as described in Section 5, on a semi-monthly
basis through the end of the Initial Term.

-3-
<PAGE> 4

in connection with a felony; (iii) the association, directly or indirectly of
the Consultant, or Barry Goldstein, for his profit or financial benefit, with
any person, firm, partnership association, entity or corporation that competes
in any material way with the Company; (iv) the disclosing or using of any
material trade secret or confidential information of the Company at any time by
the Consultant except as required in connection with his duties to the Company;
(v) failure of the Consultant to adhere to the Compliance program of the
Company and all applicable state and federal laws (vi) Barry Goldstein fails to
own 100% of the outstanding shares of the Consultant with anyone other than
Patricia Goldstein, (vii) the death or catastrophic disability of Barry
Goldstein, or (viii) the breach by the Consultant of the terms and conditions
of this Agreement and the failure of the Consultant to cure such breach within
five (5) days written notice to the Consultant. Upon any termination pursuant
to this Section 8, the Consultant shall be entitled to the compensation
referred to in Section 5 above to the date of termination, and the Company
shall have no further liability hereunder, subject, however, to the provisions
of Section 4.

8.3 Termination By The Consultant. The Consultant shall, at all
times, have the right to terminate the Consultant's engagement hereunder upon
180 days' prior written notice to the Company. Upon any termination pursuant
to this Section 8.3, the Consultant shall be entitled to the compensation
referred to in Section 5 above to the date of termination, and the Company
shall have no further liability hereunder, subject however, to the provisions
of Section 4.

9. Severability. The parties hereby agree that each provision
herein shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively
broad as to scope, activity or subject so as to be unenforceable at law, such
provision or provisions shall be construed by the appropriate judicial body by
limiting and reducing it or them, so as to be enforceable to the extent
compatible with the applicable law as it shall then be in effect.

10. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.

11. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original but all of which shall constitute
but one and the same instrument. One or more counterparts of this Agreement
may be delivered via telecopier, with the intention that they shall have the
same effect as an original counterpart hereof.

12. Assignment. Consultant may not assign, transfer, pledge,
encumber or otherwise dispose of this Agreement or any of its respective rights
or obligations hereunder, without the written consent of the Company which may
be denied in the absolute discretion of the Company. This Agreement shall
inure to the benefit of the Company and its successors and assigns and persons
acquiring, whether by merger, consolidation, purchase of assets or stock or
otherwise, all or substantially all of the Company's assets.

13. Amendment; Entire Agreement. This Agreement may not be
changed orally but only by an agreement in writing making specific reference to
this Agreement and agreed to by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought. This Agreement
embodies the entire agreement and understanding of the parties hereto
concerning the subject matter of this Agreement, and supersedes and replaces
all prior agreements and replaces all prior agreements, understandings and
commitments with respect to such subject matter.

14. Litigation. All disputes arising in connection with this
Agreement shall be finally settled under the Rules of the American Arbitration
Association (the "Rules") by three (3) arbitrators appointed in accordance with
said Rules. Any such arbitration shall be held pursuant to the laws of the
State of Florida unless the parties hereto mutually agree in writing upon some
other location for arbitration. The arbitrators shall not be empowered to
award punitive, exemplary and/or consequential damages to any party. There
shall be no consolidation of this arbitration with any other dispute or
proceeding involving third parties. The provisions of this Agreement shall
prevail in case of inconsistency between the Rules and this Agreement.

15. Stock. As further consideration for the company's appointment
of the Consultant, the Consultant agrees that Barry Goldstein will not sell an
amount of stock of the Company in excess of eighty thousand (80,000) shares
within any thirty (30) day period of time. If Company is sold, merged or upon
a change of control, or subsequent public offering, Barry Goldstein will be
subject to the same rights and restrictions as a founding shareholder or insider
under SEC rules.

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<PAGE> 5

16. Notices. All notices, demands, consents, approvals and
requests given by either party to the other hereunder shall be in writing and
shall be personally delivered or sent by registered or certified mail, return
receipt requested, postage prepaid, to the parties at the following addresses:

If to the Company: If to the Consultant:
Continucare Corporation Barry Goldstein
100 Southeast Second Street 1900 N. E. 211 Street
Miami, FL 33131 North Miami Beach, FL 33179

Any party may at any time change its or his respective address by sending
written notice to the other party of the change in the manner hereinabove
prescribed.

17. Access to Records. In the event any governmental agency or
its duly authorized representative is entitled to access to any books,
documents, papers and records of the Consultant involving transactions
pertaining to this Agreement, the Consultant agrees to make the same available
for inspection in accordance with the terms and requirements of applicable laws
and regulations.

