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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>As filed with the Securities and Exchange Commission on
September&nbsp;29, 2000</B>

<DIV align="right">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</B>
</DIV>

<P align="left">
<HR size="1" width="100%" align="left">

<DIV align="left">
<HR size="1" width="100%" align="left">
</DIV>

<DIV align="center">
<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>
</DIV>

<DIV align="center">
<B>Washington, D.C. 20549</B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<B><FONT size="6">FORM S-1</FONT></B>

<DIV align="center">
<B>REGISTRATION STATEMENT UNDER</B>
</DIV>

<DIV align="center">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<B><FONT size="6">AMERICAN MEDICAL LABORATORIES, INCORPORATED
</FONT></B>

<DIV align="center">
<B><FONT size="2">(Exact name of registrant as specified in its
charter)</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="34%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="32%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="28%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<B>Delaware</B></FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	<B>8071</B></FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	<B>54-1983356</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<B>(State or other jurisdiction of<BR>
	incorporation or organization)</B></FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	<B>(Primary Standard Industrial<BR>
	Classification Code Number)</B></FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	<B>(I.R.S. Employer<BR>
	Identification No.)</B></FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<B>14225 Newbrook Drive</B>

<DIV align="center">
<B>Chantilly, VA 20153</B>
</DIV>

<DIV align="center">
<B>Telephone: (703)&nbsp;802-6900</B>
</DIV>

<DIV align="center">
<B><FONT size="2">(Address, including zip code, and telephone
number, including area code,</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">of registrant&#146;s principal executive
offices)</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<B>Timothy J. Brodnik</B>

<DIV align="center">
<B>Chairman, President and Chief Executive Officer</B>
</DIV>

<DIV align="center">
<B>14225 Newbrook Drive</B>
</DIV>

<DIV align="center">
<B>Chantilly, VA 20153</B>
</DIV>

<DIV align="center">
<B>Telephone: (703)&nbsp;802-6900</B>
</DIV>

<DIV align="center">
<B><FONT size="2">(Name, address, including zip code, and
telephone number,</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">including area code, of agent for service)
</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<I>Copies to:</I>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="50%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="47%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<B>Sanford E. Perl, Esq.<BR>
	Gerald T. Nowak, Esq.<BR>
	Kirkland &#38; Ellis<BR>
	200 E. Randolph Drive<BR>
	Chicago, IL 60601<BR>
	Telephone: (312)&nbsp;861-2000</B></FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	<B>John D. Watson, Jr., Esq.<BR>
	Stuart S. Kurlander, Esq.<BR>
	Latham &#38; Watkins<BR>
	1001 Pennsylvania Avenue, N.W., Suite&nbsp;1300<BR>
	Washington, D.C. 20004<BR>
	Telephone: (202)&nbsp;637-2200</B></FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Approximate date of commencement of proposed
sale to the public:</FONT></B><FONT size="2"> As soon as
practicable after this Registration Statement becomes effective.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant
to Rule&nbsp;415 under the Securities Act of 1933 (the
&#147;Securities Act&#148;), check the following
box.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is filed to register additional
securities for an offering pursuant to Rule&nbsp;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.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is a post-effective amendment filed
pursuant to Rule&nbsp;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.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is a post-effective amendment filed
pursuant to Rule&nbsp;462(d) 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.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If delivery of the prospectus is expected to be
made pursuant to Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>

<DIV align="left">
<HR size="1" width="100%" align="left">
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left">
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="43%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="24%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="27%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Title of each class of</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Proposed Maximum Aggregate</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Amount of</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>securities to be registered</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Offering Price(1)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Registration Fee(2)</B></FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="5"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Common Stock, par value $.01 per share</FONT></TD>
	<TD></TD>
	<TD align="center" valign="bottom"><FONT size="2">
	$115,000,000</FONT></TD>
	<TD></TD>
	<TD align="center" valign="bottom"><FONT size="2">
	$30,360</FONT></TD>
</TR>

<TR>
	<TD colspan="5" align="left"><HR size="1"></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD><FONT size="2">(1)&nbsp;</FONT></TD>
	<TD align="left">
	<FONT size="2">Includes shares of common stock that the
	underwriters have the option to purchase from the registrant to
	cover over-allotments, if any.</FONT></TD>
</TR>

<TR valign="top">
	<TD><FONT size="2">(2)&nbsp;</FONT></TD>
	<TD align="left">
	<FONT size="2">Estimated solely for the purpose of calculating
	the registration fee pursuant to Rule&nbsp;457(o) under the
	Securities Act of 1933, as amended.</FONT></TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">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&nbsp;8(a) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as the
 Commission, acting pursuant to said Section&nbsp;8(a), may
determine.</FONT></B>

<DIV align="left">
<HR size="1" width="100%" align="left">
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left">
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<B><FONT size="2" color="#FF0000">The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting
 an offer to buy these securities in any state where the offer or
 sale is not permitted. <BR>
</FONT></B>
</TD></TR></TABLE>

<P align="center">SUBJECT TO COMPLETION, DATED SEPTEMBER&nbsp;29, 2000

<P align="center"><FONT size="4">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
</FONT>

<P align="center">
<IMG src="w40527amll4.gif" alt="(AMERICAN MEDICAL LABS, INC. LOGO)">

<P align="center"><FONT size="4">Common Stock</FONT>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common stock. The initial public offering price of our common
stock is expected to be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. We are applying to list
 our common stock on The Nasdaq National Market under the symbol
&#147;AMLS.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters have an option to purchase a maximum of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
 shares from us to cover over-allotments of shares.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in the common stock involves risks. See &#147;Risk
Factors&#148; on page 4.</B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="54%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Underwriting</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Price to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Discounts and</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Proceeds to</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Public</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Commissions</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>AML</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Per Share</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">&nbsp; $</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">&nbsp; $</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">&nbsp; $</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Delivery of the shares of common stock will be made on or about
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.

<P align="left">
<B><FONT size="5">Credit Suisse First Boston</FONT></B>

<DIV align="center">

</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="20%"></TD>
	<TD width="80%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<B><FONT size="5">Banc of America Securities LLC</FONT></B></TD>
</TR>

</TABLE>

<DIV align="center">

</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="40%"></TD>
	<TD width="60%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<B><FONT size="5">First Union Securities, Inc.</FONT></B></TD>
</TR>

</TABLE>

<P align="center">The date of this prospectus is
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
 2000.
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
[Description of cover art:

<P align="left">
Graphics&nbsp;&#151; pictures of medical technicians performing
various tasks and a picture of our headquarters building.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>Captions</TD>
	<TD align="left">
	&nbsp;&#151; American Medical Laboratories</TD>
</TR>

</TABLE>

<DIV align="left">
&nbsp;&#151; The CLIENT is our reason for being here.]
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PROSPECTUS SUMMARY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">RISK FACTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">USE OF PROCEEDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">DIVIDEND POLICY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">CAPITALIZATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">DILUTION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">SELECTED CONSOLIDATED FINANCIAL DATA</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">BUSINESS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">MANAGEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">PRINCIPAL STOCKHOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#014">DESCRIPTION OF CAPITAL STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">SHARES ELIGIBLE FOR FUTURE SALE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">MATERIAL UNITED STATES TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#017">UNDERWRITING</A></TD></TR>
<TR><TD colspan="9"><A HREF="#018">NOTICE TO CANADIAN RESIDENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">LEGAL MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#020">EXPERTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#021">WHERE YOU CAN FIND MORE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">INDEX TO FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="w40527ex23-1.htm">CONSENT OF KPMG</A></TD></TR>
<TR><TD colspan="9"><A HREF="w40527ex27-1.txt">FINANCIAL DATA SCHEDULE</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>

<DIV align="center">
 <HR size="1" width="22%" align="center">
</DIV>

<P align="center"><B>TABLE OF CONTENTS</B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="90%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	PROSPECTUS SUMMARY</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	RISK FACTORS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	USE OF PROCEEDS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	DIVIDEND POLICY</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	CAPITALIZATION</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	DILUTION</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	SELECTED CONSOLIDATED FINANCIAL DATA</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
	OPERATIONS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
	AND RESULTS OF OPERATIONS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	BUSINESS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	MANAGEMENT</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	PRINCIPAL STOCKHOLDERS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	DESCRIPTION OF CAPITAL STOCK</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	SHARES ELIGIBLE FOR FUTURE SALE</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">61</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	MATERIAL UNITED STATES TAX CONSIDERATIONS FOR NON-<BR>
	UNITED STATES HOLDERS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	UNDERWRITING</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	NOTICE TO CANADIAN RESIDENTS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	LEGAL MATTERS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	EXPERTS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	WHERE YOU CAN FIND MORE INFORMATION</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	INDEX TO FINANCIAL STATEMENTS</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center">
<HR size="1" width="22%" align="center">
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>You should rely only on the information contained in this
document or to which we have referred you. We have not authorized
 anyone to provide you with information that is different. This
document may only be used where it is legal to sell these
securities. The information in this document may only be accurate
 on the date of this document.</B>

<P align="center"><B>Dealer Prospectus Delivery Obligation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Until
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2000 (25&nbsp;days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer&#146;s obligation
to deliver a prospectus when acting as an underwriter and with
respect to unsold allotments or subscriptions.</B>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PROSPECTUS SUMMARY" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center"><B>PROSPECTUS SUMMARY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary may not contain all of the information that may
be important to you. You should read the entire prospectus,
including the financial data and related notes, before making an
investment decision. Unless specifically indicated in this
prospectus or the context otherwise requires, the terms
&#147;we,&#148; &#147;us,&#148; &#147;our,&#148; &#147;AML&#148;
and &#147;company&#148; refer to American Medical Laboratories,
Incorporated, a Delaware corporation, and its subsidiaries, and
the term &#147;offering&#148; refers to the offering of common
stock made pursuant to this prospectus.</I>

<P align="center"><B>AML</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading national provider of esoteric laboratory testing
 services. Esoteric tests are clinical laboratory tests that are
more complex and typically priced higher than routine tests. We
market our esoteric testing services to hospitals and independent
 clinical laboratories nationwide. As of September&nbsp;15, 2000,
 we provided our services to over 380 hospitals and 160
independent clinical laboratories in 31 states. Our two main
laboratories are located in metropolitan Washington, D.C. and
Las&nbsp;Vegas, Nevada. We are the leading provider of
comprehensive testing services in each of those markets. We seek
to achieve the highest levels of client satisfaction and foster
long-term relationships through superior customer service. We
believe our commitment to customer service has contributed to our
 99% client retention rate from January 1999 to June 2000. We
strengthen our offering by providing our clients advanced
information technology solutions, as well as other value-added
laboratory services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to Washington G-2 Reports, the U.S. clinical laboratory
 industry generated $31.8&nbsp;billion of revenues in 1999, which
 represented approximately 3% of total healthcare expenditures. A
 growing market segment of the industry is esoteric testing,
which in 1998 represented approximately $2.0&nbsp;billion of
revenues. We believe the growth in the esoteric testing market is
 driven by general advances in medical technology and the
accelerating pace of new genetic-based testing. We believe that,
due to the high degree of complexity and costs involved with
esoteric testing, many hospitals and independent clinical
laboratories use laboratories such as AML to perform these tests.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hospitals and independent clinical laboratories choose us because
 we offer them superior service, excellent quality and rapid
turnaround time. In addition, unlike the laboratories that
provide comprehensive services on a national basis, we generally
do not compete with our clients for routine testing business in
their local markets. We believe that we offer our clients one of
the most complete esoteric testing service offerings available,
as well as access to the latest in innovative testing technology.
 We obtain this access through acquisition and licensure of new
testing technologies, which leverages external research in
esoteric testing and reduces our development time and costs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 1999, we acquired APL Healthcare Group, the leading
laboratory services provider in Nevada. With this purchase, we
acquired a full service laboratory facility in Las Vegas, Nevada
that complements the geographic reach of our Chantilly, Virginia
facility and enhances our position as a nationwide provider of
esoteric testing services. We have been successful in attracting
a wide range of clients for our esoteric testing services,
including Kaiser Permanente, Consorta Catholic Health Resource
Partners, Health Trust Purchasing Group and Massachusetts General
 Hospital. We are currently performing more than 330,000 total
tests per week. For the six months ended June&nbsp;30, 2000 and
for the year ended December&nbsp;31, 1999 on a pro forma basis,
we had net revenue of $129.9&nbsp;million and
$225.6&nbsp;million, respectively, and Adjusted EBITDA of
$19.2&nbsp;million and $27.3&nbsp;million, respectively.

<P align="center">1
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>Our Business Strategy</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The principal elements of our business strategy include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	expanding our position as a leading national provider of esoteric
	 testing services;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	maintaining our comprehensive offering of esoteric tests;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	growing our leadership position in our core geographic markets;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	enhancing our competitive position by providing the highest
	levels of client service; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	strengthening our customer relationships with value-added
	services.</TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our principal executive office is located at 14225 Newbrook
Drive, Chantilly, Virginia 20153 and our telephone number is
(703)&nbsp;802-6900. We maintain a world wide web site at<I>
&nbsp;aml.com</I>. Our website and the information it contains
are not a part of this prospectus.

<P align="center"><B>The Offering</B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="41%"></TD>
	<TD width="1%"></TD>
	<TD width="58%"></TD>
</TR>

<TR>
	<TD valign="top">
	Common stock offered</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	Common stock to be outstanding after this offering</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	Over-allotment option</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	Use of proceeds</TD>
	<TD></TD>
	<TD valign="top">
	Net proceeds from this offering will be approximately
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;million.
	 We intend to use the net proceeds to repay outstanding
	indebtedness.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	Proposed Nasdaq National Market symbol</TD>
	<TD></TD>
	<TD valign="top">
	AMLS</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The common stock to be outstanding after this offering does not
include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
	 issuable upon the exercise of outstanding options, with a
	weighted average exercise price of
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
	 shares of common stock expected to be reserved for future
	grants, awards or sale under our 2000 Equity Incentive Plan or
	sale under the 2000 Employee Stock Purchase Plan.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless we indicate otherwise, the information in this prospectus
does not reflect the exercise by the underwriters of their option
 to purchase up to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
 shares of common stock from us to cover over-allotments.

<P align="center">2
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>Summary Historical and Pro Forma Condensed</B>

<DIV align="center">
<B>Consolidated Financial Data</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following summary historical and pro forma condensed
consolidated financial data should be read in conjunction with
&#147;Selected Consolidated Financial Data,&#148; &#147;Unaudited
 Pro Forma Condensed Consolidated Statements of Operations,&#148;
 &#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the consolidated
financial statements of AML and APL included elsewhere in this
prospectus. The consolidated statement of operations data set
forth below for the years ended December&nbsp;31, 1998 and 1999
are derived from our audited consolidated financial statements,
which appear elsewhere in this prospectus.</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The summary pro forma condensed consolidated financial data
give effect to the acquisition of APL, which occurred on
October&nbsp;13, 1999, and related transactions, and assumes that
 those transactions occurred on January&nbsp;1, 1999. The summary
 pro forma condensed financial data do not purport to represent
what our results would actually have been if those transactions
had in fact occurred on that date, nor does this data purport to
project our results for any future period.</I>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="37%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Six Months</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Ended June&nbsp;30,</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Unaudited</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Year Ended</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December&nbsp;31,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Year Ended</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(unaudited)</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>December&nbsp;31,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Actual</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Actual</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="23"><FONT size="2"><B>(in thousands, except per share data)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	<B>Consolidated Statement of Operations Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net revenue</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,729</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">143,436</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,636</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58,609</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110,094</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">129,895</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Operating income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,540</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,991</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,627</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,646</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,066</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,584</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net income (loss)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,959</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,236</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(534</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,012</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">507</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,546</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net income (loss) to common shareholders before extraordinary
	item</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,036</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,216</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(554</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,704</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">199</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,451</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net income (loss)&nbsp;to common shareholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,036</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">774</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(996</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,637</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">132</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,451</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net income (loss)&nbsp;per common share:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Basic</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Diluted</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Weighted average common shares outstanding:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Basic</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Diluted</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	<B>Other Financial Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Adjusted EBITDA(1)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,696</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,694</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,293</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,015</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,079</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,181</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Adjusted EBITDA as a % of net revenue</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.5</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13.7</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14.8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="34%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>As of</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>June&nbsp;30, 2000</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Actual</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>As Adjusted(2)</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>Consolidated Balance Sheet Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,008</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Total assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">202,352</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Total debt</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,819</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,004</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Total stockholders&#146; equity</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,210</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD><FONT size="2">(1)&nbsp;</FONT></TD>
	<TD align="left">
	<FONT size="2">Adjusted EBITDA is defined as EBITDA adjusted to
	exclude stock-based compensation expense. Stock-based
	compensation expense for the six-month period ended June&nbsp;30,
	 2000 was $172 and zero for all other periods presented. EBITDA
	consists of net income before interest expense, income taxes,
	equity in income (loss) of affiliates, depreciation and
	amortization and extraordinary items. EBITDA and Adjusted EBITDA
	should not be considered as measures of financial performance
	under GAAP. Items excluded from EBITDA and Adjusted EBITDA are
	significant components in understanding and assessing financial
	performance. We present Adjusted EBITDA, which is a non-GAAP
	measure, to enhance the understanding of our operating results.
	Adjusted EBITDA should not be considered in isolation or as an
	alternative to net income, cash flows generated from operations,
	investing or financing activities, or other financial statement
	data presented in the consolidated financial statements as an
	indicator of financial performance or liquidity. Because Adjusted
	 EBITDA is not a measurement determined in accordance with GAAP
	and is thus susceptible to varying calculations, Adjusted EBITDA
	as presented may not be comparable to other similarly titled
	measures of other companies.</FONT></TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD><FONT size="2">(2)&nbsp;</FONT></TD>
	<TD align="left">
	<FONT size="2">As adjusted to give effect to the sale by us of
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock in
	this offering, assuming an offering price of
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of
	the range set forth on the cover page of this prospectus and the
	application of the net proceeds of this offering, the redemption
	of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our redeemable
	preferred stock with an aggregate liquidation value of
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;; and the
	conversion of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;aggregate
	principal amount of convertible subordinated notes into shares of
	 our common stock at
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
	 share, and the payment of all accrued interest on the
	convertible subordinated notes and the repayment of the remaining
	 principal of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of convertible
	 subordinated notes.</FONT></TD>
</TR>

</TABLE>

<P align="center">3
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<P align="center"><B>RISK FACTORS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should carefully consider the following factors in
addition to the other information set forth in this prospectus,
including the financial statements and related notes, before
investing in the common stock offered hereby. The risks and
uncertainties described below are not the only ones facing us.
Additional risks and uncertainties that we do not presently know
about or that we currently believe are immaterial may also impair
 our business. If any of the following risks actually occurs, our
 business, financial condition or results of operations will
likely suffer. In such case, the trading price of our common
stock could decline, and you may lose all or part of your
investment.</I>

<P align="center"><B>Risks Related to Our Industry</B>

<P align="left"><B>We could incur significant fines and other penalties as a
result of the extensive, complex and sometimes unpredictable,
government regulation of our industry.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The clinical laboratory industry is subject to significant
governmental regulation at the federal, state and local levels.
Specifically, we are subject to a number of certification and
licensing regulations as well as federal, state and local
legislation regarding:
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	fraud and abuse;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	billing for our services;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	kickbacks;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
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	referrals;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	rebates and fee splitting;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the handling and disposal of medical specimens, hazardous waste
	and controlled substances;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	consumer protection;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	privacy and confidentiality;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	health care plans;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	various licensure and certification laws, such as managed care
	and third-party administrator laws; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	employee safety.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although we believe that we are in compliance, in all material
respects, with the statutes, regulations and other requirements
applicable to our laboratory operations, the clinical laboratory
industry is subject to complex and extensive regulations. Many of
 these statutes and regulations have not been interpreted by the
courts. We are unable to predict what additional federal or state
 legislation or regulatory initiatives may be enacted in the
future relating to our business or the health care industry in
general, or what effect such legislation or regulations might
have on us. We also cannot provide any assurance that federal or
state governments will not impose additional restrictions or
adopt interpretations of existing laws that could have a material
 adverse effect on us. Therefore, we cannot assure you that
applicable statutes and regulations might not be interpreted or
applied by a regulatory or judicial authority in a manner that
would adversely affect us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Potential sanctions for violation of these statutes and
regulations include significant fines and criminal penalties and
the loss of various licenses, certificates and authorizations,
which in turn can lead to denial of the right to conduct business
 or an exclusion from participation in federal or state health
care programs. The revocation or loss of one or more of our
laboratory licenses would have a material adverse effect on us.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we are subject to licensing and regulation under
federal, state and local laws and regulations relating to the
protection of the environment and human health and safety,
including those relating to the handling, transportation and
disposal of medical specimens, infectious and hazardous waste and
 radioactive materials, and the safety and health of laboratory
employees. The sanctions for failure to comply with these
regulations may include denial of the right to conduct business,
significant fines and criminal penalties. The loss of a license,
imposition of a fine, incurrence of liability under, or future
changes in, such federal, state and local laws and regulations,
or in the interpretation of current laws and regulations, could
have a material adverse effect on us.