18. Indemnification. The Consultant agrees to indemnify and
hold the Company harmless from any claims, liabilities, judgments, losses,
costs, penalties, damages and expenses (including reasonable attorneys' fees)
suffered or incurred by the Company as a result of the services provided by the
Consultant hereunder (the "Damages"). The Company shall have the right to
offset the Damages against the payments due to the Consultant hereunder.

19. Attorneys' Fees. In the event that a suit for the
collection of any damages resulting from or for the injunction of any action
constituting a breach of any of the terms or provisions of this Agreement, then
the prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the non-prevailing party.

20. Non Waiver. The failure by any party to exercise any
right, remedy or elections herein contained or permitted by law shall not
constitute or be construed as a waiver or relinquishment for the future
exercise of such right, remedy or election, but the same shall continue and
remain in full force and effect.

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<PAGE> 6

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

CONTINUCARE CORPORATION

By /s/ Charles M. Fernandez
--------------------------------------
Charles M. Fernandez
Chief Executive Officer
Continucare Corporation

By /s/ Barry Goldstein By /s/ Barry Goldstein
---------------------------------- --------------------------------------
Barry Goldstein, Barry Goldstein
Personally as to Section 15, Stock President
----- Business Development Resources

-6-

<PAGE> 1
EXHIBIT 10.5

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as of
the 11th day of September, 1996, to be effective as of September 11, 1996,
(the "effective" date) by and between Continucare Corporation, a Florida
corporation ("Company"), and Operational Consultants, Inc., a Florida
Corporation (the "Consultant").

Recitals

A. The Board of Directors of the Company (the "Board") believes
that the Consultant can contribute its expertise and services to the growth and
success of the Company.

B. The Board has determined that this Consulting Agreement will
reinforce and encourage the Consultant's devotion of its expertise and services
to the Company.

C. The Consultant is willing to make its services and expertise
available to the Company on the terms and conditions hereinafter set forth.

D. In consideration for this Agreement, and as part of the merger
of the Company, Consultant is willing to enter into certain restrictions
regarding the ownership of stock in the Company as hereinafter set forth.

AGREEMENT

NOW, THEREFORE, it is agreed as follows:

2. Duties of Consultant. The Consultant shall render consulting
services to the Company as reasonably requested by the Company and as agreed to
by the Consultant from time to time with respect to overall operational
oversight of clinical, marketing, community outreach, and
facility/program-based financial management. The Consultant shall render its
services in adherence to the Compliance Program of the Company and all
applicable state and federal laws. The Consultant shall make periodic reports
to the Board and senior management of the Company with respect to the
consulting services provided hereunder. The Consultant shall (i) give the
Company the benefit of its special knowledge, skill, contacts and business
expertise, (ii) keep reasonably informed as to the operations of the Company's
business, and (iii) promote the Company's financial welfare.

2.1 Performance of Duties of Consultant. All services
performed by Consultant shall be performed by Douglas Miller, or a designee
approved in writing by the Company, prior to the appointment of such designee.

3. Other Terms and Benefits. The Company acknowledges and agrees
that (i) the Consultant shall devote as much time as requested by the Company
to the affairs of the Company in accordance with Section 2 and (ii) subject to
material compliance with the provisions of this Agreement, the Consultant shall
have the right to be employed by or render consulting services to other
persons, or engage in the business of consulting for its own account, so long
as it does not compete with the business of the Company.

4. Reimbursement of Expenses; Independent Contractor. The
Company agrees to provide appropriate office space to the Consultant. All
expenses incurred by the Consultant in the performance of its duties under and
during the term of this Agreement shall be for the account of, on behalf of,
and at the expense of, the Company only if approved in writing by the Company
prior to the time that the expenses are
<PAGE> 2

incurred. The Consultant shall not be obligated to make any advances to or for
the account of the Company or to pay any sums nor shall the Consultant be
obligated to incur any liability or obligation for the account of the Company.
The Consultant shall be an independent contractor, and nothing contained in
this Agreement shall be deemed or construed to (i) create a partnership or
joint venture between the Company or any of its Affiliates and the Consultant
or any of his Affiliates, or (ii) constitute the Consultant as an employee,
officer or agent of the Company or any other entity. The Consultant agrees to
file all tax returns and pay all taxes arising out of his payments pursuant to
this Agreement and to indemnify the Company for any failure on his part to do
so.

5. Consulting Fee. As compensation for the services to be
performed hereunder, the Company shall pay the Consultant, semi-monthly, at a
rate of Three Hundred Twenty-Five Thousand and no/cents Dollars [$325,000] per
annum.

-2-
<PAGE> 3

(b) Non-Competition. While providing services as
described in this Agreement to the Company, and for a period of two years
following the termination of Consultant's Agreement hereunder, (other than a
termination without cause, as contemplated in Section 8.1 hereof) the
Consultant shall not, directly or indirectly, engage in or have any interest in
any sole proprietorship, partnership, corporation or business or any other
person or entity (whether as an employee, officer director, partner, agent
security holder, creditor, consultant or otherwise) that directly or indirectly
engages primarily in the healthcare business (the Business") in competition
with the Company or its "affiliates" (as such term is defined in Rule 12b-2 as
promulgated under the Securities Exchange Act of 1934, as amended) or otherwise
similar to the business of the Company and its affiliates in Florida or in any
other state in which the Company and/or its affiliates are conducting business
at the time of termination.

(e) Survival. The obligations of the Consultant under
this Section 7 shall survive the termination of this Agreement.

8. Termination.

8.2 Termination For Cause By The Consultant. The Company shall,
at all times, have the right upon written notice to the Consultant, to
terminate the Consultant's employment hereunder for "Cause" (as hereinafter
defined). For the purpose of this Agreement, the term "Cause" shall mean
subject to Section 2 of this Agreement (i) the willful failure or refusal of
the Consultant to perform the duties or render the services assigned to him
from time to time by the Company; (ii) the conviction of the Consultant, or
Douglas Miller, in connection with a felony; (iii) the association, directly
or indirectly of the Consultant, or Douglas Miller, for his profit or
financial benefit, with any person, firm, partnership association, entity or
corporation that competes in any material way with the Company; (iv) the
disclosing or using of any material trade secret or confidential information of
the Company at any time by the Consultant except as required in connection with
his duties to the Company; (v) failure of the Consultant to adhere to the
Compliance program of the Company and all applicable state and federal laws
(vi) Douglas Miller fails to own 100% of the outstanding shares of the
Consultant with anyone other than Holly Miller, (vii) the death or catastrophic
disability of Douglas Miller, or (viii) the breach by the Consultant of the
terms and conditions of this Agreement and the failure of the Consultant to
cure such breach within five (5) days written notice to the Consultant. Upon
any termination under this Section 8.2, the Consultant shall be entitled to the
compensation referred to in Section 5 above to the date of termination, and the
Company shall have no further liability hereunder, subject, however, to the
provisions of Section 4.

-3-
<PAGE> 4

Agreement shall for any reason be held to be excessively broad as to scope,
activity or subject so as to be unenforceable at law, such provision or
provisions shall be construed by the appropriate judicial body by limiting and
reducing it or them, so as to be enforceable to the extent compatible with the
applicable law as it shall then be in effect.

10. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.

15. Stock. As further consideration for the company's appointment
of the Consultant, the Consultant agrees that Douglas Miller or his affiliates
will not sell an amount of stock of the Company in excess of eighty thousand
(80,000) shares within any thirty (30) day period of time. If Company is sold,
merged or upon a change of control, or subsequent public offering, Douglas
Miller will be subject to the same rights and restrictions as a founding
shareholder or insider under SEC rules.

If to the Company: If to the Consultant:
Continucare Corporation Doug Miller
100 Southeast Second Street 303 Egret Lane
Miami, FL 33131 Ft. Lauderdale, FL 33327

Any party may at any time change its or his respective address by sending
written notice to the other party of the change in the manner hereinabove
prescribed.

-4-
<PAGE> 5

20. Attorneys' Fees. In the event that a suit for the collection
of any damages resulting from or for the injunction of any action constituting
a breach of any of the terms or provisions of this Agreement, then the
prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the non-prevailing party.

21. Non Waiver. The failure by any party to exercise any right,
remedy or elections herein contained or permitted by law shall not constitute
or be construed as a waiver or relinquishment for the future exercise of such
right, remedy or election, but the same shall continue and remain in full force
and effect.

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<PAGE> 6

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

CONTINUCARE CORPORATION

By: /s/ Charles M. Fernandez
-----------------------------------
Charles M. Fernandez
Chief Executive Officer
Continucare Corporation

By: /s/ Douglas Miller By: /s/ Douglas Miller
----------------------------------- -----------------------------------
Douglas Miller Douglas Miller
Personally as to Section 15, Stocks President
------ Operational Consultant

-6-

<PAGE> 1
Exhibit 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Continucare Corporation
on Form SB-2 of our report dated August 9, 1996, except for paragraphs six
through eleven of Note 11, as to which the date is October 2, 1996, appearing
in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Miami, Florida

November 22, 1996

<PAGE> 1
EXHIBIT 23.3

ARTHUR
ANDERSON

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report,
dated September 17, 1996, and to all references to our Firm included in or
made part of this SB-2 registration statement.

/s/ Arthur Anderson LLP
---------------------------
ARTHUR ANDERSEN LLP

Los Angeles, California
November 21, 1996