<P align="left"><B>The independent clinical laboratory industry in the United
States is highly competitive, which could adversely affect our
operations.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The independent clinical laboratory industry in the United States
 is highly competitive and has experienced intense price
competition over the past several years.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Independent clinical laboratories generally fall into one of four
 separate categories:
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	larger laboratories that provide a broad range of tests and
	services nationwide;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	niche laboratories that typically offer fewer tests and services
	and generally focus on a segment of the clinical laboratory
	testing market;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	laboratories that are affiliated with large medical centers or
	universities; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	smaller, generally local, laboratories with fewer resources than
	larger laboratories.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our primary competitors include large independent laboratories,
such as Quest Diagnostics and Laboratory Corporation of America.
We also compete with niche laboratories such as Specialty
Laboratories, Impath and Athena Diagnostics, as well as
laboratories affiliated with educational institutions such as
Mayo Medical Laboratories and Associated Regional University
Pathologists, in the esoteric testing market. In the toxicology
testing business, we compete with Quest Diagnostics, Laboratory
Corporation of America, Psychemedics and PharmChem. Many of our
competitors have significantly greater resources than we do. In
addition, in our core geographic markets where we provide a
comprehensive service offering, hospitals compete with us by also
 providing routine testing services to physicians. We may not be
able to compete successfully with our existing or potential new
competitors and competitive pressures faced by us may materially
and adversely affect us. For more details, see
&#147;Business&nbsp;&#151; Competition.&#148;

<P align="left"><B>Changes in reimbursement policies for clinical laboratory
services may reduce our revenues.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Government payors, such as Medicare and Medicaid, as well as
private insurers and large employers, have taken steps and may
continue to take steps to control the cost, use and delivery of
health care services. For the six months ended June&nbsp;30,
2000, approximately 5.9% of our total net revenue was received
under Medicare and approximately 0.8% was received from Medicaid
or other federal or state health care programs. Any efforts on
the part of these or other payors to reduce reimbursement for our
 laboratory testing services could reduce our revenue and
adversely affect our operating results.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business depends on continued participation in these programs
 and we are generally required by law to accept reimbursement
from Medicare and Medicaid as payment in full for covered tests
performed for Medicare and Medicaid beneficiaries. In an effort
to address increasing health care costs, legislative and
regulatory changes continue to be introduced with an objective of
 reducing amounts paid for laboratory services under the Medicare
 and Medicaid programs. Recent examples include:
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	federal legislation or proposed legislation to reduce ceilings on
	 Medicare reimbursement for laboratory testing services;</TD>
</TR>

</TABLE>

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	<TD align="left">
	a presidential proposal for a 30% reduction in the Medicare
	reimbursement rates for certain commonly ordered laboratory
	tests;</TD>
</TR>

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	changes in the number of tests which can be concurrently ordered
	and billed for;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a presidential proposal for a 20% co-payment from Medicare and
	Medicaid patients;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	limits on the ability of laboratories to bill for tests unless
	the tests are considered to be medically necessary and properly
	documented by the ordering physician; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	requirements in the 1997 Balanced Budget Act that the U.S. Health
	 Care Finance Administration, or HCFA, conduct and complete by
	2002 five Medicare bidding demonstrations involving various types
	 of medical services. HCFA is expected to include a laboratory
	demonstration project in a metropolitan statistical area as part
	of the legislative mandate. Competitive bidding for laboratory
	tests is still under review. If competitive bidding were
	implemented on a regional or national basis for laboratory
	testing, it could materially adversely affect the clinical
	laboratory industry and our business.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to these legislative and regulatory changes, we may receive
lower reimbursement from Medicare or Medicaid or we may not be
reimbursed for a portion of our Medicare and Medicaid related
testing.

<P align="left"><B>Our operations may be adversely affected by the increasing
role and pricing structure of managed-cost health care
organizations.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may experience declines in average revenue per test processed
as managed care organizations maintain or strengthen their
significant role in the health care insurance market. Managed
care organizations typically negotiate capitated payment
contracts. Under this type of contract, a laboratory receives a
fixed monthly fee per covered individual, regardless of the
number or cost of tests performed per covered individual and
regardless of the number or cost of tests performed during the
month, excluding certain tests, such as esoteric tests.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Traditionally, laboratory service agreements with managed care
organizations have been competitively priced due to the volume of
 testing involved and the expectation that a laboratory would
capture not only the volume of testing to be covered under the
contract, but also the additional fee-for-service business from
patients of participating physicians who are not covered by the
managed care plan. However, if the number of patients covered
under managed care plans continues to increase, there will be
less fee-for-service business and, accordingly, less high margin
business to offset the lower margin managed care business.
Furthermore, physicians increasingly are affiliated with more
than one managed care organization, which may decrease the
likelihood of any particular independent laboratory capturing
their fee-for-service business.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a participating provider in managed care plans, a physician
may be required to refer laboratory tests to specific
laboratories, depending on the plan in which each covered patient
 is enrolled. Laboratories that are not authorized to perform
tests under a given physician&#146;s managed care plan or plans
may also fail to capture that physician&#146;s fee-for-service
business. The increase in managed care has also slowed the growth
 in utilization of routine laboratory testing services.

<P align="left"><B>The complexities of billing may affect our revenue and cash
flow.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Billing for laboratory services is complicated. Laboratories have
 a mix of various payors, such as individual patients, insurance
companies, Medicare, Medicaid, doctors, hospitals, laboratories
and employer groups. All of these payors have different billing
requirements. Most of our bad debt expense is the result of the
inability to collect from financially impaired clients and
individual patients.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Billing complications include, but are not limited to, the
following:
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	disputes between payors as to which party is responsible for
	payment;</TD>
</TR>

</TABLE>

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	disparity in coverage among various payors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	assuring adherence to specific billing requirements;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	disparity in information requirements among payors; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	high volume/low dollar claims.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may experience some or all of these billing complications and
do not know what impact, if any, they would have on our financial
 condition and results of operations.

<P align="left"><B>We must rapidly adapt to technology changes and even if we do,
 these changes may allow our customers to perform their own tests
 in a cost-effective manner.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The clinical laboratory testing industry is subject to rapid and
significant changes in technology. The effect of technological
changes on our business cannot be predicted. We believe our
future success will depend, in part, on our ability to anticipate
 or adapt to such changes and to offer, on a timely basis,
services that meet customer demands. We may not be able to obtain
 access to new technologies on a timely basis or on satisfactory
terms. Any failure by us to obtain new technologies could cause
us to lose customers and market share. In addition, advancing
technology may enable other clinical laboratories, hospitals,
physicians or other medical providers to perform tests in their
offices or hospitals in various departments without requiring the
 services of outside laboratories. If these or other advances in
technology result in a decreased demand for our services, our
testing volume and revenue would be impaired.

<P align="left"><B>We may be subject to professional liability litigation, which
may be costly to defend and result in significant monetary
damages.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Providers of laboratory testing services may from time to time be
 subject to lawsuits alleging negligence or other similar legal
claims. These lawsuits could involve claims for substantial
damages and be costly to defend. We maintain liability insurance,
 subject to limits and deductibles, for professional liability
claims. While there can be no assurance, we believe that the
levels of coverage are adequate to cover currently estimated
exposures to professional liability claims. Although we believe
that we will be able to obtain adequate insurance coverage in the
 future at acceptable costs, we may not be able to do so, or we
may incur liabilities in excess of policy limits. In addition,
litigation could also have an adverse impact on our reputation
and therefore, our client base.

<P align="center"><B>Risks Related to Our Business</B>

<P align="left"><B>Failure in our information technology systems could
significantly increase turnaround time, reduce our production
capacity, and otherwise disrupt our operations, which may reduce
our customer base and result in lost net revenue.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our success depends, in part, on the continued and uninterrupted
performance of our information technology, or IT, systems.
Sustained or repeated system failures that interrupt our ability
to process test orders, deliver test results or perform tests in
a timely manner would reduce significantly the attractiveness of
our services to our customers. Our business, results of
operations and financial condition could be materially and
adversely affected by any damage or failure that interrupts or
delays our operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our computer systems are vulnerable to damage from a variety of
sources, including telecommunications failures, malicious human
acts and natural disasters. Moreover, despite network security
measures, some of our servers are potentially vulnerable to
physical or electronic break-ins, computer viruses and similar
disruptive problems, in part because they are located at a
third-party&#146;s facility and we cannot control the maintenance
 and operation of our third-party data centers. Despite the
precautions we have taken, unanticipated problems affecting our
systems could cause interruptions in our IT systems. Our

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<DIV align="left">
insurance policies may not adequately compensate us for any
losses that may occur due to any failures in our systems. See
&#147;Business&nbsp;&#151;&nbsp;Information Technology.&#148;
</DIV>

<P align="left"><B>If we fail to acquire licenses for new or improved testing
technologies, we may not be able to use new esoteric testing
methods, which could impair our ability to successfully achieve
our core business strategy.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our ability to grow our esoteric testing business will depend, in
 part, on our ability to license new or improved testing
technologies on favorable terms. We may not be able to negotiate
acceptable licensing arrangements and we cannot be certain that
such arrangements will yield commercially successful esoteric
tests. If we are unable to license these testing technologies at
competitive rates, our research and development costs may
increase as a result. In addition, if we are unable to license
new or improved testing methods, our methods may be outdated when
 compared with our competition and our testing volume and revenue
 may be materially and adversely affected.

<P align="left"><B>We compete with some of our customers. If they reduce or
discontinue purchasing our laboratory testing services for
competitive reasons, it will reduce our revenue.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We compete with some of our customers, such as Quest Diagnostics,
 Laboratory Corporation of America, Mayo Medical Laboratories and
 Associated Regional University Pathologists in the esoteric
testing market. These organizations often refer tests to us that
they either cannot or elect not to perform themselves. These
parties may no longer refer tests to us because they wish to
develop and market tests similar to ours. If independent
laboratories decide to reduce or discontinue purchases of our
tests for competitive reasons, it will adversely affect our
revenue.

<P align="left"><B>If group purchasing organizations do not continue our
contracts, we may lose an important mechanism to further
penetrate the hospital customer base.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many of our existing and potential hospital customers are part of
 group purchasing organizations, or GPOs. GPOs typically pool
independent hospitals together for the purpose of negotiating
with providers of health care services for the price of those
services to participating hospitals, including prices for
laboratory testing. These GPOs provide compliance incentives to
their participating hospitals to utilize clinical laboratories
which have contracts with GPOs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are aggressively seeking to expand our relationships with
GPOs. We do not know if we will be able to retain our accounts
with GPO-affiliated hospitals if an agreement with a GPO is
terminated or not renewed. If any GPO-affiliated hospital no
longer uses our services, it will adversely affect our net
revenue. In addition, if we are unable to attract new hospital
customers because a GPO contract is terminated, it may adversely
affect our ability to grow our business.

<P align="left"><B>Infringement on the intellectual property rights of others may
 give rise to costly litigation, which may cause us to pay
substantial damages or prohibit us from performing certain tests.
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other companies or individuals, including our competitors, may
obtain patents or other proprietary rights that would prevent,
limit or interfere with our ability to develop, perform or sell
our tests. As a result, we may be found to infringe on the
proprietary rights of others. We could incur substantial costs in
 defending any litigation. An adverse result in an intellectual
property litigation could force us to do any of the following:
<P>

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	<TD align="left">
	cease developing, performing, or selling products or services
	that incorporate the challenged intellectual property;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	obtain and pay for licenses from the holder of the infringed
	intellectual property right;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	redesign or reengineer our tests; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	pay substantial damages.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that there is a successful infringement claim
against us and we fail to obtain the necessary licenses on
commercially reasonable terms, we may be required to reengineer
our tests. Any

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<DIV align="left">
efforts to reengineer our tests could substantially increase our
costs, force us to interrupt product sales or delay new test
releases.
</DIV>

<P align="left"><B>We may have difficulty integrating APL into our company.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, we acquired APL, an independent
laboratory in Nevada with approximately 1,300&nbsp;employees. We
are continuing to integrate the business practices, financial
reporting systems and compliance programs of APL with our
company. If this integration is not successful or is more
expensive than we anticipate, it could result in inconsistent
operating and financial practices throughout our organization.
Our overall profitability in turn could be adversely affected.

<P align="left"><B>Our business could be adversely affected as a result of future
 acquisitions.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to remain competitive, we may find it necessary to
acquire additional businesses. At this time, we have no specific
understanding, commitments or agreements with respect to any
acquisitions. If we identify an appropriate acquisition
candidate, we may not be successful in negotiating acceptable
terms of the acquisition, financing the acquisition, or
integrating the acquired business into our existing business and
operations. Completing an acquisition and integrating an acquired
 business will significantly divert management time and
resources. If we consummate any significant acquisitions using
stock or other securities as consideration, your equity in us
could be significantly diluted. If we make any significant
acquisitions using cash consideration, we may be required to use
a substantial portion of our available cash or to incur
substantial indebtedness. Acquisition financing may not be
available on favorable terms, if at all. In addition, we may be
required to amortize significant amounts of goodwill and other
intangible assets in connection with future acquisitions, which
would harm our operating results.

<P align="left"><B>Our success largely depends on the services of our senior
management and senior technical management and the loss of any
one of them could have a material adverse effect on our business.
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our success is largely dependent on the skills, experience and
efforts of our senior management and senior technical management.
 The loss of services of our Chairman, President and Chief
Executive Officer, Timothy J. Brodnik, or one or more members of
our senior management or senior technical management could have a
 material adverse effect on us. We do not maintain &#147;key
man&#148; life insurance policies on any of our senior management
 or senior technical management. We cannot assure you that we
will be able to continue to employ key personnel. Failure to
retain or attract key personnel could have an adverse affect on
us.

<P align="left"><B>The loss of our skilled personnel could have a material
adverse effect on our research and development, marketing and
sales efforts.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our competitiveness will depend in large part upon whether we can
 attract and retain skilled technical and marketing personnel.
Competition for skilled personnel is intense in both Nevada and
metropolitan Washington, D.C. We do not know if we will be
successful in attracting and retaining the technical and
marketing personnel we require to develop and market new test
services and to continue to grow and operate profitably. If we
cannot attract skilled personnel, we may not be able to operate
successfully in the future.

<P align="left"><B>Our principal stockholder may exercise its control in a manner
 adverse to your interests.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, our principal stockholder,
Golder, Thoma, Cressey, Rauner Fund V, L.P., or GTCR, and one of
its affiliates will own approximately
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common stock.
By virtue of this stock ownership, GTCR has the power to direct
our affairs and will likely be able to determine the outcome of
all matters required to be submitted to stockholders for
approval, including the election of a majority of our directors,
any merger, consolidation or sale of all or substantially all of
our

<P align="center">9
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<DIV align="left">
assets and amendment of our certificate of incorporation.
Transactions could be difficult or impossible to complete without
 the support of GTCR, and the interests of GTCR may not be the
same as those of our other stockholders. It is possible that GTCR
 will exercise control over us in a manner adverse to your
interests. See &#147;Principal Stockholders.&#148;
</DIV>

<P align="center"><B>Risks Related to This Offering</B>

<P align="left"><B>Provisions of our charter documents and Delaware law may make
it difficult to acquire our company and could adversely affect
the price of our common stock.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provisions of our certificate of incorporation and by-laws may
have the effect of delaying, deferring or preventing a change in
control of our company not approved by our board of directors.
These provisions would limit the circumstances in which a premium
 may be paid for our common stock in proposed transactions or a
proxy contest for control of the board may be initiated. These
provisions provide for:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a classified board of directors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a prohibition on stockholder action through written consents;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a requirement that special meetings of stockholders be called
	only by our chief executive officer or the board of directors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	advance notice requirements for stockholder proposals and
	nominations;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	limitations on the ability of stockholders to amend, alter or
	repeal the by-laws; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the authority of the board to issue, without stockholder
	approval, preferred stock with such terms as the board may
	determine.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will also be afforded the protections of Section&nbsp;203 of
the Delaware General Corporation Law, which could have similar
effects. See &#147;Description of Capital Stock.&#148;

<P align="left"><B>There may not be an active market for our common stock, making
 it difficult for you to sell your stock.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has not been a public market for
our common stock. We cannot predict the extent to which a trading
 market will develop after this offering or how liquid that
market might become. An illiquid market for our stock may result
in price volatility and poor execution of buy and sell orders for
 investors. The initial public offering price has been determined
 by negotiations between representatives of the underwriters and
us, and may not be indicative of prices that will prevail in the
trading market. Historically, stock prices and trading volumes
for newly public companies fluctuate widely for a number of
reasons, including some reasons that may be unrelated to their
business or results of operations. The price of our common stock
that will prevail in the market after the offering may be lower
than the price you pay.

<P align="left"><B>Future sales of our common stock could depress its market
price.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The market price for our common stock could fall substantially if
 our stockholders who hold restricted securities sell large
amounts of shares in the public market following this offering.
Our directors, executive officers and existing shareholders and
optionholders own
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 of common stock and options to purchase
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 of common stock that are subject to &#147;lock-up&#148;
agreements. Those agreements prohibit them from selling shares of
 our common stock for 180&nbsp;days after the date of this
prospectus. When the 180-day &#147;lock-up&#148; period expires,
or if Credit Suisse First Boston Corporation consents, in its
sole discretion, to an earlier sale, our existing stockholders
will be able to sell their shares in the public market, subject
to legal restrictions on transfer.

<P align="center">10

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our existing stockholders are parties to a registration
agreement with us that provides for &#147;demand&#148;
registration rights to cause us to register under the Securities
Act all or part of the shares of our common stock, as well as
&#147;piggyback&#148; registration rights. Registration of the
sale of these shares of our common stock would permit their sale
into the market immediately. If our existing stockholders sell a
large number of shares, the market price of our common stock
could decline, as these sales may be viewed by the public as an
indication of an upcoming or recently occurring shortfall in the
financial performance of our company. Moreover, the perception in
 the public market that these stockholders might sell shares of
our common stock could depress the market price of the common
stock. See &#147;Certain Relationships and Related
Transactions&nbsp;&#151; Registration Agreement&#148; and
&#147;Shares Eligible for Future Sale.&#148;

<P align="left"><B>Because you will pay more for your shares than existing
stockholders, the value of your investment in our common stock
will be diluted.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you purchase our common stock in this offering, you will pay
more for your shares than the amount paid by existing
stockholders or payable by our employees upon exercise of options
 granted before this offering. As a result, the value of your
investment, based on the value of our net tangible assets as
recorded on our books, will be less than the amount you pay for
shares of our common stock in this offering. In addition, the
total amount of our capital will be less than what it would have
been had you and all of the existing stockholders and optionees
paid the same amount per share of our common stock as you will
pay in this offering. You may experience further dilution to the
extent that additional shares of our common stock are issued upon
 the exercise of stock options or warrants. See
&#147;Dilution.&#148;

<P align="left"><B>Our quarterly operating results may fluctuate and this could
cause our stock price to fluctuate or decline.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our quarterly operating results have varied significantly in the
past and may vary significantly in the future. If our quarterly
net revenue and operating results fall below the expectations of
securities analysts and investors, the market price of our common
 stock could fall substantially. Operating results vary depending
 on a number of factors, many of which are outside our control,
including:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	demand for our tests and ancillary services;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	loss of a significant customer or group purchasing organization
	contract;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	new test introductions by competitors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	changes in our pricing policies or those of our competitors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the hiring and retention of key personnel;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	changes in healthcare laws and regulations;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	changes in fuel prices, which affect our cost of collecting
	specimens;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	costs related to acquisitions of technologies or businesses; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	general economic factors.</TD>
</TR>

</TABLE>

<P align="left">
Our quarterly operating results may also be affected by seasonal
factors. See &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&nbsp;&#151;
Seasonality.&#148;

<P align="left"><B>Our stock price is likely to be volatile and could drop
unexpectedly.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following this offering, the price at which our common stock will
 trade is likely to be volatile. The stock market has from time
to time experienced significant price and volume fluctuations
that have affected the market prices of securities, particularly
securities of clinical laboratory, biotechnology and other
healthcare service companies. As a result, you may experience a
material decline in the market price of our common stock,
regardless of our operating performance. In the past, following
periods of volatility in

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<DIV align="left">
the market price of a particular company&#146;s securities, class
 action litigation has often been brought against that company.
We may become involved in this type of litigation in the future.
Litigation of this type is often expensive and diverts
management&#146;s attention and resources.
</DIV>

<P align="left"><B>The reliability of market data included in this prospectus is
uncertain.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In this prospectus, we rely on and refer to information regarding
 the clinical laboratory testing industry and its segments and
competitors derived from our internal estimates, industry
publications, market research reports, analyst reports and other
publicly available information. Although we believe that this
information is reliable, we cannot guarantee the accuracy and
completeness of the information and have not independently
verified it. None of the sources that we rely on for information
about the clinical laboratory testing industry has consented to
the disclosure and use of their information in this prospectus.

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<DIV align="left"><A NAME="002"></A></DIV>

<P align="center"><B>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of the statements contained in this prospectus contain
forward-looking information. These statements are found in the
sections entitled, including, without limitation,
&#147;Prospectus Summary,&#148; &#147;Risk Factors,&#148;
&#147;Use of Proceeds,&#148; &#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations&#148; and &#147;Business.&#148; They include, but are
not limited to, statements concerning:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our business;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our growth strategy;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	conditions in the clinical laboratory testing industry;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our ability to compete in the intensely competitive clinical
	laboratory testing industry;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our dependence on key personnel;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our dependence on continuous introduction of new services based
	on the latest testing technology;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	liquidity and capital expenditures; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our future financial position and sources of revenue.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You can identify these statements by forward-looking words
including &#147;believe,&#148; &#147;expect,&#148;
&#147;anticipate,&#148; &#147;intend&#148; and other similar
expressions. Potential investors are cautioned not to place undue
 reliance on these forward-looking statements. These
forward-looking statements are based largely on our current
expectations and are subject to a number of risks and
uncertainties, including, without limitation, those identified
under the &#147;Risk Factors&#148; section and elsewhere in this
prospectus and other risks and uncertainties indicated from time
to time in our filings with the SEC. Actual results could differ
materially from these forward-looking statements. In addition,
important factors to consider in evaluating such forward-looking
statements include changes in external market factors, changes in
 our business or growth strategy or an inability to execute our
strategy due to changes in our industry or the economy generally,
 the emergence of new or growing competitors and various other
competitive factors. In light of these risks and uncertainties,
there can be no assurance that the matters referred to in the
forward-looking statements contained in this prospectus will in
fact occur.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless required by law, we do not undertake to update our
forward-looking statements or risk factors to reflect future
events or circumstances.

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<!-- link1 "USE OF PROCEEDS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center"><B>USE OF PROCEEDS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that the net proceeds from our sale
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock in this
offering will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
 assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the
range set forth on the cover page of this prospectus and after
deducting underwriting discounts and commissions and estimated
offering expenses payable by us. If the underwriters&#146;
over-allotment option is exercised in full, we estimate that the
net proceeds from this offering will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will use the proceeds from this offering to repay a portion of
 the Term&nbsp;A and Term&nbsp;B loans under our senior credit
facility. This indebtedness carries the following terms:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the Term&nbsp;A loan matures on October&nbsp;13, 2004 and
	currently bears interest at a rate of 10.0%; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the Term&nbsp;B loan matures on April&nbsp;13, 2006 and currently
	 bears interest at a rate of 10.625%.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2000, there was $112.7&nbsp;million
outstanding under the Term&nbsp;A and Term&nbsp;B loans. In
connection with this offering, we intend to amend or refinance
our existing senior credit facility on what we believe will be
improved terms.

<!-- link1 "DIVIDEND POLICY" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center"><B>DIVIDEND POLICY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have not in the past paid, and do not expect for the
foreseeable future to pay, dividends on our common stock.
Instead, we anticipate that all of our earnings, if any, in the
foreseeable future will be used for working capital and other
general corporate purposes. The payment of dividends by us to
holders of our common stock is prohibited by our current senior
credit facility, and we expect any future credit facility would
also contain a prohibition on our ability to pay dividends. Any
future determination to pay dividends will be at the discretion
of our board of directors and will depend upon, among other
factors, our results of operations, financial condition, capital
requirements and contractual restrictions.

<P align="center">14
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<!-- link1 "CAPITALIZATION" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="center"><B>CAPITALIZATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our total capitalization as of
June&nbsp;30, 2000 on an actual basis and on an as adjusted basis
 to reflect:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the sale by us of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common
	stock in this offering, assuming an offering price of
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
	 share, the midpoint of the range set forth on the cover page of
	this prospectus, and the application of the net proceeds as
	described under &#147;Use of Proceeds&#148;;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the redemption of shares of our redeemable cumulative preferred
	stock with an aggregate liquidation value of
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as described under
	&#147;Certain Relationships and Related Transactions&#148;; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the conversion of
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;aggregate principal
	amount of convertible subordinated notes into shares of our
	common stock at $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	 per share, and the payment of all accrued interest on the
	convertible subordinated notes and the repayment of the remaining
	 principal of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
	convertible subordinated notes.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This table should be read in conjunction with &#147;Selected
Consolidated Financial Data,&#148; &#147;Unaudited Pro Forma
Condensed Consolidated Statement of Operations,&#148; our
consolidated financial statements, the notes to those
consolidated financial statements and the other financial
information appearing elsewhere in this prospectus.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="62%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>As of June 30, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Actual</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>As Adjusted</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(unaudited)</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(dollars in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Long-term debt, including current maturities</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,819</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Redeemable cumulative 10% preferred stock, $0.01 par value,
	60,000 shares authorized and 1,491 shares issued and outstanding
	at liquidation value on an actual basis; no shares authorized,
	issued or outstanding on an as adjusted basis</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,004</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Stockholders&#146; equity:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Preferred stock, $0.01 par value, no shares authorized, issued or
	 outstanding on an actual basis; 5,000,000 shares authorized and
	no shares issued and outstanding on an as adjusted basis</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Common stock, $0.01 par value, 25,000,000 shares authorized and
	20,863,811 shares issued and outstanding on an actual basis;
	&nbsp;&nbsp; &nbsp;shares authorized and &nbsp;&nbsp;
	&nbsp;shares issued and outstanding on an as adjusted basis</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">209</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Additional paid-in capital</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,588</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Stock-based deferred compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,613</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Retained earnings</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,026</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total stockholders&#146; equity</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,210</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total capitalization</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">159,033</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The common stock to be outstanding after this offering does not
include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issuable upon
	the exercise of outstanding options, with a weighted average
	exercise price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
	 shares of common stock expected to be reserved for future
	grants, awards or sale under our 2000 Equity Incentive Plan or
	sale under our 2000 Employee Stock Purchase Plan.</TD>
</TR>

</TABLE>

<P align="center">15
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "DILUTION" -->
<DIV align="left"><A NAME="006"></A></DIV>

<P align="center"><B>DILUTION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share of our common stock and the as adjusted
net tangible book value per share of common stock after this
offering. Our net tangible book value as of June&nbsp;30, 2000,
as adjusted to reflect the conversion of convertible subordinated
 notes described under &#147;Capitalization,&#148; was
$&nbsp;&nbsp;&nbsp;million or $&nbsp;&nbsp;&nbsp;per share. Net
tangible book value per share represents the amount of our total
tangible assets less total liabilities, divided by the number of
shares of common stock outstanding. Dilution in net tangible book
 value per share represents the difference between the amount per
 share paid by purchasers of common stock in this offering and
the net tangible book value per share of common stock immediately
 after the completion of this offering. After giving effect to
the sale of the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of
common stock in this offering at an assumed initial public
offering price of $&nbsp;&nbsp;&nbsp;per share less estimated
underwriting discounts and commissions and estimated offering
expenses, our as adjusted net tangible book value as of
June&nbsp;30, 2000 would have been $&nbsp;&nbsp;&nbsp;million or
approximately $&nbsp;&nbsp;&nbsp;per share. This represents an
immediate increase in net tangible book value of
$&nbsp;&nbsp;&nbsp;per share to existing stockholders and an
immediate dilution in net tangible book value of
$&nbsp;&nbsp;&nbsp;per share to new investors, or approximately
&nbsp;&nbsp;% of the assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;per share. The following table illustrates
this per share dilution:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="73%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Assumed initial public offering price per share</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Tangible book value per share at June&nbsp;30, 2000</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Increase in net tangible book value per share attributable to new
	 investors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net tangible book value per share after this offering</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Dilution per share to new investors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes, on an as adjusted basis as of
June&nbsp;30, 2000, the number of shares purchased, the total
consideration paid, or to be paid, and the average price per
share paid, or to be paid, by the existing stockholders and the
purchasers of common stock in the offering. The table assumes an
offering price of $&nbsp;&nbsp;&nbsp;per share before deducting
the estimated offering expenses and underwriting discounts and
commissions:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="37%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Shares Purchased</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Total Consideration</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Average Price</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Per Share</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Existing stockholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	New investors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The foregoing discussion and tables assume no exercise of any
outstanding stock options. The exercise of all options
outstanding as of June&nbsp;30, 2000 having an exercise price
less than the assumed initial public offering price would
increase the dilutive effect to new investors to
$&nbsp;&nbsp;&nbsp;per share.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the underwriters exercise their over-allotment in full, the
following will occur:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the number of shares of common stock held by existing
	stockholders will decrease to approximately &nbsp;&nbsp;% of the
	total number of shares of our common stock outstanding; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the number of shares held by new investors will increase to
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares, or approximately
	&nbsp;&nbsp;% of the total number of shares of our common stock
	outstanding after this offering.</TD>
</TR>

</TABLE>

<P align="center">16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SELECTED CONSOLIDATED FINANCIAL DATA" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P align="center"><B>SELECTED CONSOLIDATED FINANCIAL DATA</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth selected consolidated financial
data of:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Our predecessor, as of and for the years ended December&nbsp;31,
	1995 and 1996, and for the period from January&nbsp;1, 1997 to
	May&nbsp;1, 1997; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Our company, as of December&nbsp;31, 1997 and for the period from
	 May&nbsp;2, 1997 to December&nbsp;31, 1997, as of and for the
	years ended December&nbsp;31, 1998 and 1999, and as of and for
	the six months ended June&nbsp;30, 1999 and 2000.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Data as of and for the six months ended June&nbsp;30, 1999 and
2000 were derived from our unaudited consolidated financial
statements which, in the opinion of management, reflect all
adjustments, consisting of normal recurring adjustments,
necessary for the fair presentation of the financial condition
and results of operations for such periods.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated statement of operations data for the periods
from January&nbsp;1, 1997 to May&nbsp;1, 1997 and from
May&nbsp;2, 1997 to December&nbsp;31, 1997, and for the years
ended December&nbsp;31, 1998 and 1999, and the consolidated
balance sheet data as of December&nbsp;31, 1998 and 1999, are
derived from consolidated financial statements, which have been
audited by KPMG LLP, independent auditors, and which are included
 in this prospectus. The consolidated income statement data for
the years ended December&nbsp;31, 1995 and 1996, and the
consolidated balance sheet data as of December&nbsp;31, 1995 and
1996 of our predecessor, are derived from audited financial
statements which were audited by a predecessor auditor that do
not appear in this prospectus.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The selected consolidated financial data should be read in
conjunction with &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations&#148; and our
audited consolidated financial statements and related notes
appearing elsewhere in this prospectus.

<P align="center">17
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>SELECTED CONSOLIDATED FINANCIAL DATA</B>

<DIV align="center">
<B>(in thousands, except per share data)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="25%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="19"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Predecessor(1)(2)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="19"><FONT size="2"><B>American Medical Laboratories, Incorporated(1)(2)</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="19"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period</B></FONT></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Year Ended</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January 1,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May 2,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Year Ended</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Six Months</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997 to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Ended June 30,</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to&nbsp;May 1,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1995</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1996</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(unaudited)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>Consolidated Statement of Operations Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net revenue</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,336</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">77,975</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,340</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59,234</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,729</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">143,436</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58,609</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">129,895</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cost of services</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,658</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,468</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,055</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41,748</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">69,888</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">96,067</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,530</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,816</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Selling, general and administrative</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">34,195</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,756</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,151</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,071</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,131</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,575</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,077</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,070</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,255</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,974</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">524</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,073</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,170</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,803</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,356</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,425</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Loss on impairment of assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,674</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Operating expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,108</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">78,872</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,730</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55,892</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">95,189</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">134,445</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,963</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">117,311</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Operating income (loss)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,228</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(897</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,610</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,342</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,540</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,991</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,646</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,584</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Interest expense</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,839</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,811</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">130</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">619</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">927</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,578</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">835</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,602</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Other (income)&nbsp;expense</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">184</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(49</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">331</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Share in loss of affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">165</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">694</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">443</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">815</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">407</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">284</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Extraordinary item</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">442</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Provision (benefit)&nbsp;for taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(557</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,357</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">612</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">683</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,197</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,820</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,338</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,152</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net income (loss)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,238</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,351</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,015</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,959</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,236</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,012</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,546</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Dividends on preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">566</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">923</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">462</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">375</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">95</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net income (loss)&nbsp;to common shareholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,238</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,351</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">449</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,036</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">774</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,637</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,451</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net income (loss)&nbsp;per common share</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Basic</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Diluted</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Weighted-average common shares outstanding</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Basic</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Diluted</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>Other Financial Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Adjusted EBITDA(3)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,299</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,077</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,183</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,084</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,696</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,694</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,015</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,181</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Adjusted EBITDA as of % of net revenue</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.7</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.5</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14.8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash flows provided by (used in) operating activities</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,238</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,845</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,393</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,974</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,464</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,710</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,058</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,834</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash flows provided by (used in) investing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,201</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,363</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,154</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,545</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,388</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(88,431</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,511</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,548</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash flows provided by (used in) financing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,114</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,954</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,216</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,445</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,924</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">87,590</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">678</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,853</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>Consolidated Balance Sheet Data (at&nbsp;period&nbsp;end):</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,581</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,125</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">869</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,225</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,008</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Working capital (deficit)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,128</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(22,128</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,366</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,258</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,391</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,255</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,367</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Total assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,524</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">57,597</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,303</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45,263</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">202,093</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,634</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">202,352</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Total debt</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,895</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,871</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,170</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,473</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">138,969</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,676</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,819</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,238</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,161</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,909</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,822</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,004</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Total stockholders&#146; equity</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">827</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,863</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,584</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,060</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,210</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD><FONT size="2">(1)&nbsp;</FONT></TD>
	<TD align="left">
	<FONT size="2">On May&nbsp;2, 1997, we acquired all of the
	outstanding stock of Medical Laboratories Corporation, our
	predecessor, in a business combination accounted for as a
	purchase. Therefore the assets and liabilities were recorded at
	fair value as required by the purchase method of accounting and
	the operations were reflected in our results of operations from
	the date of acquisition.</FONT></TD>
</TR>

<TR valign="top">
	<TD><FONT size="2">(2)&nbsp;</FONT></TD>
	<TD align="left">
	<FONT size="2">The financial data for the periods presented are
	not strictly comparable due to the significant effect that the
	acquisitions of Medical Laboratories Corporation and APL have had
	 on such data. See &#147;Management&#146;s Discussion and
	Analysis of Financial Condition and Results of
	Operations&#151;General&#148; and Notes 1 and 6 of the notes to
	our consolidated financial statements, appearing elsewhere in
	this prospectus.</FONT></TD>
</TR>

<TR valign="top">
	<TD><FONT size="2">(3)&nbsp;</FONT></TD>
	<TD align="left">
	<FONT size="2">Adjusted EBITDA is defined as EBITDA adjusted to
	exclude stock-based compensation expense. Stock-based
	compensation expense for the six-month period ended June&nbsp;30,
	 2000 was $172 and zero for all other periods presented. EBITDA
	consists of net income before interest expense, income taxes,
	equity in income (loss) of affiliates, depreciation and
	amortization and extraordinary items. EBITDA and Adjusted EBITDA
	should not be considered as measures of financial performance
	under GAAP. Items excluded from EBITDA and Adjusted EBITDA are
	significant components in understanding and assessing financial
	performance. We present Adjusted EBITDA, which is a non-GAAP
	measure, to enhance the understanding of our operating results.
	Adjusted EBITDA should not be considered in isolation or as an
	alternative to net income, cash flows generated from operations,
	investing or financing activities, or other financial statement
	data presented in the consolidated financial statements as an
	indicator of financial performance or liquidity. Because Adjusted
	 EBITDA is not a measurement determined in accordance with GAAP
	and is thus susceptible to varying calculations, Adjusted EBITDA
	as presented may not be comparable to other similarly titled
	measures of other companies.</FONT></TD>
</TR>

</TABLE>

<P align="center">18
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="center"><B>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED</B>

<DIV align="center">
<B>STATEMENTS OF OPERATIONS</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We prepared the following Unaudited Pro Forma Condensed
Consolidated Statements of Operations for the year ended
December&nbsp;31, 1999 and for the six months ended June&nbsp;30,
 1999 to illustrate the effects of our acquisition of APL on
October&nbsp;13, 1999 and related transactions. The Unaudited Pro
 Forma Condensed Consolidated Statements of Operations are
presented as if these transactions had occurred as of
January&nbsp;1, 1999. We have not presented a pro forma statement
 of operations for the six months ended June&nbsp;30, 2000
because these transactions were reflected in our actual results
for the entire period, and therefore no pro forma adjustments are
 required for an understanding of our results of operations for
that period. We have not presented a pro forma balance sheet
because these transactions were reflected in our balance sheet as
 of June&nbsp;30, 2000, and therefore no pro forma adjustments
are required for an understanding of our financial position on
that date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the assumptions used in preparing the Unaudited
Pro Forma Condensed Consolidated Statements of Operations provide
 a reasonable basis for presenting the significant effects
directly attributable to the APL acquisition and related
transactions. The Unaudited Pro Forma Condensed Consolidated
Statements of Operations do not purport to represent what our
results of operations would actually have been if these
transactions had in fact occurred on January&nbsp;1, 1999 or to
project our results of operations for any future period. These
statements should be read in connection with, and are qualified
by reference to, &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations&#148; and the
financial statements and related notes included elsewhere in this
 prospectus.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="37%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><FONT size="2"><B>For the Year Ended December 31, 1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><FONT size="2"><B>(in thousands, except per share data)</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Historical</B></FONT></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>American Medical</B></FONT></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Laboratories,</B></FONT></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Incorporated,</B></FONT></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>including APL</B></FONT></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>from October 13,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Historical APL</B></FONT></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999 to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January 1, 1999 to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>December 31, 1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>October 12, 1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Adjustments</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Consolidated</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net revenue</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">143,436</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">82,430</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(230</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)<B>(A)</B></FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,636</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cost of services</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">96,067</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">57,524</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,386</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)<B>(B)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,205</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Selling, general and administrative</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,575</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,612</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,187</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,803</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,621</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,193</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">&nbsp;<B>(C)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,617</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total operating expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">134,445</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">78,757</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,193</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">210,009</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Operating income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,991</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,673</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,963</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,627</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Interest expense</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,578</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,366</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,003</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)<B>(D)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,947</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Share in loss of affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(815</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(815</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other (income) expense</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">149</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Income before income taxes and extraordinary items</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,498</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,456</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,040</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,914</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Provision for income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,820</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,186</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">&nbsp;<B>(E)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,006</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Income (loss)&nbsp;before extraordinary item</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,678</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,456</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,226</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(92</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Dividends on preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(462</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(462</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma net income (loss) applicable to common shareholders
	before extraordinary item</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,216</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,456</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,226</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(554</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Pro forma net loss per common share before extraordinary
	item&nbsp;&#151;&nbsp;basic and diluted <B>(F)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Pro forma weighted-average common shares used in per share
	computation:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Basic <B>(F)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Diluted <B>(F)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other Financial Data<BR>
	Adjusted EBITDA</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,293</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>(footnotes on page&nbsp;21)</I>

<P align="center">19
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED</B>

<DIV align="center">
<B>STATEMENT OF OPERATIONS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="28%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><FONT size="2"><B>For the Six Months Ended June 30, 1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><FONT size="2"><B>(dollars in thousands, except per share data)</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Historical American</B></FONT></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Medical</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Historical APL</B></FONT></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Laboratories,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January&nbsp;1, 1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Incorporated</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to June 30, 1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Adjustments</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Consolidated</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net revenue</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58,609</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,600</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(115</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)<B>(A)</B></FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110,094</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cost of services</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,530</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,180</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(316</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)<B>(B)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70,394</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Selling, general and administrative</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,077</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,544</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,621</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,356</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,333</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,324</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">&nbsp;<B>(C)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,013</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total operating expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,963</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44,057</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,008</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">101,028</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Operating income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,646</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,543</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,123</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,066</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Interest expense</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(835</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(817</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,354</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)<B>(D)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,006</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Share in loss of affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(407</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(407</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Other (income) expense</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Income before income taxes and extraordinary items</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,417</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,713</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,477</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,653</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Provision for income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,338</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">741</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">&nbsp;<B>(E)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,079</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Income&nbsp;before extraordinary items</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,079</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,713</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,218</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">574</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Dividends on preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">375</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">375</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma net income applicable to common shareholders before
	extraordinary item</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,704</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,713</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,218</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">199</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Pro forma net income per common share before extraordinary
	item&nbsp;&#151;&nbsp;basic and diluted <B>(F)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Pro forma weighted-average common shares used in per share
	computation:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Basic <B>(F)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Diluted <B>(F)</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Other Financial Data<BR>
	Adjusted EBITDA</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,079</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>(footnotes on following page)</I>

<P align="center">20
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED</B>

<DIV align="center">
<B>STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<B>For the Year Ended December&nbsp;31, 1999 and the Six Months
Ended June&nbsp;30, 1999</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="92%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>A</B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Reflects the elimination of approximately $230,000 and $115,000
	of inter-company sales from January&nbsp;1, 1999 to
	October&nbsp;12, 1999 and January&nbsp;1, 1999 to June&nbsp;30,
	1999, respectively.</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>B</B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Reflects the elimination of expense associated with the
	following: (1)&nbsp;approximately $7.9&nbsp;million and $200,000
	in salaries and bonuses of the former owners and key members of
	management of APL during the periods January&nbsp;1, 1999 to
	October&nbsp;12, 1999 and January&nbsp;1, 1999 to June&nbsp;30,
	1999, respectively, based on contractual agreements which
	established the compensation of these individuals subsequent to
	the closing of the transaction; and (2)&nbsp;approximately
	$224,000 and $0 in merger related expenses incurred by APL from
	January&nbsp;1, 1999 to October&nbsp;12, 1999 and January&nbsp;1,
	 1999 to June&nbsp;30, 1999, respectively.</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>C</B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Reflects the amortization of intangible assets, including
	goodwill over three to twenty year periods. The estimated period
	of amortization of identifiable intangible assets and goodwill is
	 based on preliminary allocations of values to identifiable
	assets of APL. We do not believe that the final allocation of
	values to intangible assets and goodwill of APL will result in
	amortization expense materially different from the adjustment
	above.</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>D</B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Reflects the elimination of the historical interest expense
	related to debt not assumed in the acquisition, and inclusion of
	the debt incurred to finance the acquisition.</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>E</B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Reflects the income tax effect of combining our company&#146;s
	and APL&#146;s results of operations and pro forma adjustments,
	excluding the impact of nondeductible amounts. In conjunction
	with the APL acquisition, APL changed from an S Corporation to a
	C Corporation for federal and state income tax reporting
	purposes, which requires APL to recognize the tax consequences of
	 operations in its statements of operations. The pro forma
	adjustments reflect the estimated impact of recognizing income
	tax expense as if APL had been a C Corporation and part of our
	consolidated group for tax reporting purposes for the entire year
	 ended December&nbsp;31, 1999.</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>F</B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	The pro forma net income (loss) per common share before
	extraordinary item information gives effect to the issuance of
	common stock to the former owners of APL in conjunction with the
	transaction.</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">21
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->
<DIV align="left"><A NAME="009"></A></DIV>

<P align="center"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION</B>

<DIV align="center">
<B>AND RESULTS OF OPERATIONS</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following discussion should be read in conjunction with
our consolidated financial statements, the notes to those
statements and the other financial information appearing
elsewhere in this prospectus. This prospectus contains
forward-looking statements that involve risks and uncertainties.
Our actual results may differ materially from those indicated in
forward-looking statements. See &#147;Cautionary Note Regarding
Forward-Looking Statements.&#148;</I>

<P align="left"><B>Background</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our company was founded in 1959 by pathologists in Fairfax,
Virginia. Over time, we expanded our clinical laboratory
operations and became the leading provider of laboratory tests to
 physicians&#146; offices in the metropolitan
Washington,&nbsp;D.C. area. We also developed a significant
business in esoteric testing for hospital customers in the
central Atlantic states. In 1992, we moved our headquarters into
a custom-designed laboratory facility in Chantilly, Virginia,
located near Dulles International Airport.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May 2, 1997, GTCR and current management purchased our company
 from the prior owners for $23.0&nbsp;million in cash. The
transaction was accounted for using the purchase method of
accounting, under which a new basis was established for the
company&#146;s assets. Accordingly, the results of operations in
the selected consolidated financial data table for the
predecessor company for periods prior to May&nbsp;2, 1997 are not
 comparable to the results of subsequent periods.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have grown significantly since May 1997. Shortly after the
purchase of the company by GTCR and current management, we
implemented an aggressive sales program, which, combined with our
 focus on customer service, has resulted in growth in our
esoteric business nationwide as well as our esoteric and routine
business in the metropolitan Washington, D.C. area. In June 1998,
 we acquired Providence Laboratory Associates, or PLA, a small
laboratory located in Maryland, which also contributed to our
growth.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We grew dramatically in 1999 with the APL acquisition. APL was
founded in 1966 and is the leading laboratory services provider
in the state of Nevada. We acquired all of the outstanding
capital stock of APL in October&nbsp;1999 for a total purchase
price of $107.2&nbsp;million, consisting of $64.3&nbsp;million of
 cash, the issuance of convertible subordinated notes in an
aggregate principal amount of $17.5&nbsp;million, the issuance of
 shares of our common stock with a value at that time of
$5.6&nbsp;million, the assumption of debt of approximately
$17.8&nbsp;million and acquisition costs of approximately
$2.0&nbsp;million. Holders of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;aggregate principal amount of
these convertible subordinated notes have elected to convert
their notes into shares of our common stock in connection with
this offering. The APL acquisition was accounted for using the
purchase method of accounting. Due to the significant effect of
the APL acquisition, financial data in the tables and schedules
which follow in this prospectus may not be strictly comparable
between periods.

<P align="center">22
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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><B>Results of Operations</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table describes our results of operations as a
percentage of net revenue for the periods presented:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="32%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Six Months</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Ended June 30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period</B></FONT></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May 2, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Year Ended</B></FONT></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(unaudited)</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Actual</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Actual</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>2000</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>Statement of Operations Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net revenue</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Cost of services</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70.5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68.0</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67.0</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65.7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63.9</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">64.5</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Selling, general and administrative</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22.5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23.4</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24.0</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22.4</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20.8</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.9</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Operating income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.6</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.9</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.2</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.7</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Adjusted EBITDA</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.5</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13.7</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14.8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Six months ended
June&nbsp;30, 2000 compared to six months ended June&nbsp;30,
1999</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Revenue. </I>Net revenue increased to $129.9&nbsp;million
for the six months ended June&nbsp;30, 2000 from
$58.6&nbsp;million for the same period of 1999, representing an
increase of $71.3&nbsp;million or 121.7%. Approximately
$58.7&nbsp;million of the increase was attributable to revenue
generated from the acquisition of APL, which was acquired
subsequent to the first six months of 1999. Excluding the effect
of the acquired business, net revenue increased
$12.6&nbsp;million or 21.5%, primarily as a result of an
increased volume of laboratory tests performed. Laboratory tests
for our customers are ordered and billed on a per accession
basis. An accession represents a single patient intervention on
which one or more tests may be performed. Also excluding the
effect of the acquired business, the number of billed accessions
increased approximately 18.5% in the first six months of 2000
compared to the same period in 1999, while the average price
billed per accession increased approximately 3.2%. This volume
growth has primarily been driven by a net increase in the number
of total customers we serve. During 2000, we have been successful
 in attracting new customers, primarily in the hospital,
physician and independent clinical laboratory markets, while also
 maintaining a very high retention rate for our existing
customers. The increase in the average price billed per accession
 is due to a greater proportion of higher-priced esoteric tests
performed in the first six months of 2000 compared to the same
period in 1999, as well as to price increases during 2000 for
certain client and patient fee schedules.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cost of Services.</I> Cost of services increased to
$83.8&nbsp;million for the six months ended June&nbsp;30, 2000
from $38.5&nbsp;million for the same period in 1999, representing
 an increase of $45.3&nbsp;million or approximately 117.7%.
Approximately $35.1 million of the increase is attributable to
the cost of services performed by APL. Excluding the effect of
the acquired business, cost of services increased
$10.2&nbsp;million or approximately 26.5%. Approximately
$6.4&nbsp;million of the $10.2&nbsp;million increase is due to
the greater volume of laboratory tests performed in the first six
 months of 2000 compared to the same period in 1999. In addition,
 we experienced cost increases on a per-test basis for laboratory
 supplies, operations labor and transportation costs. Supplies
cost per test increased due to the greater proportion of esoteric
 tests performed in the first six months of 2000 compared to the
same period of 1999, while the increases in labor and
transportation primarily reflect wage increases and higher
transportation volumes and fuel costs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling, General and Administrative.</I> Selling, general and
administrative expense increased to $27.1&nbsp;million for the
six months ended June&nbsp;30, 2000 from $14.1&nbsp;million for
the same period of 1999, representing an increase of
$13.0&nbsp;million or 92.2%. Approximately $10.9&nbsp;million of
the increase was attributable to the acquisition of APL.
Excluding the effect of the acquired business, selling, general
and

<P align="center">23
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
administrative expense increased $2.1&nbsp;million or
approximately 14.9%. The increase in selling expense is due to
increased costs to expand our national sales coverage, including
additional travel and sales office costs. The increase in general
 and administrative expense primarily relates to expansion of our
 management team and our information technology capabilities in
order to support our growth. We incurred increased costs in
personnel salaries and benefits, travel and information
technology. General and administrative expense for the six months
 ended June&nbsp;30, 2000 also includes $0.2&nbsp;million of
stock-based compensation expense; there was no similar charge in
the prior year period. Stock-based compensation expense
represents the difference between the exercise price of options
granted during the first six months of 2000 and the deemed fair
value of our common stock on the date of grant. The difference is
 being amortized over the five-year vesting period.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Depreciation and Amortization.</I> Depreciation and
amortization expense increased to $6.4&nbsp;million for the six
months ended June&nbsp;30, 2000 from $1.4 million for the same
period in 1999, representing an increase of $5.0&nbsp;million.
The increase is primarily due to approximately $2.7&nbsp;million
in goodwill amortization and $2.1&nbsp;million of additional
depreciation expense as a result of the acquisition of APL in the
 fourth quarter of 1999.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest Expense.</I> Interest expense increased to
$7.6&nbsp;million for the six months ended June&nbsp;30, 2000
from $0.8&nbsp;million for the same period of 1999, representing
an increase of $6.8&nbsp;million. The increase reflects the
increase in long-term debt arranged in conjunction with
acquisition of APL in the fourth quarter of 1999.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision for Income Taxes.</I> The provision for income taxes
 increased to $2.2&nbsp;million for the six months ended
June&nbsp;30, 2000 from $1.3&nbsp;million for the same period of
1999, representing an increase of $0.9&nbsp;million. The increase
 is due both to the increase in income before income taxes as
well as to an increase in the effective tax rate. The effective
tax rate has increased due to the amortization of intangibles
acquired in connection with the APL acquisition, which are not
deductible for tax purposes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Adjusted EBITDA.</I> Adjusted EBITDA increased to
$19.2&nbsp;million for the six months ended June&nbsp;30, 2000
from $6.0&nbsp;million for the same period of 1999, representing
an increase of $13.2&nbsp;million. Approximately
$12.0&nbsp;million of the increase is due to the acquisition of
APL. Excluding the acquired business, Adjusted EBITDA increased
approximately $1.2&nbsp;million or 20.0% in the first six months
of 2000 compared to the same period of 1999.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Actual six months ended
June&nbsp;30, 2000 compared to pro forma six months ended
June&nbsp;30, 1999</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Revenue.</I> Net revenue increased to $129.9&nbsp;million
for the six months ended June&nbsp;30, 2000 from
$110.1&nbsp;million for the pro forma 1999 period, representing
an increase of $19.8&nbsp; million or 18.0%. We achieved
substantial volume growth in billed accessions at both of our
major laboratories, with total volume growth approximating 15.8%.
 This volume increase has primarily been driven by a net increase
 in the number of total customers we serve, particularly in the
hospital, physician and independent clinical laboratory markets.
The average price per billed accession increased approximately
2.7% in the first six months of 2000 compared to the pro forma
1999 period. The increase in the average price billed per
accession is due to a greater proportion of higher-priced
esoteric tests performed as well as to price increases in 2000
for certain client and patient fee schedules.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cost of Services.</I> Cost of services increased to
$83.8&nbsp;million for the six months ended June&nbsp;30, 2000
from $70.4&nbsp;million for the pro forma 1999 period,
representing an increase of $13.4&nbsp;million or 19.0%. The
increase in cost of services was primarily due to the increase in
 the testing volume at our laboratories. In addition, we
experienced cost increases on a per&nbsp;test basis for
laboratory supplies, operations labor and transportation costs.
Supplies cost per test increased due to the greater proportion of
 esoteric tests performed in the first six months of 2000, while
the increases in labor and transportation primarily reflect wage
increases and higher transportation volumes and fuel costs.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling, General and Administrative.</I> Selling, general and
administrative expense increased to $27.1&nbsp;million for the
six months ended June&nbsp;30, 2000 from $24.6&nbsp;million for
the pro forma 1999 period, representing an increase of
$2.5&nbsp;million or 10.2%. The increase in selling costs is due
to increased costs to expand our national sales coverage. The
increase in general and administrative costs primarily relates to
 expansion of our management team and our information technology
capabilities in order to support our growth.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Depreciation and Amortization.</I> Depreciation and
amortization expense increased to $6.4&nbsp;million for the six
months ended June&nbsp;30, 2000 from $6.0&nbsp;million for the
pro forma 1999 period, representing an increase of
$0.4&nbsp;million. The increase is primarily due to additional
depreciation expense as a result of capital expenditures.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest Expense.</I> Interest expense increased to
$7.6&nbsp;million for the six months ended June&nbsp;30, 2000
from $6.0&nbsp;million for the pro forma 1999 period. The
increase reflects greater borrowings under our senior credit
facility incurred to finance the expansion of our business.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision for Income Taxes.</I> The provision for income taxes
 increased to $2.2&nbsp;million for the six months ended
June&nbsp;30, 2000 from $2.1&nbsp;million for the pro forma 1999
period. The increase is due both to the increase in income before
 income taxes as well as to a decrease in the effective tax rate.
 The effective tax rate has decreased due to the effect of the
amortization of intangibles acquired in connection with the APL
acquisition, which are not deductible for tax purposes. Because
the non-deductible amount is fixed, to the extent our income
before income taxes increases, our effective tax rate declines.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Adjusted EBITDA.</I> Adjusted EBITDA increased to
$19.2&nbsp;million for the six months ended June&nbsp;30, 2000
from $15.1&nbsp;million for the pro forma 1999 period. As a
result, Adjusted EBITDA as a percentage of net revenue increased
to 14.8% for the six months ended June&nbsp;30, 2000 from 13.7%
for the pro forma 1999 period.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Year ended December&nbsp;31,
1999 compared to year ended December&nbsp;31, 1998</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Revenue.</I> Net revenue increased to $143.4&nbsp;million
for the year ended December&nbsp;31, 1999 from
$102.7&nbsp;million in the prior year, representing an increase
of $40.7&nbsp;million or 39.6%. Approximately $22.9&nbsp;million
of the increase was attributable to revenue generated from the
acquisition of APL. Excluding the effect of the acquired
business, net revenue increased $17.8&nbsp;million or 17.3%,
primarily as a result of an increased volume of laboratory tests
performed. Also excluding the effect of the acquired business,
the number of billed accessions increased approximately 11.3% in
the year ended December&nbsp;31, 1999 compared to the year ended
December&nbsp;31, 1998, while the average price billed per
accession increased approximately 5.2%. Our volume growth has
primarily been driven by a net increase in the number of total
customers we serve. During 2000, we have been successful in
attracting new customers, primarily in the hospital, physician
and independent clinical laboratory markets while also
maintaining a very high retention rate for our existing
customers. The increase in the average price billed per accession
 is due to a greater proportion of higher-priced esoteric tests
performed in 1999 compared to 1998, as well as to price increases
 during 1999 for certain client and patient fee schedules.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cost of Services.</I> Cost of services increased to
$96.1&nbsp;million for the year ended December&nbsp;31, 1999 from
 $69.9&nbsp;million in the prior year, representing an increase
of $26.2&nbsp;million or 37.5%. Approximately $14.3&nbsp;million
of the increase is attributable to the cost of services performed
 by APL, which was acquired during the fourth quarter of 1999.
Excluding the effect of the acquired business, cost of services
increased $11.9&nbsp;million or approximately 17.0%.
Approximately $6.9&nbsp;million of the $11.9&nbsp;million
increase is due to the greater volume of laboratory tests
performed in 1999 compared to the prior year. The remaining
$5.0&nbsp;million is due to cost increases on a per-test basis
for laboratory supplies, operations labor and transportation
costs. Supplies cost per test increased due to the greater
proportion of esoteric tests performed in 1999 compared to the
prior year, while the increases in labor and transportation costs
 primarily reflect wage increases and higher transportation
volumes and fuel costs.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling, General and Administrative.</I> Selling, general and
administrative expense increased to $33.6&nbsp;million for the
year ended December&nbsp;31, 1999 from $23.1&nbsp;million for the
 year ended December&nbsp;31, 1998, representing an increase of
$10.5&nbsp;million or 45.5%. Approximately $5.0&nbsp;million of
the increase was attributable to the acquisition of APL.
Excluding the effect of the acquired business, selling, general
and administrative costs increased $5.5&nbsp;million or 23.8%.
The increase in selling expense is due to increased costs to
expand our national sales coverage, including additional travel
and sales office costs. The increase in general and
administrative expense primarily relates to expansion of our
management team and our information technology capabilities in
order to support our growth. We incurred increased costs in
personnel salaries and benefits, travel and information
technology.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Depreciation and Amortization.</I> Depreciation and
amortization expense increased to $4.8&nbsp;million for the year
ended December&nbsp;31, 1999 from $2.2 million for the year ended
 December&nbsp;31, 1998, representing an increase of
$2.6&nbsp;million. The increase is primarily due to amortization
of goodwill and additional depreciation attributable to the
acquisition of APL in the fourth quarter of 1999.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest Expense.</I> Interest expense increased to
$4.6&nbsp;million for the year ended December&nbsp;31, 1999 from
$0.9&nbsp;million for the year ended December&nbsp;31, 1998,
representing an increase of $3.7&nbsp;million. The increase
reflects the effect of an increase in long-term debt arranged in
conjunction with acquisition of APL in the fourth quarter of
1999.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision for Income Taxes.</I> The provision for income taxes
 decreased to $1.8&nbsp;million for the year ended
December&nbsp;31, 1999 from $2.2&nbsp;million for the year ended
December&nbsp;31, 1998, representing a decrease of
$0.4&nbsp;million. The decrease is due to the decrease in income
before income taxes, primarily due to higher interest expense in
1999, which was partially offset by an increase in the effective
tax rate. The effective tax rate has increased due to the
amortization of intangibles acquired in connection with the APL
acquisition, which are not deductible for tax purposes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Adjusted EBITDA.</I> Adjusted EBITDA increased to
$13.7&nbsp;million for the year ended December&nbsp;31, 1999 from
 $9.7&nbsp;million for the year ended December 31, 1998,
representing an increase of $4.0&nbsp;million. Approximately
$3.5&nbsp;million of the increase is due to the acquisition of
APL, which was acquired during the fourth quarter of 1999.
Excluding the effect of the acquired business, Adjusted EBITDA
increased approximately $0.5&nbsp;million or 5.2% in 1999
compared to 1998.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Year ended December 31, 1998 compared to the period
May&nbsp;2, 1997 to December&nbsp;31, 1997</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Revenue.&nbsp;&nbsp;</I>Net revenue increased to
$102.7&nbsp;million in the year ended December&nbsp;31, 1998,
from $59.2&nbsp;million in the May&nbsp;2, 1997 to
December&nbsp;31, 1997 period, representing an increase of
$43.5&nbsp;million or 73.5%. The increase in net revenue in the
twelve-month 1998 period compared to the eight-month 1997 period
is due both to the longer time period and to a full year-to-year
growth in the volume of billed accessions. The growth in testing
volume was the result of the success of the aggressive sales and
marketing program instituted during 1997 and 1998. The average
price per accession did not vary significantly between periods.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cost of Services.&nbsp;&nbsp;</I>Cost of services increased to
 $69.9&nbsp;million in the year ended December&nbsp;31, 1998 from
 $41.7&nbsp;million in the May&nbsp;2, 1997 to December&nbsp;31,
1997 period, representing an increase of $28.2&nbsp;million or
approximately 67.6%. The increase in the cost of services of the
twelve-month 1998 period compared to the eight-month 1997 period
of 67.6% is due both to the longer time period and to a full year
 increase in the volume of laboratory tests performed. The
average cost per test did not vary significantly between periods.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling, General and Administrative.&nbsp;&nbsp;</I>Selling,
general and administrative expense increased to
$23.1&nbsp;million in the year ended December&nbsp;31, 1998 from
$13.1&nbsp;million in the May&nbsp;2, 1997 to December&nbsp;31,
1997 period, representing an increase of $10.0&nbsp;million or
76.3%. This increase is due both to the longer time period as
well as increased expenditures. Selling expense increased due to
the costs

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<DIV align="left">
associated with the expanded sales coverage and marketing program
 initiated by the new management team.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Depreciation and Amortization.&nbsp;&nbsp;</I>Depreciation and
 amortization increased to $2.2&nbsp;million in the year ended
December&nbsp;31, 1998 from $1.1&nbsp;million in the May&nbsp;2,
1997 to December&nbsp;31, 1997 period. The increase in 1998 over
the 1997 amount is due to the longer time period, the effect of
depreciation on capital additions and amortization of the
goodwill from the 1998 Providence Laboratory Associates
acquisition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Adjusted EBITDA.&nbsp;&nbsp;</I>Adjusted EBITDA increased to
$9.7&nbsp;million for the year ended December&nbsp;31, 1998 from
$4.1&nbsp;million in the May&nbsp;2, 1997 to December&nbsp;31,
1997 period, representing an increase of 136.6%. This increase is
 due both to the longer time period in 1998 as well as to the
factors discussed above.

<P align="left"><B>Suppliers</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On a pro forma basis, no single supplier comprised greater than
6.2% of our laboratory supply purchases for the year ended
December&nbsp;31, 1999. We believe that suppliers are numerous
and compete aggressively for our business. We believe that our
relative size and position in the market offer us procurement
advantages not available to other smaller laboratories in the
industry.

<P align="left"><B>Seasonality</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We experience seasonal trends that we believe affect all clinical
 laboratory companies. Testing volume generally tends to be lower
 during the holiday seasons and, to a lesser extent, inclement
weather. As a result, because a substantial portion of our
expenses are relatively fixed over the short term, our operating
income as a percentage of revenue tends to decrease during the
third and fourth quarter of each year. Our historical results do
not necessarily demonstrate the impact of seasonality given our
high growth during the periods presented.

<P align="left"><B>Liquidity and Capital Resources</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our principal sources of liquidity are cash flow generated from
operations and borrowings under our senior credit facility. Total
 debt obligations increased to $145.8&nbsp;million as of
June&nbsp;30, 2000 from $139.0&nbsp;million as of
December&nbsp;31, 1999 and $12.5&nbsp;million as of
December&nbsp;31, 1998. Total debt obligations as of
June&nbsp;30, 2000 are composed of $123.5&nbsp;million in
borrowings under our senior credit facility, $17.5&nbsp;million
related to the convertible subordinated notes, and
$4.8&nbsp;million in other borrowings. The increase resulted
primarily from borrowings to finance the acquisition of APL in
1999. As of June&nbsp;30, 2000, we had $1.0&nbsp;million in cash
and cash equivalents and $23.4&nbsp;million in non-cash working
capital.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash flow from operations was $1.5&nbsp;million in the year
ended December&nbsp;31, 1998, $1.7&nbsp;million in the year ended
 December&nbsp;31, 1999, and $6.8&nbsp;million in the six months
ended June&nbsp;30, 2000. The trend of improved operating cash
flow is due to an improvement in our net income since our
acquisition of APL in October&nbsp;1999. Operating cash flow has
been negatively impacted by increases in working capital,
primarily accounts receivable and inventories, that have
accompanied the growth in business volumes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used for investing activities was $7.4&nbsp;million in
the year ended December&nbsp;31, 1998, $88.4&nbsp;million in the
year ended December&nbsp;31, 1999, and $13.5 million in the six
months ended June&nbsp;30, 2000. Investing activities consist of
acquisitions and capital expenditures for property, equipment and
 intangibles. Cash used in investing activities for the year
ended December&nbsp;31, 1998 was primarily for the acquisition of
 Providence Laboratory Associates. Cash used in investing
activities for the year ended December&nbsp;31, 1999 was
primarily for the acquisition of APL. Capital expenditures
primarily represent laboratory operating equipment, leasehold
improvements to the lab facilities and office equipment,
primarily computers. Capital expenditures during fiscal 1998 were
 approximately $2.9 million, $5.5&nbsp;million in 1999 and
$3.2&nbsp;million in the six months ended June 30, 2000.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by (used in) financing activities was
$5.9&nbsp;million in the year ended December&nbsp;31, 1998,
$87.6&nbsp;million in the year ended December&nbsp;31, 1999, and
$6.9 million in the six months ended June&nbsp;30, 2000.
Financing activities in 1998 consisted primarily of borrowings
and repayments under a $20.0 million credit facility with Heller
Financial Inc., which consisted of a term loan and accounts
receivable based line of credit. Financing activities in 1999
included the refinancing of our credit agreement with Heller
Financial Inc. with a new term loan of $20.0&nbsp;million and a
revolving facility of $15.0 million. On October&nbsp;13, 1999,
all of the outstanding debt related to the Heller Financial
credit agreement was repaid.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, in connection with the APL acquisition,
 we entered into an amended and restated senior credit facility
with Bankers Trust Company, as agent, and various other lenders
that provides for:
<P>

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	<TD width="3%"></TD>
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	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a revolving credit facility providing for up to
	$25.0&nbsp;million in revolving credit loans and letters of
	credit;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a Term A Loan facility providing for $50.0&nbsp;million in term
	loans; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a Term B Loan facility providing for $65.0&nbsp;million in term
	loans.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may borrow amounts under the senior credit facility for
permitted acquisitions, including related fees and expenses and
to fund working capital and general corporate needs. All
revolving loans incurred under the senior credit facility will
mature on October&nbsp;13, 2004. At June&nbsp;30, 2000, there was
 $48.0&nbsp;million outstanding under the Term&nbsp;A facility
and $64.7&nbsp;million outstanding under the Term&nbsp;B
facility, $10.8&nbsp;million of revolving credit borrowings and
$14.2&nbsp;million of unused borrowing capacity. The senior
credit facility provides that all of our indebtedness be secured
by a first priority security interest in some of our assets and
the capital stock of our subsidiaries.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our borrowings under the senior credit facility bear interest at
a floating rate and may be maintained by us as base rate loans
or, at our option, as Euro-rate loans, in each case, plus an
applicable margin. For the six-month period ended June&nbsp;30,
2000, our weighted average interest rate under our senior credit
facility was 9.94%.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The term loans mature, and as a result must be repaid, in
quarterly installments on March&nbsp;31, June&nbsp;30,
September&nbsp;30 and December&nbsp;31 of each year, beginning on
 June&nbsp;30, 2000. The scheduled repayments for the term loans
for the remainder of this year and 2001 are $4.7&nbsp;million and
 $9.2&nbsp;million, respectively. The final maturity date of the
Term A loan is October&nbsp;13, 2004 and the final maturity date
of the Term B loan is April&nbsp;13, 2006.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior credit facility requires us to meet certain financial
tests, including, without limitation, minimum interest coverage
ratios, a maximum senior debt leverage ratio, a maximum level of
capital expenditures and a minimum adjusted net worth. For the
three-month period ended June&nbsp;30, 2000, we were not in
compliance with a financial ratio covenant in our senior credit
facility. We have received a waiver from the lenders under our
senior credit facility for that noncompliance.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior credit facility contains customary events of default,
including without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, cross-defaults
 to certain other indebtedness, specified events of bankruptcy
and insolvency, judgment defaults, failure of any guaranty or
security document supporting the senior credit facility to be in
full force and effect and a change of control.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will use the net proceeds of the offering to repay
indebtedness under the Term&nbsp;A loan and the Term&nbsp;B loan.
 In connection with, and subject to, the offering, we expect to
amend or refinance our senior credit facility on terms and
conditions that are more favorable to us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our cash and cash equivalents together with cash
flows expected to be generated from operations and borrowing
capabilities under the current or an amended senior credit
facility will be sufficient to meet anticipated requirements for
working capital, interest payments, capital expenditures and
scheduled principal payments under our debt obligations for the
foreseeable future.

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<P align="left"><B>Quantitative and Qualitative Disclosure of Market Risks</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest on amounts borrowed under our credit facility discussed
above is subject to adjustment determined based on certain levels
 of financial performance. For LIBOR borrowings, the applicable
margin added to LIBOR can range from 2.00% to 3.25% for Term A
and revolving loans and is equal to 3.875% for Term B loans. At
any time, a sharp rise in interest rates could have a material
adverse impact on our cost of working capital and interest
expense. For every one-half percent rise in interest rates, our
variable note obligations held at June&nbsp;30, 2000 interest
expense would increase by $0.6&nbsp;million annually.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 1999, we entered into one interest rate swap agreement,
which is used to reduce the impact of interest rate changes on
net income. This agreement effectively converts, for a three-year
 period, $58.0&nbsp;million of floating rate borrowings to fixed
rate borrowings. We secured a fixed interest rate on this
agreement of 6.6225%.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not conduct business operations in foreign currencies and,
as a result, are not generally subject to the exposures that
arise from foreign exchange rate movements. However, occasionally
 we may purchase laboratory supplies or reagents from vendors who
 are located outside the United States. In such cases, we usually
 arrange to purchase the supplies or reagents through a U.S.
distributor, so we would not be directly exposed to exchange rate
 risk.

<P align="left"><B>Recent Accounting Pronouncements</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June&nbsp;1998, the Financial Accounting Standards Board
issued SFAS No.&nbsp;133, &#147;Accounting for Derivative
Instruments and Hedging Activities,&#148; which establishes
accounting and reporting standards for derivative instruments and
 hedging activities. SFAS&nbsp;133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. This statement was amended by SFAS&nbsp;137 which
defers the effective date to all fiscal quarters of fiscal years
beginning after June&nbsp;15, 2000. SFAS 133 is effective for our
 first quarter in the fiscal year ending December&nbsp;31, 2001
and is not expected to have a material effect on our financial
position or results of operations. However, the ultimate impact
will depend on the derivative activity that we have at the date
of adoption and thereafter.

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<DIV align="left"><A NAME="010"></A></DIV>

<P align="center"><B>BUSINESS</B>

<P align="left"><B>Overview</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading national provider of esoteric laboratory testing
 services. Esoteric tests are clinical laboratory tests that are
more complex and typically priced higher than routine tests. We
market our esoteric testing services to hospitals and independent
 clinical laboratories nationwide. As of September&nbsp;15, 2000,
 we provided our services to over 380&nbsp;hospitals and 160
independent clinical laboratories in 31 states. Our two main
laboratories are located in metropolitan Washington, D.C., and
Las Vegas, Nevada. We are the leading provider of comprehensive
laboratory services in each of those markets. We strengthen our
offering by providing our clients advanced information technology
 solutions, as well as other value-added laboratory services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we are well positioned to serve our target
clients. Many hospitals and independent clinical laboratories do
not perform esoteric tests because of the complexity and high
cost of performing these tests internally. These organizations
choose us as their esoteric laboratory because we offer them
superior service, excellent quality and rapid turnaround time. In
 addition, unlike the laboratories that provide comprehensive
services on a national basis, we generally do not compete with
our clients for routine testing business in their local markets.
We believe that we offer our clients one of the most complete
esoteric testing service offerings available, as well as access
to the latest in innovative testing technology. We obtain this
access through acquisition and licensure of new testing
technologies, which leverages external research in esoteric
testing and reduces our development time and costs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 1999, we acquired APL, the leading laboratory services
 provider in Nevada. With this purchase, we acquired a full
service laboratory facility in Las Vegas, Nevada that complements
 the geographic reach of our Chantilly, Virginia facility and
enhances our position as a nationwide provider of esoteric
testing services. We have been successful in attracting a wide
range of clients for our esoteric testing services, including
Kaiser Permanente, Consorta Catholic Health Resource Partners,
Health Trust Purchasing Group and Massachusetts General Hospital.
 We are currently performing more than 330,000 total tests per
week. For the six months ended June&nbsp;30, 2000 and for the
year ended December&nbsp;31, 1999 on a pro forma basis, we had
net revenue of $129.9&nbsp;million and $225.6&nbsp;million,
respectively, and Adjusted EBITDA of $19.2&nbsp;million and $27.3
 million, respectively.

<P align="left"><B>Industry</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reliance on laboratory testing for detection, diagnosis,
evaluation, monitoring and treatment of diseases and other
medical conditions creates significant market demand for clinical
 laboratory testing services. In 1998, over 5.6&nbsp;billion
tests were performed in the United States. According to industry
sources, more than 70% of all health care decisions and spending
are impacted by clinical laboratory test results.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to Washington G-2 Reports, the U.S.&nbsp;clinical
laboratory industry generated $31.8&nbsp;billion in revenues in
1999, which represented approximately 3% of total healthcare
expenditures. We expect growth in clinical laboratory spending
due to the following:
<P>

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	general aging of the U.S. population;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	growth in new highly-specialized tests, including genetic
	testing;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	increasing testing for diagnosis and monitoring of infectious
	diseases, such as HIV and hepatitis&nbsp;C;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	increasing testing by employers for substance abuse;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	increasing outsourcing in the health care industry; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	increasing awareness of patients as to the value of laboratory
	testing and an increasing willingness of patients to pay for
	screening and other tests that may not be covered by third-party
	payors.</TD>
</TR>

</TABLE>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Laboratory tests are provided by hospital-affiliated
laboratories, physician-owned laboratories and independent
clinical laboratories. The clinical laboratory testing market is
highly fragmented with over 165,000 federally-regulated clinical
laboratories, 8,900 of which are hospital-based clinical
laboratories and 4,900 of which are independent clinical
laboratories. Washington G-2 Reports estimates that in 1998, 63%
of all laboratory testing revenue was derived from hospital-based
 laboratories, 26% was derived from independent clinical
laboratories and the remaining 11% was derived from
physician-based laboratories. We believe hospitals and
independent clinical laboratories will continue to outsource
esoteric laboratory testing services because of the complexity
and high cost of performing these tests internally. We also
believe that hospitals will compete on an &#147;outreach&#148;
basis with independent clinical laboratories for routine,
physician-generated testing business in local markets. Providing
these services allows hospitals to spread the fixed costs of
their internal laboratory facilities across a broader revenue
base.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We perform laboratory tests on body fluids such as blood and
urine as well as on tissue and other samples, such as human
cells. The tests that we perform can be categorized as follows:

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Esoteric Tests:</I> Esoteric tests are specialized tests which
 are used by physicians to obtain information not provided by
routine tests. These tests are performed less frequently than
routine tests and require specialized equipment, highly-trained
personnel and may have significant non-automated processes. In
1998, the esoteric testing market represented approximately
$2.0&nbsp;billion. We believe the esoteric testing market is
growing rapidly, driven by general advances in medical technology
 and the accelerating pace of new genetic-based testing. Esoteric
 tests generally command a higher price, are more profitable and
have a more attractive payor mix than routine tests. We believe
that, due to the high degree of complexity and costs involved
with esoteric testing, the majority of these tests are performed
by independent clinical laboratories, such as AML.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Toxicology Tests:</I> Toxicology tests are targeted at the
discovery and identification of chemical and drug substances
present in the body&#146;s metabolism. Employers are increasingly
 utilizing toxicology tests in attempting to lower their overall
health care costs and improve their workplace environment by
maintaining a healthy, drug free work force. According to
Washington G-2 Reports, among firms in the United States,
approximately 70% test employees or job applicants for illegal
drug use. The toxicology testing market in the United States has
been estimated at $750&nbsp;million per year. Toxicology tests
are often classified as a subcategory of esoteric tests.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Routine Tests:</I> Routine tests are used by physicians in
general patient care to establish or support a diagnosis and to
monitor disease. These tests typically measure the functionality
of organs such as the kidney, heart, liver and thyroid. Routine
tests are conducted 24 hours-a-day, 365 days-a-year, with results
 often provided electronically within 24 hours of testing. Among
independent laboratory companies, routine tests are offered or
conducted through their respective patient service centers,
primary laboratories and short turnaround time, or STAT,
laboratories. Patient service centers are facilities at which
specimens are collected and are typically in close proximity to
medical professional buildings or complexes.

<P align="left"><B>Our Business Strategy</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The principal elements of our business strategy include:
<P>

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	<TD width="1%"></TD>
	<TD width="96%"></TD>
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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Expanding Our Position as a Leading National Provider of
	Esoteric Testing Services.</I> We will continue to expand
	nationally by providing esoteric testing services to our clients
	as a service offering that complements their routine testing
	operations. We believe that as tests become more complex and
	costly, hospitals and independent clinical laboratories will
	refer more of these tests to esoteric testing laboratories, such
	as ours. Hospitals and independent clinical laboratories find our
	 esoteric testing services attractive in part because we do not
	compete with them for routine testing</TD>
</TR>

</TABLE>

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	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD></TD>
	<TD align="left">
	services outside of our core markets of Nevada and metropolitan
	Washington, D.C. With significant operations in both the eastern
	and western United States, we offer hospitals and independent
	clinical laboratories throughout the nation access to esoteric
	testing technology and expertise that supports and enhances their
	 clinical laboratory offerings and objectives.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Maintaining Our Comprehensive Offering of Esoteric Tests.</I>
	We will continue to acquire and license new esoteric tests to
	satisfy our clients&#146; needs. We believe this approach allows
	us to leverage external research and reduce our development time
	and costs while providing the latest in technological innovation.
	 We will continue to maintain strong relationships with
	developers of new medical testing technologies to remain a
	leading provider of esoteric testing services. Our operating
	history, market knowledge and strong professional relationships
	have consistently enabled us to access and provide newly-created
	esoteric tests expeditiously.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Growing Our Leadership Position in Our Core Geographic
	Markets.</I> We believe the attractive demographic
	characteristics and growth prospects of our core geographic
	markets, Nevada and metropolitan Washington, D.C., provide an
	excellent opportunity for us to continue to expand and grow our
	esoteric and routine operations. We also believe that our strong
	regional presence and reputation for superior quality and client
	service position us as the preferred provider of laboratory
	testing services for hospitals, independent clinical laboratories
	 and physician laboratories in these markets. In response to our
	clients&#146; needs, we have developed an extensive
	infrastructure and provide a full spectrum of testing services
	supported by a network of rapid collection, processing and
	distribution services. Our extensive infrastructure and strong
	financial performance in our core geographic markets provide us
	with a platform for offering esoteric testing services on a
	national basis. We may opportunistically expand our full-service
	testing offering in strategic locations throughout the United
	States.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Enhancing Our Competitive Position by Providing the Highest
	Levels of Client Service.</I> We seek to achieve the highest
	levels of client satisfaction and foster long-term relationships
	through superior customer service. Members of our executive
	management team begin each day with a meeting to address specific
	 client service issues. We have a comprehensive quality assurance
	 program which ensures that laboratory specimens are properly
	collected and tested and that client and patient information is
	timely and properly recorded, billed and filed. Our sales and
	operations teams are trained to identify, respond to and resolve
	all client service issues in a time efficient and satisfactory
	manner. We constantly monitor, assess and strive to improve
	turnaround time, process workflow and overall client
	satisfaction. We utilize external providers to perform
	proficiency testing on, and confirm accuracy of, laboratory
	results. We believe we have a reputation as one of the highest
	quality providers of clinical laboratory services in the markets
	in which we operate. We believe our strong client service has
	contributed to our 99% client retention rate over the period from
	 January&nbsp;1999 to June&nbsp;2000.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Strengthening Customer Relationships with Value-Added
	Services.</I> We will continue to leverage our long history of
	clinical laboratory experience and expertise to develop and
	strengthen the community outreach efforts of our clients. We have
	 developed innovative services that address the evolving needs of
	 our hospital, physician and independent clinical laboratory
	clients. Our value-added services enable our clients to more
	effectively manage certain laboratory services while outsourcing
	other services to us. We believe that offering these value-added
	services to our clients creates a long-term relationship,
	providing us with a sustainable competitive advantage.</TD>
</TR>

</TABLE>

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<P align="left"><B>Our Services</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table depicts the various services we offer:

<P align="left">


<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="21%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="17%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="25%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="28%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Testing</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Category</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Scientific Focus</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Selected Examples</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Selected Client Relationships</B></FONT></TD>
</TR>

<TR>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B><I>Esoteric</I></B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Endocrinology<BR>
	Genetics<BR>
	Immunology<BR>
	Immunoperoxidase<BR>
	Microbiology<BR>
	Molecular Biology<BR>
	Oncology<BR>
	Serology<BR>
	Special Chemistry<BR>
	Clinical Toxicology</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	HIV Genotyping<BR>
	Polymerase Chain Reaction<BR>
	Tuberculosis<BR>
	Blood Cultures<BR>
	Bone Marrow<BR>
	Karotyping<BR>
	Phenotyping<BR>
	Prognostic HIV<BR>
	DNA Sequencing<BR>
	Blood Leads</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Kaiser Permanente<BR>
	Whitman Walker Clinic<BR>
	Georgetown University Hospital<BR>
	Massachusetts General Hospital<BR>
	Universal Health Services</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B><I>Toxicology</I></B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Forensic</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Drug Testing (Hair and Urine)<BR>
	Blood Alcohol</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	US Postal Service<BR>
	US Airways<BR>
	Starwood Resorts<BR>
	Frito Lay<BR>
	Publix Supermarkets</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B><I>Routine</I></B></FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Hematology<BR>
	Cytology<BR>
	Histology<BR>
	Automated Chemistry<BR>
	Bacteriology</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Complete Blood Count<BR>
	Routine Health Screens<BR>
	Cholesterol Tests<BR>
	Electrolytes<BR>
	Pregnancy and Prenatal<BR>
	Pap Smears<BR>
	Glucose Monitoring</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Sierra Health<BR>
	Aetna US Healthcare<BR>
	Individual physician practices</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Esoteric Testing.</B> We perform an average of 123,000
esoteric tests per week. The nature of these tests requires a
high level of accuracy, quick turnaround time and substantial
human involvement. Because it is not cost effective for most
laboratories to perform esoteric tests in-house, they generally
refer many esoteric tests to outside testing laboratories.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We offer our clients a broad array of esoteric tests, which we
believe represent substantially all of the esoteric tests
typically requested. We have relationships with niche
laboratories that perform the small number of tests that we do
not perform internally. We acquire and license new esoteric tests
 created by others to leverage external research and reduce our
development time and costs while providing the latest testing
technology to our clients.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently offer a wide range of genetic tests, which are tests
 that are based on DNA and RNA. We believe genetic testing is a
substantial area of growth for us because recent scientific
advances have made it possible to use esoteric testing to
identify genetic characteristics of many diseases. As science
expands our understanding of the human genome, we believe that
genetic testing will increase in importance.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We use complex testing technologies, such as Branch DNA and
polymerase chain reaction, or PCR, testing to directly evaluate
genetic material. These testing technologies provide earlier and
more precise detection of disease and predisposition to disease
than historically has been available. In August of this year, we
became the first national laboratory to offer Roche&#146;s new
PCR test for the sexually transmitted

<P align="center">33

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<DIV align="left">
diseases chlamydia and gonorrhea. This highly specialized
esoteric test has been scientifically proven to be a more
sensitive test than traditional methodologies.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 1999 and the six months
ended June&nbsp;30, 2000, esoteric testing represented 47.0% and
52.9% of our net revenue, respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Toxicology Testing.</B> We perform an average of 43,500
forensic toxicology tests per week. Forensic toxicology requires
complex procedures and government licensure, which we have both
at our Las Vegas, Nevada and Chantilly, Virginia laboratories.
Our toxicology customers are large employers and government
organizations who test their employees for drugs of abuse, as
well as hospitals and independent laboratories who choose not to
do these tests.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our forensic toxicology department screens urine and hair
specimens for the presence of drugs. Specimens are submitted to
us by customers needing to comply with company, state or federal
government workplace drug testing programs. Toxicology testing
can occur on a pre-employment, random, for cause, return-to-duty
or post-accident basis. Hair testing can often detect drugs used
by an individual in the last 60 to 90&nbsp;days, whereas
conventional urine drug testing typically only detects drug use
in the last few days.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have made significant proprietary advances in the use of hair
testing for drug use, which have enabled enhanced detection of
drug users. We recently received a patent related to our hair
testing product and, in accordance with a final rule published by
 the FDA in April&nbsp;2000, we will be seeking to obtain FDA
approval of that product. Our hair testing product shortens the
time needed to perform a hair test to a single day.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 1999 and six months ended
June&nbsp;30, 2000, toxicology testing represented 10.1% and
10.3% of our net revenue, respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Routine Testing.</B> We perform an average of 164,000 routine
tests per week. Routine clinical laboratory tests measure various
 important bodily health parameters such as the function of the
kidneys, heart, liver, thyroid and other organs. Commonly ordered
 tests include:
<P>

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	blood chemistry tests;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	complete blood count, or CBC;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	pap smears;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	HIV screening tests;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	urinalyses; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	pregnancy tests.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We perform routine testing through our primary and STAT
laboratories. We also perform routine testing in hospitals where
we have on-site laboratories. Many test results are delivered
electronically to our customers, which include managed care
organizations and individual physician practices.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 1999 and the six months
ended June&nbsp;30, 2000, routine testing represented 42.9% and
36.8% of our net revenue, respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Value-Added Services.</B> As part of our comprehensive service
 offering, we provide value-added services designed to support
our customers&#146; laboratory businesses and enhance our
relationship with these customers. We draw on our expertise in
the clinical laboratory testing market to provide the following
value-added services to our customers:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Information Technology Services.</I> Our information
	technology capabilities enable online connectivity between us and
	 our clients.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Medical Directorships.</I> We provide medical directors for
	37&nbsp;of our clients&#146; laboratories.</TD>
</TR>

</TABLE>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Test Management.</I> We examine our client&#146;s testing menu
	 and services and recommend strategies to reduce overall
	laboratory costs, while optimizing laboratory quality and
	turnaround time.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Sales Support.</I> Our sales force accompanies clients to
	promote our esoteric laboratory testing services as the
	client&#146;s reference laboratory.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Ancillary Services.</I> We assist our clients in ancillary
	services, including courier services, information technology and
	laboratory technical expert consultation.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>On-Site Laboratories.</I> Some hospitals wish to reduce their
	involvement in the day-to-day operation of their in-house
	laboratories. We sometimes enter into agreements with our clients
	 under which we establish and license, in our name, an on-site
	laboratory, renting space from the client as necessary.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	<I>Phlebotomy Services.</I> In response to a request by a client,
	 we will work with our client to provide phlebotomy services,
	which is the process for collecting a blood specimen, in accord
	with relevant state and federal law.</TD>
</TR>

</TABLE>

<P align="left"><B>Customers</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide testing services to a broad range of health care
providers including hospitals, independent clinical laboratories,
 employers, managed care organizations, physicians and physician
practice groups. No single customer or affiliated group of
customers accounted for more than 7% of our total net revenues
for the six months ended June&nbsp;30, 2000. Our strong client
service focus has contributed to a 99% client retention rate from
 January&nbsp;1999 to June&nbsp;2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our principal customers include:

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Hospitals.</I> We provide esoteric testing and value-added
services to over 380 hospitals throughout the United States. We
believe that we are one of the industry leaders in servicing
hospitals&#146; esoteric laboratory testing needs. Hospitals are
competing for routine testing businesses in order to spread the
fixed costs of their internal laboratory facilities across a
broader revenue base. Our ability to assist hospitals in
expanding their routine testing businesses helps position us as
their preferred provider for esoteric testing services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our clients in the hospital market include individual hospitals,
hospital networks and hospitals belonging to GPOs. We recently
were named a preferred provider in contracts with two large GPOs,
 Health Trust Purchasing Group and Consorta Catholic Health
Resource Partners, which together have over 600 hospitals as
participating members. Our individual hospital clients include
Georgetown University Hospital and Massachusetts General
Hospital; and our hospital network clients include Central
Pennsylvania Alliance of Laboratories and Inova Health System.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hospitals generally maintain on-site laboratories to perform
routine testing and outsource less frequently needed and esoteric
 procedures to laboratories like AML. Many hospitals compete with
 independent laboratories by offering testing services to
community physicians via the hospital&#146;s own laboratory. As a
 national esoteric laboratory services provider, we provide our
hospital customers with services that complement their routine
testing operations, and unlike other comprehensive national
laboratory service providers, other than in our core geographic
markets, we do not compete with those hospitals for routine
testing business in their local markets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Independent Clinical Laboratories.</I> We provide esoteric
testing services to local and regional independent laboratories
that do not have the breadth of our esoteric testing
capabilities. The services we perform for independent laboratory
clients are similar to the esoteric testing services we perform
for hospital clients. We have over 160 independent clinical
reference laboratories as clients, including MDS, PathLab and
Dynacare.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Employers and Other Institutions.</I> We believe that we are
one of the leaders in the clinical laboratory industry in
providing testing to employers for illegal drug use. We believe
that the employer

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<DIV align="left">
market is a large, growing market for laboratory testing as
companies and governmental agencies increase their pre-employment
 drug screening programs to ensure that their work environments
are safe and drug-free. All of our 4,730 employer and other
institutional customers are charged on a fee-for-service basis.
These customers include US Airways, United States Postal Service
and Publix Supermarkets.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Managed Care Organizations.</I> In our core geographic
markets, we service the managed care needs of our physician
clients. Managed care organizations in these markets contract
with us because of our share of the physician market and our
extensive service network. We also service the esoteric testing
needs of managed care organizations such as Kaiser Permanente,
which have their own routine testing laboratories but outsource
esoteric testing to us. We have capitated contracts, which
provide for billing on a fixed-fee basis, with 13 managed care
organizations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Physicians and Physician Groups.</I> We provide esoteric
testing services to physicians and physician groups on a national
 basis. We also service the routine testing needs of these
customers in our core geographic markets. Many physicians are
required to refer tests to a specific laboratory. In addition to
capturing a share of that business, we believe our reputation as
a premier provider of testing services has enabled us to capture
many physicians&#146; or physician groups&#146; other testing
business. Our physician and physician group clients are billed on
 a fee-for-service basis.

<P align="left"><B>Payors</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We bill the majority of our testing services on a fee-for-service
 basis. If the service is a physician-ordered test, the payor may
 be the physician, the patient or a third party who pays the bill
 for the patient, such as an insurance company, Medicare or
Medicaid. Fees are billed to hospitals, independent clinical
laboratories and physicians based on a negotiated fee schedule.
Medicare and Medicaid reimbursements are based on fee schedules
set by governmental authorities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Over the past few years, billing on a capitated basis has become
a larger segment of the industry&#146;s revenue. We have
selectively entered into capitated agreements and we received
only approximately 5% of our net revenue for the six months ended
 June&nbsp;30, 2000 from capitated arrangements. The following
table shows current estimates of the breakdown of the percentage
of our net revenue for the six months ended June&nbsp;30, 2000
applicable to each payor group:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="76%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Six Months Ended</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>June 30, 2000</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Health care providers and employers</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59.9%</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Patient</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12.4%</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Other insurance</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21.0%</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Medicare and Medicaid</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.7%</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0%</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Sales and Marketing</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our sales and marketing strategy is designed to expand our
esoteric services nationally and increase the penetration of our
comprehensive service offering in Nevada and metropolitan
Washington, D.C. The key elements of our strategy include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	continuing our direct sales efforts targeted at hospitals and
	independent clinical laboratories;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	expanding our direct sales force with an increasing national
	focus; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	increasing the technical expertise of our sales organization.</TD>
</TR>

</TABLE>

<P align="center">36
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our sales force is a key competitive advantage. Our
sales force includes recognized laboratory industry veterans and
is currently comprised of 46 sales professionals and a support
staff of 16 individuals. Twenty-four of our salespeople focus on
sales of esoteric testing and value-added services, while seven
focus primarily on toxicology sales. The remaining 15 salespeople
 focus primarily on sales to physicians and physician groups in
Nevada and metropolitan Washington, D.C. Many of our sales
professionals are medical technologists or other health care
professionals. We continue to expand our sales force with
additional personnel and management staff to accommodate new
market opportunities and to concentrate on increasing revenues
and profitability from existing clients.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We continually train and educate our sales force on the testing
services offered by our company. We emphasize client service and
quality, including periodic comprehensive reviews of our
performance and daily meetings among management and the sales
professionals to review any issues or problems with our clients.
We believe the success of our focus and efforts on client service
 and quality is demonstrated by our strong client retention,
growth in new clients and high customer satisfaction.

<P align="left"><B>Information Technology</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide a comprehensive offering of information technology
solutions to our clients that enables multi-level connectivity
and system interface functionality. Our offering includes a wide
range of flexible services, ranging from electronic data
interchange to internet-based services. Drawing on our extensive
operating history and diverse client base, we have created a
state of the art information technology solution that is user
friendly, cost effective and hardware neutral. Our service
offering includes:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	automated test ordering;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	results reporting;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	legacy system interface and connectivity; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a strategic relationship with LabPortal, Inc., which we believe
	will provide our clients with the latest clinical laboratory
	web-based connectivity software products and services.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These information technology capabilities help us establish a
long term relationship and provide value-added services not
typically offered in the laboratory industry. We have made a
significant investment in building a strong information
technology infrastructure that allows our customers to
efficiently and cost-effectively access and deliver data. We
believe that these investments give us a competitive advantage,
as customers find it easier to do business with us than with our
competitors.

<P align="left"><B>Competition</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The esoteric clinical laboratory business is highly competitive
and is served by several national laboratories, as well as many
niche and regional organizations. Our primary competitors include
 large independent laboratories, such as Quest Diagnostics and
Laboratory Corporation of America. We also compete with niche
laboratories such as Specialty Laboratories, Impath and Athena
Diagnostics, as well as laboratories affiliated with educational
institutions such as Mayo Medical Laboratories and Associated
Regional University Pathologists, in the esoteric testing market.
 In the toxicology testing business, we compete with Quest
Diagnostics, Laboratory Corporation of America, Psychemedics and
PharmChem. The routine laboratory testing business is highly
fragmented and also very competitive.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that health care providers consider the following
factors, among others, in selecting a laboratory:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	accuracy, timeliness and consistency in reporting test results;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	breadth of tests performed by the laboratory;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	customer service capability;</TD>
</TR>

</TABLE>

<P align="center">37

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reputation in the medical community;</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	logistics capability and geographic location;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	information technology solutions;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	approval of managed care organizations; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	pricing.</TD>
</TR>

</TABLE>

<P align="left">
We believe that we compete favorably in each of these areas.

<P align="left"><B>Compliance Program</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Compliance with government rules and regulations is a significant
 concern throughout the clinical laboratory industry because of
evolving interpretations of regulations and the national debate
over health care expenditures, fraud and abuse. We have created a
 compliance program that we believe substantially follows the
United States Department of Health and Human Services&#146;
Office of Inspector General&#146;s Model Compliance Plan for
Clinical Laboratories. We are in the process of integrating the
compliance programs of AML and APL. We believe that we comply, in
 all material respects, with applicable statutes and regulations.

<P align="left"><B>Quality Assurance</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our goal is to provide the highest levels of client satisfaction
and foster long-term relationships. To achieve that goal, we have
 implemented a comprehensive quality assurance program which
ensures that laboratory specimens are properly collected and
tested and client and patient information is timely and properly
recorded, billed and filed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Internal Quality Control and Audits.</I> Quality control
samples are processed in parallel with the analysis of patient
specimens. The results of tests on quality control samples are
then monitored to identify imprecision in the analytical
processes. In addition, we administer an extensive internal
program of &#147;blind&#148; proficiency testing, where quality
control samples are processed through our systems as normal
patient samples. We also perform internal process audits as part
of our comprehensive quality assurance program.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>External Proficiency Testing and Accreditation.</I> Our
laboratories participate in various externally-conducted blind
sample quality surveillance programs. These programs are
performed in connection with all other quality assurance
procedures. They include proficiency testing programs
administered by the College of American Pathologists, as well as
many state agencies. Our laboratories are all accredited by the
College of American Pathologists, an independent nongovernmental
organization of board certified pathologists approved by the
United States Health Care Financing Administration to inspect
laboratories to determine compliance with the standards required
by the Clinical Laboratory Improvement Amendments of 1988. The
College of American Pathologists, or CAP, offers an accreditation
 program, which includes on-site inspections and participation in
 a proficiency testing program, to which laboratories may
voluntarily subscribe.

<P align="left"><B>Regulation of Clinical Laboratory Operations</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The clinical laboratory industry is subject to significant
federal and state regulation. Governmental authorities may impose
 fines or criminal penalties or take other enforcement actions,
including revoking a clinical laboratory&#146;s right to conduct
business, in order to enforce laws and regulations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>CLIA and State Law.</I> Our laboratories and patient service
centers are licensed and accredited by applicable federal and
state agencies. The Clinical Laboratory Improvement Amendments of
 1988, or CLIA, regulate virtually all clinical laboratories by
requiring that they be certified by the federal government to
ensure that laboratory testing services are uniformly accurate,
reliable and timely. CLIA permits states to adopt regulations
that are more stringent than federal law. For example, state laws
 may require additional personnel qualifications, including
licensure or certification, specific lab report or billing

<P align="center">38
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<DIV align="left">
disclosure, quality control, record maintenance or proficiency
testing. State laws may also prohibit mark-ups or multiple fee
schedules by laboratories performing tests on specimens
originating in the state. A number of states with some degree of
jurisdiction over our activities, including New York, have in
fact adopted regulations stricter than those set forth in CLIA.
CAP performs inspections under CLIA for HCFA every two years.
CLIA certification via CAP or other federally designated agencies
 and compliance with applicable state licensure requirements also
 are prerequisites for our continued participation in the
Medicare and Medicaid programs.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Drug Testing.</I> The Substance Abuse and Mental Health
Services Administration, or SAMHSA, regulates drug testing for
public sector employees. SAMHSA has established detailed
performance and quality standards that laboratories must meet to
perform drug testing on federal employees and contractors and
other regulated entities. Our laboratories that perform such
testing must be certified as meeting SAMHSA standards. Our SAMHSA
 certified laboratories are subject to on-site inspections twice
a year by SAMHSA and CAP.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Controlled Substances.</I> The federal Drug Enforcement
Administration, or DEA, regulates access to controlled substances
 in drug abuse testing. Our laboratories that handle controlled
substances are licensed by the DEA.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Medical Waste and Radioactive Materials.</I> Clinical
laboratories are also subject to federal, state and local
regulations relating to the handling and disposal of medical
specimens, hazardous waste and radioactive materials. We use
licensed outside suppliers for such disposal. We believe that we
currently comply with all laws in connection with the disposal of
 medical waste and radioactive materials.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Occupational Safety.</I> The federal Occupational Safety and
Health Administration, or OSHA, has established extensive
requirements relating specifically to workplace safety for health
 care employers. This includes laboratories whose workers may be
exposed to blood-borne or airborne viruses. We believe that we
are in substantial compliance with OSHA rules and regulations and
 have adopted policies to meet OSHA requirements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Specimen Transportation.</I> Regulations of the Department of
Transportation, the Public Health Service and the United States
Postal Service apply to surface and air transportation of
laboratory specimens. We believe that we are in substantial
compliance with such regulations.

<P align="left"><B>Regulation of Reimbursement for Laboratory Services</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Overview.</I> The health care industry has been undergoing
significant changes. Governmental payors, such as Medicare, which
 principally serves patients aged 65&nbsp;years and older, and
Medicaid, which principally services indigent patients, as well
as private insurers and large employers, have taken steps to
control the cost, utilization and delivery of health care
services. We believe that our non-government reimbursed business
may depend on continued participation in the Medicare and
Medicaid programs, because many clients may want a single
laboratory to perform all of their laboratory testing services,
regardless of whether reimbursements are ultimately made by
themselves, Medicare, Medicaid or other payors.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Billing and reimbursement for laboratory testing is subject to
significant federal and state regulation. Penalties for
violations of laws relating to billing federal health care
programs and for violations of federal fraud and abuse laws
include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	exclusion from participation in Medicare/ Medicaid and other
	federal health care programs;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	asset forfeitures;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	civil and criminal penalties and fines; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	loss of various licenses, certificates and authorizations
	necessary to operate some or all of our business.</TD>
</TR>

</TABLE>

<P align="center">39

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Reduced Reimbursements.</I> In 1984, Congress established a
Medicare fee schedule for laboratory services performed for
patients covered under Part&nbsp;B of the Medicare program. In
1986, Congress imposed a ceiling (the national limitation amount)
 on the amount that would be paid under the Medicare fee schedule
 reimbursement methodology. Since then, Congress has periodically
 reduced previous ceilings on the national limitation amount. The
 Medicare national limitation amount was reduced in 1996 to 76%
of the national limitation amount and in 1998 to 74% of the
national limitation amount. In addition, Congress also eliminated
 through 2002 the provision for annual fee schedule increases
based on the consumer price index. The Clinton
administration&#146;s proposed budget for fiscal Year 2000 sought
 to reduce further the Medicare national limitation amount to
72%, to reduce laboratory payment updates by the Consumer Price
Index, or CPI, minus one percent over the next five years, and to
 reduce laboratory payments by 30&nbsp;percent for four common
laboratory tests (HgbAlc, TSH, PSA and urine culture) where data
show Medicare overpays compared to the private sector. We cannot
predict whether Congress will implement the proposed reductions
or any other reductions.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Laboratories must bill the Medicare program directly and must
accept the scheduled amount as payment in full for most tests
performed on behalf of Medicare beneficiaries. In addition, state
 Medicaid programs are prohibited from paying more (and in most
instances, pay significantly less) than Medicare. Major
laboratories, including us, typically use two fee schedules:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Fees charged to physicians, hospitals and institutions to which a
	 laboratory supplies services on a wholesale basis. These are
	generally subject to negotiation or discount.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Fees charged to individual patients and third party payors, like
	Medicare and Medicaid. These generally require separate bills for
	 each requisition.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fees established by Medicare are typically lower than patient
 fees otherwise charged by us, but are higher than our fees
actually charged to many clients. During 1992, the Office of the
Inspector General, or OIG, of the Department of Health and Human
Services, or HHS, issued final regulations that prohibited
charging Medicare fees substantially in excess of a
provider&#146;s usual charges. The OIG, however, declined to
provide any guidance concerning interpretation of these rules,
including whether or not discounts to nongovernmental clients and
 payors or the dual-fee structure might be inconsistent with
these rules.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A proposed rule released in September&nbsp;1997 would have
authorized the OIG to exclude from participation in the Medicare
program providers, including laboratories, that charge Medicare
and other federal health care programs fees that are
&#147;substantially in excess of .&nbsp;.&nbsp;. usual charges
 .&nbsp;.&nbsp;. to any of [their] customers, clients or
patients.&#148; This proposal was withdrawn by the OIG in 1998.
However, the 1997 Balanced Budget Act permits HCFA to adjust
reimbursement for some Part&nbsp;B services, including laboratory
 services, if the fees are &#147;inherently unreasonable.&#148;
In January&nbsp;1998, HCFA issued an interim final rule setting
forth criteria to be used by HCFA in determining whether to
exercise this power. Among the factors listed in the rule are
whether the statutorily prescribed fees are &#147;grossly higher
or lower than the payment made for the .&nbsp;.&nbsp;. services
by other purchasers in the same locality.&#148; We cannot provide
 any assurances to you that fees payable by Medicare could not be
 reduced as a result of the application of this rule.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
HCFA recently issued a contract to a company to develop
background data to be used in an inherent reasonableness review
of Pap Smears and 50 other high volume tests. The background data
 will be used by HCFA to determine whether the payments made by
Medicare are grossly deficient or grossly excessive for the tests
 to be studied. We cannot determine the results of this review at
 this time. The Clinical Laboratory Management Association, or
CLMA, a trade association representing the clinical laboratory
industry, is also conducting its own industry-wide study of costs
 of 21 laboratory tests, including the four targeted in President
 Clinton&#146;s fiscal year 2001 budget proposal for Medicare
payment reductions of 30%. The CLMA hopes to make the study an
annual event so that there will be a database for test costs. We

<P align="center">40

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<DIV align="left">
cannot determine at this time what the outcome of the study will
be, or how HCFA or Congress will respond to it.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, in the 1997 Balanced Budget Act Congress directed
the Institute of Medicine, or IOM, to undertake a study of
Medicare&#146;s current payment system for clinical laboratory
services, to include a review of the adequacy of the current
methodology and recommendations regarding alternative payment
systems. The IOM study is scheduled to be completed and released
in the Fall of 2000. We cannot predict the study&#146;s
recommendations regarding payment methodologies, or how Congress
may react to the study&#146;s findings, and we cannot assure you
that significant changes to the Medicare reimbursement system for
 clinical laboratory services would not have a material adverse
effect on our business.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Reduced Utilization of Laboratory Testing.</I> In recent
years, HCFA has taken several steps to reduce utilization of
laboratory testing. Since 1995, Medicare carriers have adopted
policies under which they do not pay for some commonly-ordered
tests unless the ordering physician has provided an appropriate
diagnostic code supporting the medical necessity of the test.
Physicians are required by law to provide diagnostic information
when they order tests for Medicare and Medicaid patients, for
which tests the laboratory is required to provide a diagnosis.
However, there is no penalty prescribed for violations of this
law by physicians.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March&nbsp;1996, HCFA eliminated its prior policy under which
Medicare paid for all tests contained in an automated chemistry
panel when at least one of the tests in the panel is medically
necessary. HCFA indicated that under the new policy, Medicare
will only pay for those individual tests in a chemistry panel
that are medically necessary. Later in 1996, the American Medical
 Association, or AMA, in conjunction with HCFA, designed four new
 panels of &#147;clinically relevant&#148; automated chemistry
panels. Each panel consists of between 4 and 12 tests. These four
 new panels replaced the previous automated chemistry test
panels, consisting of 19 to 22 tests. HCFA adopted these panels
in early 1998. Since then, Medicare carriers have focused limited
 coverage application to the panel level and not to the test
component level. However, we cannot assure you that Medicare
carriers will not focus future limited coverage application to
the test component level, thereby further limiting our ability to
 obtain Medicare reimbursement for these profiles.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are generally permitted to bill patients directly for some
statutorily excluded laboratory services. We are also generally
permitted to bill patients for laboratory tests that Medicare
does not pay for due to &#147;medical necessity&#148;
limitations, but only if the patient signs a properly completed
Advance Beneficiary Notice, or ABN (such tests include limited
coverage tests for which an approved diagnosis code is not
provided by the ordering physician). We often must rely on our
physician customers to obtain ABNs from their Medicare patients.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Negotiated Rulemaking.</I> On March&nbsp;10, 2000, the Health
Care Financing Administration issued a proposed rule that would
adopt national coverage and claims processing policies for
clinical laboratory services. These proposals were the result of
negotiated rulemaking mandated by Congress in the Balanced Budget
 Act of 1997 in response to concerns resulting from inconsistent
Medicare carrier policies relating to medical necessity,
documentation and recordkeeping requirements for clinical
laboratory services. We have reviewed the proposed rule and do
not believe it will have a significant impact on our business.
However, we cannot provide any assurances that HCFA will not
implement substantial changes in the final rule that could have a
 material adverse affect on us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Regional Medicare Carriers.</I> The 1997 Balanced Budget Act
also directed HCFA to replace the current system of local
Medicare carriers with no more than five regional lab carriers.
To date, HCFA has delayed taking any substantive action on this
mandate and has indicated a desire to have the regional lab
carrier requirement repealed by Congress. We do not believe that
implementation of this regional carrier concept is important to
our success.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Competitive Bidding.</I> The 1997 Balanced Budget Act requires
 HCFA to conduct and complete by 2002 five Medicare bidding
demonstrations involving various types of medical services. HCFA
is expected

<P align="center">41

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<DIV align="left">
to include a laboratory demonstration project in a metropolitan
statistical area as part of the legislative mandate. Competitive
bidding for laboratory tests is still under review. If
competitive bidding were implemented on a regional or national
basis for laboratory testing, it could materially adversely
affect the clinical laboratory industry and our business.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Future Legislation.</I> Future changes in federal, state and
local statutes and regulations (or in the interpretation of
current regulations) affecting governmental reimbursement for
laboratory testing could materially adversely affect us. We
cannot predict, however, whether and what type of legislation or
regulations will be enacted into law.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Fraud and Abuse Regulations.</I> The federal anti-kickback
statute broadly prohibits laboratories from making payments or
furnishing other benefits to influence the referral of tests
billed to Medicare, Medicaid or other federal health care
programs. Enforcement of this anti-kickback prohibition has
steadily increased in recent years as part of a broader effort by
 various federal enforcement agencies, including the Federal
Bureau of Investigation and the OIG, to interpret liberally and
enforce aggressively statutory fraud and abuse provisions.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to public statements by the Department of Justice, or
DOJ, health care fraud has been elevated to one of the highest
priorities of the DOJ and substantial prosecutorial and other law
 enforcement resources have been committed to investigating
health care provider fraud. The OIG also is involved in such
investigations and has, according to recent public statements and
 workplans, targeted certain laboratory practices for study,
investigation and prosecution.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As noted above, the penalties for violation of these laws may
include criminal and civil fines and penalties and exclusion from
 participation in federal programs. Many of the anti-fraud
statutes and regulations, including those relating to joint
ventures and alliances, are vague or indefinite and have not been
 interpreted by the courts. In addition, regulators have
generally offered little guidance to the clinical laboratory
industry. Despite several requests from the clinical laboratory
industry for clarification of the anti-fraud and abuse rules
since 1992, the OIG has issued only a few fraud alerts and
advisory opinions regarding laboratory practices. Although we
believe we are in compliance with these laws, we cannot predict
if some of the fraud and abuse rules will be interpreted contrary
 to our practices.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Moreover, many states have anti-kickback, anti-rebate,
anti-fee-splitting and other laws that also affect our
relationships with clients who refer non-government-reimbursed
laboratory testing business to us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, since 1992, a federal anti-&#147;self-referral&#148;
 law, commonly known as the &#147;Stark&#148; law, prohibits,
with certain exceptions, Medicare payments for laboratory tests
referred by physicians who have, personally or through a business
 or immediate family member, an investment interest in, or a
compensation arrangement with, the testing laboratory. Since
January 1995, these restrictions have also applied to
Medicaid-covered services. Penalties apply to violations of this
statute. Many states have similar anti-&#147;self-referral&#148;
laws that also affect investment and compensation arrangements
with physicians and other clients who refer laboratory testing
business to us. Penalties also apply to violations of these laws.

<P align="left"><B>Insurance</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain liability insurance, subject to limits and
deductibles, for claims that could result from providing or
failing to provide laboratory testing, including inaccurate
testing results. These claims could be substantial. Management
believes that present insurance coverage and reserves are
adequate to cover currently estimated exposures. Although we
believe that we will be able to obtain adequate insurance
coverage in the future at acceptable costs, we cannot assure you
that we will be able to do so, or obtain coverage at an
acceptable cost, or that we will not incur significant
liabilities in excess of policy limits.

<P align="left"><B>Properties</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conduct most of our testing from our 250,000 square foot
laboratory facility in Chantilly, Virginia, just outside of
Washington, D.C., under a lease which expires in 2017, and our
124,000&nbsp;square foot

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<DIV align="left">
facilities in Las Vegas, Nevada, of which 85,000&nbsp;square feet
 are owned and 39,000&nbsp;square feet are leased. In addition to
 our facilities in Virginia and Nevada, we operate 22&nbsp;remote
 service centers that are used to consolidate shipments to our
Virginia and Nevada facilities, 53&nbsp;patient centers that are
located in the Washington, D.C. and Nevada areas to draw samples
from patients and eight&nbsp;STAT laboratories established for
quick-turnaround, customer-specific testing. We lease space for
all of our remote service centers, patient centers and STAT
laboratories. Our remote service centers are generally
1,500&nbsp;square feet, our patient centers are generally
1,200&nbsp;square feet and our STAT laboratories are generally
500 to 5,000&nbsp;square feet in size.
</DIV>

<P align="left"><B>Employees</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At June&nbsp;30, 2000, we employed approximately 2,700 people, of
 which 2,400 were full-time employees. We believe that we have
good relations with our workers, none of whom is represented by a
 union.

<P align="left"><B>Legal Proceedings</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are claims, suits and complaints which arise in the
ordinary course of business that have been filed or are pending
against us. We believe that all such matters either are
adequately reserved for, are covered by insurance, or would not
have a material adverse effect on us, if adversely determined
against us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September&nbsp;2000, our APL subsidiary reached an agreement
with the United States Department of Justice, the Office of
Inspector General of the Department of Health and Human Services
and the Tricare Management Activity of the Department of Defense
to settle allegations raised in a 1996 &#147;whistleblower&#148;
lawsuit filed under the federal False Claims Act. The settlement
agreement requires APL to pay approximately $1.5&nbsp;million to
fully resolve the allegations that from 1989 until 1993 APL
billed Medicare and other federal health care programs for
medically unnecessary tests. The settlement amount and all legal
fees and other expenses associated with this matter are covered
by an indemnity and an escrow account provided by the sellers in
the APL&nbsp;acquisition. Moreover, in recognition of APL&#146;s
voluntary compliance efforts since 1993, the government has not
required APL to enter into a corporate integrity agreement as
part of the settlement; rather, APL must maintain its existing
compliance program for a period of three years. Thus, the
settlement does not involve any material continuing obligations
on the part of APL and will have no impact on our ability to
conduct our business.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are currently undergoing an IRS audit relating to our 1997 tax
 year. We have not yet made any determination as to the
additional tax liability, if any, that could result from that
audit. We do not believe that any such liability would be
material.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are not aware of any other material allegations or
investigations concerning our business by any governmental
entity.

<P align="center">43
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<!-- link1 "MANAGEMENT" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="center"><B>MANAGEMENT</B>

<P align="left"><B>Directors, Executive Officers and Key Employees</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides information about our directors,
executive officers and key employees.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="45%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="45%">&nbsp;</TD>
</TR>

<TR>
        <TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Age</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap><FONT size="2"><B>Position</B></FONT></TD>
</TR>

<TR>
        <TD align="center" nowrap><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Timothy J. Brodnik</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Chairman of the Board, President and Chief Executive Officer</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        John E. Bergstrom</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Executive Vice President&nbsp;&#151; Business Development</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Victoria L. DiFrancesco</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Executive Vice President&nbsp;&#151; Sales</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Alvin Ezrin</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">60</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Executive Vice President&nbsp;&#151; Law and Corporate Compliance
         Officer</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        H. Bryan Firestone</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">42</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Senior Vice President&nbsp;&#151; Chief Information Officer</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Charles J. Krambuhl</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">50</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Executive Vice President&nbsp;&#151; Employee and Client
        Relations</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Robert C. Low</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Senior Vice President&nbsp;&#151; Controller</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Steve R. Pierce</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">53</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Executive Vice President and Chief Financial Officer</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        John P. Schwartz</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">50</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        President of Western Operations</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Craig D. Shanklin</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Executive Vice President&nbsp;&#151; Marketing</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Nathan Sherman</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Senior Vice President and Medical Director</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Jay D. Tyler</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Executive Vice President&nbsp;&#151; Operations</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Vance R. White</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">53</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Executive Vice President&nbsp;&#151; Technical Operations and
        Research and Development</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Jerrold L. Glick</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Director and Secretary</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Bruce V. Rauner</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Director</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Donald J. Edwards</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="bottom"><FONT size="2">
        Director</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Timothy J. Brodnik, Chairman of the Board, President and Chief
 Executive Officer, </I>has served as Chairman of the Board since
 December&nbsp;1999 and has served as Director, President and
Chief Executive Officer of AML since May&nbsp;1997. From 1991 to
1997, Mr.&nbsp;Brodnik was Executive Vice President and a member
of the Executive Management Committee of Laboratory Corporation
of America and its predecessor, National Health Laboratories.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>John E. Bergstrom, Executive Vice President&nbsp;&#151;
Business Development, </I>has served in that capacity since
May&nbsp;1997. From 1995 to 1996, Mr.&nbsp;Bergstrom served as
Senior Vice President of Laboratory Corporation of America. From
1993 to 1995, he served as Executive Director &#150; Managed Care
 of National Health Laboratories.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Victoria L. DiFrancesco, Executive Vice President&nbsp;&#151;
Sales, </I>has served in that capacity since November&nbsp;1997.
From 1990 until November 1997, Ms.&nbsp;DiFrancesco was the
Associate Vice President of Division Business Development and
Customer Service for Laboratory Corporation of America in San
Diego.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Alvin Ezrin, Executive Vice President&nbsp;&#151; Law and
Corporate Compliance Officer,</I> has served in that capacity
since May&nbsp;1997. From 1995 to 1996, Mr. Ezrin served as Vice
President of Law at Laboratory Corporation of America.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>H.&nbsp; Bryan Firestone, Senior Vice President&nbsp;&#151;
Chief Information Officer,</I> has served in that capacity since
April&nbsp;2000. From 1987 to 2000, Mr.&nbsp;Firestone was the
Associate Vice President of Information Systems at Laboratory
Corporation of America and its predecessor, National Health
Laboratories.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Charles J. Krambuhl, Executive Vice President&nbsp;&#151;
Employee and Client Relations,</I> has served in that capacity
since October&nbsp;1998. From 1991 to 1998, Mr.&nbsp;Krambuhl was
 the Director, Manufacturing, Distribution and Marketing for the
American Petroleum Institute.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Robert C. Low, Senior Vice President&nbsp;&#151; Controller,
</I> has served in that capacity since May&nbsp;2000. Prior to
that time, he was Vice President and Controller of the Process
Division of Stone &#38; Webster. Prior to that time, he was the
Director of Financial Analysis at Dresser Industries, Inc. at its
 corporate headquarters. He also served as Controller for
subsidiaries of Dresser in both the United States and abroad.
Mr.&nbsp;Low joined Dresser in 1984 after nine years with Arthur
Andersen.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Steve R. Pierce, Executive Vice President and Chief Financial
Officer,</I> has served in that capacity since January&nbsp;2000.
 From 1998 until January&nbsp;2000, Mr. Pierce was the Vice
President of Finance and Administration and Controller of Kellogg
 Brown and Root, a division of Halliburton Company. From 1995
until 1998, he served as Vice President and Chief Financial
Officer for subsidiaries of Dresser Industries, Inc. in both the
United States and abroad, prior to Dresser&#146;s merger with
Halliburton Company.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>John P. Schwartz, President of Western Operations, </I>has
served in that capacity since October of 1999, and as the
President and Chief Executive Officer of APL since 1981.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Craig D. Shanklin, Executive Vice President&nbsp;&#151;
Marketing, </I>has served in that capacity since
October&nbsp;1999 and as Vice President of Marketing of APL since
 May&nbsp;1995.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Nathan Sherman, Senior Vice President &#38; Medical Director,
</I>has served in that capacity since October&nbsp;1999. From
1987 to 1999, he served as Medical Director of Laboratory
Corporation of America&#146;s Northern Virginia regional
laboratory and its predecessor, National Health Laboratories.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Jay D. Tyler, Executive Vice President&nbsp;&#151; Operations,
 </I>has served in that capacity since November&nbsp;1997 and was
 Vice President from May&nbsp;1997 to November 1997. From January
 to May&nbsp;1997, Mr.&nbsp;Tyler served as Corporate Billing
Leader for Quest Diagnostics, Inc. From 1988 to 1996, he served
in various financial positions including Vice President of
Corporate Finance of Laboratory Corporation of America.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Vance R. White, Executive Vice President&nbsp;&#151; Technical
 Operations and Research and Development,</I> has served in that
capacity since 1999. For seven years prior to that time, he was a
 clinical laboratory consultant, the last two years for the
company. From 1973 to 1991, he held various positions including
Executive Vice President of National Health Laboratories.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Jerrold L. Glick, Director and Secretary, </I>has served as a
Director of AML since May&nbsp;1997, as Chairman of the Board
from May&nbsp;1997 to December&nbsp;1999, and as our Secretary
since May&nbsp;1997. Mr.&nbsp;Glick has been a general partner of
 Columbia Group Limited, LLLP, a real estate development company,
 since 1972. Mr.&nbsp;Glick has been involved in the clinical
laboratory industry since 1967, having founded a chain of
clinical laboratories that was later sold to National Health
Laboratories. Mr.&nbsp;Glick is also a director of Telik, Inc.
and a number of private companies.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bruce V. Rauner, Director, </I>has served as a Director of AML
 since May 1997. Mr.&nbsp;Rauner is managing principal of GTCR
Golder Rauner, LLC, formed in May 1998 as a successor to Golder,
Thoma, Cressey, Rauner, Inc., of which he has been a principal
since 1981. Mr.&nbsp;Rauner is also a director of AnswerThink
Consulting Group, Inc., divine interVentures, inc., Polymer
Group, Inc., U.S. Aggregates, Inc. and a number of private
companies in GTCR&#146;s portfolio.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Donald J. Edwards, Director, </I>has served as a Director of
AML since May 1997. Mr.&nbsp;Edwards is a principal of GTCR
Golder Rauner, LLC, formed in May 1998 as a successor to Golder,
Thoma, Cressey, Rauner, Inc., of which he has been a principal
since 1996 and was an associate from 1994 to 1996.
Mr.&nbsp;Edwards is also a director of a number of private
companies in GTCR&#146;s portfolio.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are no family relationships between any of our directors or
 executive officers.

<P align="center">45
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors currently consists of four directors.
Within 90 days after the consummation of the offering, we expect
to appoint three additional directors who are not employees of
our company or otherwise affiliated with our company or our
principal stockholders. The board of directors has the power to
appoint the officers of the company. Each officer will hold
office for such term as may be prescribed by the board and until
such person&#146;s successor is chosen and qualified or until
such person&#146;s death, resignation or removal.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the completion of this offering, we will divide our
board of directors into three classes, as nearly equal in number
as possible, with each director serving a three-year term and one
 class being elected at each year&#146;s annual meeting of
stockholders. Mr. Edwards will be in the class of directors whose
 term expires at the 2001 annual meeting of our stockholders. Mr.
 Glick will be in the class of directors whose term expires at
the 2002 annual meeting of our stockholders. Messrs. Brodnik and
Rauner will be in the class of directors whose term expires at
the 2003 annual meeting of our stockholders. One of the three
additional directors that we expect to appoint to the board will
serve in each class. At each annual meeting of our stockholders,
successors to the class of directors whose term expires at such
meeting will be elected to serve for three-year terms and until
their respective successors are elected and qualified.

<P align="left"><B>Compensation of Directors</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Directors are currently not entitled to receive any compensation
for serving on the board of directors. Directors are reimbursed
for their out-of-pocket expenses incurred in connection with such
 services. Following this offering, directors who are not our
employees will receive cash and/or stock options as compensation
for their services.

<P align="left"><B>Committees of the Board of Directors</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the closing of this offering, the board of directors will
have an audit committee and a compensation committee. The audit
committee will report to the board regarding the appointment of
our independent public accountants, the scope and results of our
annual audits, compliance with our accounting and financial
policies and management&#146;s procedures and policies relative
to the adequacy of our internal accounting controls. Upon the
completion of the initial public offering, the audit committee
will consist exclusively of independent directors. The
compensation committee of the board of directors will review and
make recommendations to the board regarding our compensation
policies and all forms of compensation to be provided to our
executive officers. In addition, the compensation committee will
review bonus and stock compensation arrangements for all of our
other employees.

<P align="left"><B>Compensation Committee Interlocks and Insider Participation
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently do not have a compensation committee. The
compensation arrangements for each of our executive officers was
established pursuant to the terms of the respective employment
agreements between us and each executive officer. The terms of
the employment agreements were established pursuant to
arms-length negotiations between representatives of GTCR and each
 executive officer, except the agreement relating to Mr.
Krambuhl, which was negotiated with us and approved by the board
of directors. On a going forward basis, any changes in the
compensation arrangements of our executive officers will be
determined by the compensation committee.

<P align="left"><B>Professional Services Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For a description of our professional services agreement with
GTCR see &#147;Certain Relationships and Related
Transactions&nbsp;&#151; Professional Services Agreement.&#148;

<P align="left"><B>Executive Compensation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides, for the year ended
December&nbsp;31, 1999, the compensation paid to our Chief
Executive Officer and our other executive officers whose total
annual salary and bonus was in excess

<P align="center">46
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
of $100,000 for fiscal year 1999. For ease of reference, we refer
 to each of these executive officers throughout this section as a
 Named Executive Officer and collectively as the Named Executive
Officers.
</DIV>

<P align="center"><B>Summary Compensation Table</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="48%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>All Other</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Annual Compensation</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Compensation($)(1)</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="2"><FONT size="2"><B>Name and</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="2"><FONT size="2"><B>Principal Position</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Year</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Salary($)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Bonus($)</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="2"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Timothy J. Brodnik</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394,859</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">350,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,776</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	<I>Chairman, President and Chief Executive Officer</I></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	John E. Bergstrom</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">220,815</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">122,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">264</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	<I>Executive Vice President&nbsp;&#151; Business</I></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	<I>Development</I></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Charles Krambuhl</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">161,511</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">264</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	<I>Executive Vice President&nbsp;&#151; Employee and Client
	Relations</I></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Alvin Ezrin</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158,831</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">264</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	<I>Executive Vice President&nbsp;&#151; Law and Corporate
	Compliance Officer</I></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="22%" align="left">
</DIV>

<DIV align="left">
(1)&nbsp; Represents amounts paid by us in respect of term life
insurance premiums.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We did not grant any stock options to any of our Named Executive
Officers during the year ended December&nbsp;31, 1999.

<P align="left"><B>Fiscal Year End Option Values</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table contains information regarding unexercised
options held by the Named Executive Officers as of
December&nbsp;31, 1999. There was no public trading market for
our common stock as of December&nbsp;31, 1999. Accordingly, the
value of unexercised options has been calculated by subtracting
the exercise price from the fair market value of $7.68 per share
on December&nbsp;31, 1999, estimated by management for financial
reporting purposes, multiplied by the number of shares underlying
 the option. No options were exercised by the Named Executive
Officers during the year ended December&nbsp;31, 1999.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="29%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number of</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Securities</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Underlying</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Value of Unexercised</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Unexercised</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>In-the-Money</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Options/SARs at</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Options/SARs at</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Fiscal Year-End</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Fiscal Year-End</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares Acquired on</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercisable/</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercisable/</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercise (#)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Value Realized ($)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Unexercisable</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Unexercisable</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Timothy J. Brodnik</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;/&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;/&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	John E. Bergstrom</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;/&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;/&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Charles Krambuhl</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,500/57,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">134,050/$440,450</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Alvin Ezrin</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,250/28,750</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86,175/$220,225</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left"><B>Management Employment Agreements</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Timothy Brodnik.</I> We are party to a senior management
agreement with Mr. Brodnik. Under the agreement, Mr.&nbsp;Brodnik
 is entitled to receive an annual base salary of not less than
$650,000. Mr.&nbsp;Brodnik is also eligible for a bonus based on
our achievement of budgetary and other objectives set by our
board of directors, provided that we are obligated to pay
Mr.&nbsp;Brodnik a minimum bonus of $50,000 per year.
Mr.&nbsp;Brodnik is also entitled to all other benefits as are
approved by the board and made generally available to other
members of our senior management.

<P align="center">47

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement, on May&nbsp;2, 1997, Mr.&nbsp;Brodnik
purchased 1,476,470 shares of common stock at a price of $0.02
per share and 80.99 shares of preferred stock at $1,000 per
share. Mr.&nbsp;Brodnik paid for this stock by delivering $75,000
 in cash, a $9,023 bridge note and a $26,501 promissory note. The
 bridge note was repaid on August&nbsp;15, 1997. The promissory
note bears interest at the applicable federal rate and is due on
December&nbsp;31, 2005.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Of the 1,476,470 shares of common stock purchased by
Mr.&nbsp;Brodnik, 151,435 shares were vested on the date of
purchase and the remaining 1,325,035 shares are scheduled to vest
 in 20% increments on each of the first five anniversaries of
May&nbsp;2, 1997. The agreement also provides that upon
completion of an initial public offering, such as this offering,
the shares which were scheduled to vest during the twelve months
immediately following the date of the offering will vest at the
time of the offering.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Brodnik&#146;s employment with the company will continue
 until terminated by the resignation, death or disability of
Mr.&nbsp;Brodnik or by the board with or without cause. In the
event Mr.&nbsp;Brodnik&#146;s employment is terminated by the
board without cause or Mr.&nbsp;Brodnik resigns for good reason,
Mr.&nbsp;Brodnik would be entitled to receive a severance payment
 equal to $2.0&nbsp;million and would also be entitled to
18&nbsp;months of continued group medical and life insurance
coverage. Mr.&nbsp;Brodnik has agreed not to compete with the
company or solicit any customers or employees of the company
during the term of his employment and for two years thereafter.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>John E. Bergstrom.</I> We are party to a senior management
agreement with Mr. Bergstrom. Under the agreement,
Mr.&nbsp;Bergstrom is entitled to receive an annual base salary
of not less than $175,000. Mr.&nbsp;Bergstrom is also eligible
for a bonus based on our achievement of budgetary and other
objectives set by our board of directors, provided that we are
obligated to pay Mr.&nbsp;Bergstrom a minimum bonus of $50,000
per year. Mr.&nbsp;Bergstrom is also entitled to all other
benefits as are approved by the board and made generally
available to other members of our senior management.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement, on May&nbsp;2, 1997 Mr.&nbsp;Bergstrom
purchased 618,350 shares of common stock at a price of $0.02 per
share and 27 shares of preferred stock at $1,000 per share.
Mr.&nbsp;Bergstrom paid for this stock by delivering $25,000 in
cash, a $3,008 bridge note and a $11,347 promissory note. The
bridge note was repaid on April&nbsp;7, 1999. The promissory note
 bears interest at the applicable federal rate and is due on
December&nbsp;31, 2005.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Of the 618,350 shares of common stock purchased by
Mr.&nbsp;Bergstrom, 50,480 shares were vested on the date of
purchase and the remaining 567,870 shares are scheduled to vest
in 20% increments on each of the first five anniversaries of
May&nbsp;2, 1997. The agreement also provides that upon
completion of an initial public offering, such as this offering,
the shares which were scheduled to vest during the twelve months
immediately following the date of the offering will vest at the
time of the offering.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Bergstrom&#146;s employment with the company will
continue until terminated by the resignation, death or disability
 of Mr.&nbsp;Bergstrom or by the board with or without cause. In
the event Mr.&nbsp;Bergstrom&#146;s employment is terminated by
the board without cause or by Mr.&nbsp;Bergstrom for good reason,
 Mr.&nbsp;Bergstrom is entitled to severance at a rate equal to
his then-current base salary for a period of twelve months and
continued group medical and life insurance coverage during such
period. Mr.&nbsp;Bergstrom has agreed not to compete with the
company or solicit any customers or employees of the company
during the term of his employment and for two years thereafter.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Alvin Ezrin.</I> We are party to a severance and
non-solicitation agreement with Mr.&nbsp;Ezrin. Under the
agreement, Mr.&nbsp;Ezrin will be entitled to receive severance
payments equal to twelve months of his base salary if we
terminate his employment without cause. Mr.&nbsp;Ezrin has agreed
 not to solicit any customers or employees of ours during the
period in which he is receiving severance payments.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Charles J. Krambuhl.</I> We are party to an employment
agreement with Mr. Krambuhl. Under the agreement,
Mr.&nbsp;Krambuhl is entitled to receive an annual base salary of
 $155,000. Mr.&nbsp;Krambuhl also

<P align="center">48
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<DIV align="left">
received a signing bonus of $20,000 and management incentive
bonus of $30,000 in January&nbsp;2000. We agreed to grant
Mr.&nbsp;Krambuhl an option to purchase 15,000 shares of our
common stock at an exercise price of $0.02 per share.
Mr.&nbsp;Krambuhl is also entitled to other benefits as are
approved by the board and made generally available to other
members of our senior management.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement, Mr.&nbsp;Krambuhl will be entitled to
receive severance payments equal to twelve months of his base
salary if we terminate his employment without cause. If
Mr.&nbsp;Krambuhl&#146;s employment terminates after a change in
control of our company, he will be entitled to receive two years
of severance payments.

<P align="left"><B>1997 Stock Option Plan</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 1997, our board of directors approved the 1997 Stock
Option Plan, which as amended we refer to as the 1997 stock
option plan, and which authorizes the granting of non-qualified
stock options to employees of AML or its subsidiaries. The 1997
stock option plan authorizes the granting of stock options up to
an aggregate of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common
stock, subject to adjustment based on the occurrence of specified
 events and to prevent any dilution or expansion of the rights of
 participants that might otherwise result from the occurrence of
such events.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Options to purchase an aggregate of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our
common stock were outstanding as of September&nbsp;30, 2000 under
 the 1997 stock option plan. Such options generally vest and
become exercisable in five equal installments beginning on the
first anniversary of the grant date and continuing thereafter on
an annual basis. Unvested options will terminate in the event
that the optionee ceases to be employed by AML or its
subsidiaries and vested but unexercised options will terminate
immediately if the optionee is terminated for cause, after
30&nbsp;days if the optionee is terminated without cause, or
after 90&nbsp;days in the case of death, disability or
retirement. Subsequent to the adoption of the long-term equity
incentive plan described below, no future grants will be made
under the 1997 stock option plan.

<P align="left"><B>Long-Term Equity Incentive Plan</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the closing of the offering, we will adopt the American
Medical Laboratories, Incorporated 2000 Equity Incentive Plan.
The equity incentive plan provides for grants of stock options,
stock appreciation rights, restricted stock and performance
awards. Directors, officers and other employees of us or our
subsidiaries and persons who engage in services for us are
eligible for grants under the plan. The purpose of the equity
incentive plan is to provide these individuals with incentives to
 maximize stockholder value and otherwise contribute to our
success and to enable us to attract, retain and reward the best
available persons for positions of responsibility.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A total of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common
stock, representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our
currently outstanding common stock, will be available for
issuance under the equity incentive plan, subject to adjustment
in the event of a reorganization, stock split, merger or similar
change in our corporate structure or the outstanding shares of
common stock.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee of our board of directors will
administer the equity incentive plan. Our board also has the
authority to administer the plan and to take all actions that the
 compensation committee is otherwise authorized to take under the
 plan. We anticipate that in connection with the offering, we
will grant options to purchase an aggregate of
approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common
stock to approximately
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;employees.
 All of these options will have an exercise price equal to the
initial public offering price of the common stock in the offering
 and will be subject to vesting over a &nbsp;&nbsp;&nbsp;-year
period.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Directors, officers and employees of us and our subsidiaries, as
well as other individuals performing significant services for us,
 or to whom we have extended an offer of employment, will be
eligible to receive

<P align="center">49

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<DIV align="left">
grants under the equity incentive plan. However, only employees
may receive grants of incentive stock options. In each case, the
compensation committee will select the actual grantees.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the equity incentive plan, the compensation committee or
the board may award grants of incentive stock options conforming
to the provisions of Section&nbsp;422 of the Internal Revenue
Code of 1986, as amended, non-qualified stock options, stock
appreciation rights, restricted stock grants and other
performance awards. The compensation committee may not, however,
award to any one person in any calendar year options to purchase
common stock equal to more than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total number of shares authorized under the plan, and it
may not award incentive options first exercisable in any calendar
 year whose underlying shares have a fair market value greater
than $100,000, determined at the time of grant.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee will determine the exercise price of
any option in its discretion. However, the exercise price of an
incentive option may not be less than 100% of the fair market
value of a share of common stock on the date of grant, and the
exercise price of an incentive option awarded to a person who
owns stock constituting more than 10% of our voting power may not
 be less than 110% of such fair market value on such date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless the compensation committee determines otherwise, the
exercise price of any option may be paid in any of the following
ways:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	in cash,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	by delivery of shares of common stock with a fair market value
	equal to the exercise price,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	by simultaneous sale through a broker of shares of common stock
	acquired upon exercise, and/or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	subject to certain conditions, by having us withhold shares of
	common stock otherwise issuable upon exercise.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a participant elects to deliver or withhold shares of common
stock in payment of any part of an option&#146;s exercise price,
the compensation committee may in its discretion grant the
participant a &#147;reload option.&#148; The reload option
entitles its holder to purchase a number of shares of common
stock equal to the number so delivered or withheld.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee will determine the term of each option
 at its discretion. However, no term may exceed ten years from
the date of grant or, in the case of an incentive option granted
to a person who owns stock constituting more than 10% of our
voting power, five years from the date of grant. In addition, all
 options under the equity incentive plan, whether or not then
exercisable, generally cease vesting when a grantee ceases to be
a director, officer or employee of, or to otherwise perform
services for, us or our subsidiaries. Options generally expire
30&nbsp;days after the date of cessation of service, so long as
the grantee does not compete with us during the 30-day period. In
 the case of a grantee&#146;s death or disability, however, all
options will become fully vested and exercisable and remain so
for up to 180&nbsp;days after the date of death or disability. In
 the event of retirement, a grantee&#146;s vested options will
remain exercisable for up to 90&nbsp;days after the date of
retirement, while his or her unvested options may become fully
vested and exercisable in the discretion of the compensation
committee. Upon termination for cause, all options will terminate
 immediately. In addition, the compensation committee has the
authority to grant options that will become fully vested and
exercisable automatically upon a change in control, whether or
not the grantee is subsequently terminated.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee may also grant stock appreciation
rights, restricted stock awards and other performance awards.
Upon exercise of stock appreciation right, the grantee will
receive an amount in cash and/or shares of common stock or other
of our securities equal to the difference between the fair market
 value of a share of common stock on the date of exercise and the
 exercise price of the right. Restricted stock awards will
consist of shares of stock granted to the recipient subject to
vesting restrictions imposed in connection with the award. A
grantee will be required to pay us at least the aggregate par
value of any shares of restricted stock within ten days of the
date of grant, unless the shares are treasury shares.

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<DIV align="left">
The compensation committee may grant performance awards
contingent upon achievement by the grantee or the company of set
goals and objectives regarding specified performance criteria,
such as return on equity, over a specified performance cycle, as
designated by the compensation committee. A performance award may
 be paid out in cash and/or shares of common stock or other of
our securities.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The board may amend or terminate the equity incentive plan in its
 discretion, except that no amendment will become effective
without prior approval of our stockholders if such approval is
necessary for continued compliance with the performance-based
compensation exception of Section&nbsp;162(m) of the Code or any
stock exchange listing requirements. Furthermore, any termination
 may not materially and adversely affect any outstanding rights
or obligations under the equity incentive plan without the
affected participant&#146;s consent. If not previously terminated
 by the board, the equity incentive plan will terminate on the
tenth anniversary of its adoption.

<P align="left"><B>One Million Dollar Compensation Limit</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Revenue Reconciliation Act of 1993 limits the annual
deduction a publicly held company may take for compensation paid
to its chief executive officer or any of its four other highest
compensated officers in excess of $1.0&nbsp;million per year.
This limitation excludes compensation that is
&#147;performance-based&#148; within the meaning of
Section&nbsp;162(m) of the Code. We intend that compensation
realized upon the exercise of an option or other award granted
under the equity incentive plan be regarded as
&#147;performance-based&#148; under Section&nbsp;162(m) and that
such compensation be deductible without regard to the limits
imposed by Section&nbsp;162(m) on compensation that is not
&#147;performance-based.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Compensation paid under the equity incentive plan will not
qualify as performance-based except to the extent paid pursuant
to grants made under the plan following the approval of the plan
by the Company&#146;s stockholders in accordance with
Section&nbsp;162(m)(4)(c) of the Code and the related Treasury
Regulations, and except to the extent that other requirements are
 satisfied. However, based on a special rule contained in
regulations issued under Section 162(m), the $1.0&nbsp;million
deduction limitation described above should not apply to any
options or other awards under the equity incentive plan prior to
our annual meeting of shareholders in the calendar year following
 the close of the third calendar year after the offering.

<P align="left"><B>Employee Stock Purchase Plan</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2000 Employee Stock Purchase Plan, which we refer to as the
stock purchase plan, will be adopted by our board of directors
and stockholders prior to the completion of this offering. The
stock purchase plan will be established to give employees
desiring to do so a convenient means of purchasing shares of
common stock through payroll deductions. The stock purchase plan
provides an incentive to participate by permitting purchases at a
 discounted price. We believe that ownership of stock by
employees will foster greater employee interest in our success,
growth and development.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to restrictions, each of our employees is eligible to
participate in the stock purchase plan if he or she has been
employed by us for more than six months. Participation is
discretionary with each eligible employee. We have
reserved&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock for
issuance in connection with the stock purchase plan. Each
eligible employee is entitled to purchase a maximum
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares per year. Elections to
participate and purchases of stock will be made on a quarterly
basis. Each participating employee contributes to the stock
purchase plan by choosing a payroll deduction in any specified
amount. A participating employee may increase or decrease the
amount of such employee&#146;s payroll deduction, including a
change to a zero deduction as of the beginning of any calendar
quarter. Elected contributions will be credited to
participants&#146; accounts at the end of each calendar quarter.
In addition, employees may make lump sum contributions at the end
 of the year to enable them to purchase the maximum number of
shares available for purchase during the plan year.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is a summary of how the stock purchase plan will
operate:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Each participating employee&#146;s contributions will be used to
	purchase shares for the employee&#146;s share account within
	15&nbsp;days after the last day of each calendar quarter.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	The cost per share is 85% of the lower of the closing price of
	our common stock on the Nasdaq Stock Market on the first or the
	last day of the calendar quarter.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	The number of shares purchased on each employee&#146;s behalf and
	 deposited in his/her share account is based on the amount
	accumulated in such participant&#146;s cash account and the
	purchase price for shares with respect to any calendar quarter.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Shares purchased under the stock purchase plan carry full rights
	to receive dividends declared from time to time.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Any dividends attributable to shares in the employee&#146;s share
	 account are automatically used to purchase additional shares for
	 such employee&#146;s share account.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Share distributions and share splits will be credited to the
	participating employee&#146;s share account as of the record date
	 and effective date, respectively.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	A participating employee has full ownership of all shares in
	his/her share account and may withdraw them for sale or otherwise
	 by written request to the compensation committee of the board of
	 directors following the close of each calendar quarter.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to applicable federal securities and tax laws, the board
of directors has the right to amend or to terminate the stock
purchase plan. Amendments to the stock purchase plan will not
affect a participating employee&#146;s right to the benefit of
the contributions made by such employee prior to the date of any
such amendment. In the event the stock purchase plan is
terminated, the compensation committee is required to distribute
all shares held in each participating employee&#146;s share
account plus an amount of cash equal to the balance in each
participating employee&#146;s cash account.

<P align="center">52
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<!-- link1 "PRINCIPAL STOCKHOLDERS" -->
<DIV align="left"><A NAME="012"></A></DIV>

<P align="center"><B>PRINCIPAL STOCKHOLDERS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding our
beneficial ownership as of September&nbsp;15, 2000, on an actual
basis and as adjusted to reflect completion of the offering, by:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	each person or entity known to us to own more than 5% of any
	class of outstanding voting securities;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	each of our named executive officers;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	each of our directors; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	all of our directors and executive officers as a group.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To our knowledge, each of such stockholders has sole voting and
investment power as to the shares shown unless otherwise noted.
You should keep the following points in mind as you read the
information in the table.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	The amounts and percentage of our common stock beneficially owned
	 by a holder are reported on the basis of the regulations of the
	SEC that govern the determination of beneficial ownership of
	securities. Under these regulations, a person or group of persons
	 is deemed to be a &#147;beneficial owner&#148; of a security if
	that person or group has or share &#147;voting power,&#148; which
	 includes the power to dispose of or to direct the disposition of
	 the security. A person or group of persons is also deemed to be
	a beneficial owner of any securities that such person has the
	right to acquire within 60&nbsp;days of September&nbsp;15, 2000.
	Under these rules, more than one person may be deemed a
	beneficial owner of the same security and a person may be deemed
	to be a beneficial owner of securities as to which that person
	has no economic interest.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	The percentage of our common stock outstanding is based on the
	20,807,765&nbsp; shares of our common stock outstanding as of
	September&nbsp;15, 2000, including shares of common stock deemed
	outstanding pursuant to the definition of beneficial ownership in
	 the preceding paragraph. These shares are deemed to be
	outstanding when computing the percentage of ownership of each
	person or group of persons named above, but are not deemed to be
	outstanding for the purpose of computing the percentage ownership
	 of any other person or group.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless otherwise provided herein, the street address of each
director and executive officer is 14225 Newbrook Drive,
Chantilly, VA 20153.

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="64%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Shares Beneficially Owned</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Percentage</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Prior to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>After</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>the</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>the</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>of Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Offering</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Offering</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>Principal Stockholders:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Golder, Thoma, Cressey, Rauner Fund V, L.P. (1)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,427,025</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">64.5%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>Directors and Executive Officers:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Timothy J. Brodnik (2)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,182,691</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	John E. Bergstrom (3)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">567,346</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Charles Krambuhl</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.3</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Alvin Ezrin</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,250</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Jerrold L. Glick (4)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,082,200</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.0</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Bruce V. Rauner (5)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,427,025</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">64.5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Donald J. Edwards (5)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,427,025</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">64.5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	All directors and executive officers as a group (8 persons)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,366,345</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	Includes 23,417&nbsp;shares of common stock held by GTCR
	Associates V, a partnership affiliated with Golder, Thoma,
	Cressey, Rauner Fund V, L.P. The address of each of Golder,
	Thoma, Cressey, Rauner Fund V, L.P. and GTCR Associates V is 6100
	 Sears Tower, Chicago, Illinois 60606.</TD>
</TR>

</TABLE>

<P align="center">53

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	Includes 1,182,691&nbsp;shares of common stock held by Timothy J.
	 Brodnik with his spouse as joint tenants.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	Includes 567,346&nbsp;shares of common stock held by John&nbsp;E.
	 Bergstrom with his spouse as joint tenants.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(4)&nbsp;</TD>
	<TD align="left">
	Includes shares of common stock held by affiliates of
	Mr.&nbsp;Glick as follows: J. Glick Co., LLC&nbsp;&#151; 454,300;
	 Glick Family Investment&nbsp;&#151; 84,130; Lemnos
	Corporation&nbsp;&#151; 168,260; and Columbia Trading II,
	L.L.C.&nbsp;&#151; 134,605. Mr.&nbsp;Glick disclaims beneficial
	ownership of such shares. The address of each of these holders is
	 1600 Wynkoop Street, Suite&nbsp;200, Denver, Colorado 80202.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(5)&nbsp;</TD>
	<TD align="left">
	Includes 13,403,608 shares of common stock held by Golder, Thoma,
	 Cressey, Rauner Fund V, L.P. of which GTCR V, L.P. is the
	general partner, and also includes 23,416 shares of common stock
	held by GTCR Associates V. Each of Messrs.&nbsp;Rauner and
	Edwards is a principal of Golder, Thoma, Cressey, Rauner, Inc.,
	the general partner of GTCR V, L.P. and the managing general
	partner of GTCR Associates V, and therefore may be deemed to
	share investment and voting control over the shares of common
	stock held by Golder, Thoma, Cressey, Rauner Fund V, L.P. and
	GTCR Associates V. Each of Messrs.&nbsp;Rauner and Edwards
	disclaims beneficial ownership of the shares of common stock
	owned by Golder, Thoma, Cressey, Rauner Fund V, L.P. and GTCR
	Associates V. The address of each of these holders is 6100 Sears
	Tower, Chicago, Illinois 60606.</TD>
</TR>

</TABLE>

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<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->
<DIV align="left"><A NAME="013"></A></DIV>

<P align="center"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>

<P align="left"><B>Certain Loans to Executives</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May&nbsp;1997, we loaned $35,524 to Timothy&nbsp;J. Brodnik
and $14,365 to John&nbsp;E. Bergstrom pursuant to promissory
notes to finance their purchase of our common and preferred
stock. See &#147;Management&nbsp;&#151; Management Employment
Agreements.&#148; Each of the promissory notes is secured by a
pledge of the securities purchased with the promissory note. The
promissory notes bear interest at a rate per annum equal to the
applicable federal rate. The principal amount of the promissory
notes and all accrued interest matures on December 31, 2005. The
promissory notes may be prepaid in full or in part at any time at
 the payor&#146;s option. In connection with the loans to
executives in April&nbsp;1999 described below, these loans were
repaid.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April&nbsp;1999, we loaned Mr.&nbsp;Brodnik $1,530,000 in
cash. This loan is evidenced by a promissory note which bears
interest at 8.1% per annum, compounded annually. This note is
secured by a pledge of all of Mr.&nbsp;Brodnik&#146;s common
stock and preferred stock, but is recourse only to that stock.
The principal amount of this promissory note and all accrued
interest matures on December&nbsp;31, 2005. The promissory note
may be prepaid in full or in part at any time at
Mr.&nbsp;Brodnik&#146;s option.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April&nbsp;1999, we loaned Mr. Bergstrom $30,000 in cash. This
 loan is evidenced by a promissory note which bears interest at
10.0% per annum, compounded annually. This note is secured by a
pledge of all of Mr.&nbsp;Bergstrom&#146;s common stock and
preferred stock, but is recourse only to that stock. The
principal amount of this promissory note and all accrued interest
 matures on December&nbsp;31, 2005. The promissory note may be
prepaid in full or in part at any time at Mr. Bergstrom&#146;s
option.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April&nbsp;1999, we loaned Jerrold&nbsp;L. Glick and his
affiliate stockholders $950,000 in cash. This loan is evidenced
by a promissory note which bears interest at 10.0% per annum,
compounded annually. This note is secured by a pledge of all of
Mr.&nbsp;Glick&#146;s and his affiliate stockholders&#146; common
 stock and preferred stock, but is recourse only to that stock.
The principal amount of this promissory note and all accrued
interest matures on December&nbsp;31, 2005. The promissory note
may be prepaid in full or in part at any time at
Mr.&nbsp;Glick&#146;s option.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August&nbsp;1999, we loaned Mr.&nbsp;Bergstrom $250,000 in
cash. This loan is evidenced by a promissory note which bears
interest at 8.0% per annum, compounded annually. This note is
secured by a pledge of all of Mr.&nbsp;Bergstrom&#146;s common
stock and preferred stock, but is recourse only to that stock.
The principal amount of this promissory note and all accrued
interest matures on December&nbsp;31, 2005. The promissory note
may be prepaid in full or in part at any time at Mr.
Bergstrom&#146;s option.

<P align="left"><B>Redemptions of Preferred Stock and Common Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April&nbsp;1999, we repurchased 293,779 shares of common stock
 from Timothy&nbsp;J. Brodnik for $1,440,000 in cash.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May&nbsp;1999, we redeemed all 7,181.46 shares of preferred
stock from GTCR for $8,714,070 in cash consisting of an aggregate
 liquidation value of $7,181,460 and accrued and unpaid dividends
 of $1,532,610.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August&nbsp;1999, we repurchased 51,004 shares of common stock
 from John&nbsp;E. Bergstrom for $250,000 in cash.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September&nbsp;2000, we repurchased 189,295 shares of common
stock from Jerrold&nbsp;L. Glick for the original cost of $3,786
in cash.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the time of the offering, we anticipate redeeming all of our
remaining 1,490.71 outstanding shares of preferred stock for a
price equal to the sum of the preferred stock&#146;s aggregate
liquidation value of $1,490,710 and accrued and unpaid dividends.
 Such dividends equaled $562,396 as of September&nbsp;30, 2000.
Of this, the approximately $346,301 portion payable to
Messrs.&nbsp;Brodnik, Bergstrom and Glick as holders of

<P align="center">55

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<DIV align="left">
917.92 shares of preferred stock would be satisfied by offsetting
 a like amount against their promissory notes discussed above
under &#147;Certain Loans to Executives&#148; and the remaining
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;payable
 to the other holders of the remaining 572.79 shares of preferred
 stock would be paid in cash.
</DIV>

<P align="left"><B>Professional Services Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are party to a professional services agreement with GTCR under
 which GTCR has agreed to consult with us on business and
financial matters, including corporate strategy, budgeting of
corporate investments, acquisition and divestiture strategies and
 debt and equity financings. In exchange for such services, GTCR
is entitled to an annual management fee of up to $150,000, plus
reimbursement of out-of-pocket expenses, and a fee of 1% of the
amount of debt or equity capital raised by us from any source. In
 October&nbsp;1999, in connection with our acquisition of APL, we
 raised $140.0&nbsp;million of debt financing and thus a
$1.4&nbsp;million fee would have been owed to GTCR. GTCR agreed
to amend the professional services agreement to eliminate this
fee in exchange for our agreement to pay a $1.4&nbsp;million
one-time success fee, plus interest at 8% per annum from
October&nbsp;1999, upon consummation of a change of control or an
 initial public offering. This fee will be paid to GTCR upon
consummation of the offering. This agreement will automatically
terminate upon consummation of the offering, and except as
provided above, no fee is payable with respect to the issuance of
 the common stock in the offering. Bruce&nbsp;V. Rauner and
Donald&nbsp;J. Edwards, each of whom is a principal of GTCR, will
 continue to serve as directors of the Company.

<P align="left"><B>Stock Purchase Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are party to a purchase agreement with GTCR dated as of
May&nbsp;2, 1997, pursuant to which GTCR made its investment in
our company. At that time, GTCR purchased 13,427,025&nbsp;shares
of our common stock at a price of $0.02&nbsp;per share and
7,181.46&nbsp;shares of our preferred stock at a price of $1,000
per share. The purchase agreement provides that as long as GTCR
owns at least 15% of the securities purchased thereunder, we must
 obtain GTCR&#146;s prior consent before taking certain actions,
including paying dividends, issuing equity securities, acquiring
other businesses or merging with other entities. The provisions
of the purchase agreement providing GTCR with such consent rights
 will be terminated upon completion of the offering.

<P align="left"><B>Consulting and Non-Competition Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a consulting and non-competition agreement with Jerrold
L. Glick dated as of May&nbsp;2, 1997 pursuant to which
Mr.&nbsp;Glick provides consulting services to us. The agreement
will terminate upon the first to occur of:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the resignation or removal of Mr.&nbsp;Glick from our board of
	directors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the termination of the agreement by either party upon thirty days
	 prior written notice; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the death or incapacity of Mr.&nbsp;Glick.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We agreed to reimburse Mr.&nbsp;Glick for all reasonable expenses
 incurred by him in the course of performing his duties under the
 agreement. During the term of the agreement, Mr.&nbsp;Glick has
agreed not to compete with us or solicit any of our employees or
customers. In 1999, Mr.&nbsp;Glick received a total of $87,484 in
 compensation or reimbursement of expenses from us under this
agreement or otherwise.

<P align="left"><B>Stockholders Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our formation, we and our stockholders entered
 into a stockholders agreement dated as of May&nbsp;2, 1997, as
amended, which:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	provides for the designation of our board of directors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	imposes certain restrictions on the transfer of our shares;</TD>
</TR>

</TABLE>

<P align="center">56
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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	requires the stockholders to take certain actions upon the
	approval by a majority of the stockholders in connection with an
	initial public offering or a sale of the company;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	requires us to offer to sell shares to the stockholders under
	certain circumstances upon authorization of an issuance or sale
	of additional shares; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	grants certain of the stockholders participation rights in
	connection with a sale of shares by other stockholders.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the completion of the offering, the stockholders agreement
will be terminated.

<P align="left"><B>Registration Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our formation, we and our stockholders entered
 into a registration agreement dated as of May&nbsp;2, 1997, as
amended. Pursuant to the agreement, the existing stockholders are
 entitled to registration rights. Holders of at least a majority
of the shares of common stock held by the existing stockholders
may require us to effect the registration of their shares of
common stock from time to time. Such requirement is called a
demand registration. We are required to pay all registration
expenses in connection with all &#147;short-form&#148; demand
registrations and up to four &#147;long-form&#148; demand
registrations. In addition, if we propose to register any of our
common stock under the Securities Act, whether for our own
account or otherwise, the existing stockholders are entitled to
notice of the registration and, subject to certain priority
provisions, are entitled to include their shares of common stock
in such registration with all registration expenses being paid by
 us. Notwithstanding the foregoing, we will not be obligated to
effect a demand registration within six months after the
effective date of a prior demand registration or of a
registration we initiate. A request may be delayed by us for up
to six months, but on no more than once in any twelve-month
period. The existing stockholders have waived their registration
rights under the registration agreement in connection with the
offering.

<P align="left"><B>Investment in LabPortal, Inc.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recently sold certain of our intellectual property and
computer hardware and accessories to LabPortal in exchange for
$2.0&nbsp;million of redeemable preferred stock of LabPortal.
LabPortal is a new business that will provide web-enabled
clinical laboratory connectivity software products and services.
At the same time, Park City Solutions, Inc., another GTCR
portfolio company, also sold certain of its intellectual property
 to LabPortal in exchange for $2.0&nbsp;million of redeemable
preferred stock of LabPortal. Once LabPortal&#146;s software is
available for use, we expect to be a customer of LabPortal and to
 enter into a customary license or usage agreement with
LabPortal. GTCR is the majority investor in LabPortal; and
Timothy&nbsp;J. Brodnik, Jerrold&nbsp;L. Glick, and certain of
our other employees are also investors in LabPortal.
Mr.&nbsp;Brodnik and Donald&nbsp;J. Edwards are also directors of
 LabPortal. In connection with Mr.&nbsp;Brodnik&#146;s
appointment to the LabPortal board, he was granted an option to
acquire up to approximately 5% of LabPortal&#146;s common stock
at an exercise price significantly in excess of the current fair
market value of LabPortal&#146;s common stock.

<P align="left"><B>Practice Management Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a practice management agreement with Robert R. Belliveau,
 M.D., Thome J.&nbsp;Butler, M.D., Associated Pathologists,
Chartered, or APC, dated as of October&nbsp;13, 1999, under which
 we provide administrative and management services to APC, and
APC provides pathology medical services to us. This agreement was
 entered into in connection with our acquisition of certain of
the assets of APC concurrent with our acquisition of APL. Our
compensation under this agreement is equal to the gross revenues
of APC less certain expenses of APC incurred under the agreement.
 During the term of the agreement and for at least five years
thereafter, APC agreed not to compete with us or solicit any of
our employees or customers of ours.

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<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->
<DIV align="left"><A NAME="014"></A></DIV>

<P align="center"><B>DESCRIPTION OF CAPITAL STOCK</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under our certificate of incorporation, we are authorized to
issue &nbsp;&nbsp;&nbsp;shares of common stock
and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of preferred stock.
Shares of each class have a par value of $.01&nbsp;per share. The
 following description summarizes the material provisions of our
capital stock.

<P align="left"><B>Common Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;15, 2000, there
were&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock
outstanding, which were held of record by 45 shareholders. Each
share of our common stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the
election of directors. Subject to any preference rights of
holders of preferred stock, the holders of common stock are
entitled to receive dividends, if any, declared from time to time
 by the directors out of legally available funds. In the event of
 our liquidation, dissolution or winding up, the holders of
common stock are entitled to share ratably in all assets
remaining after the payment of liabilities, subject to any rights
 of holders of preferred stock to prior distribution.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares
 of common stock are fully paid and nonassessable and the shares
of common stock to be issued on completion of this offering will
be fully paid and nonassessable.

<P align="left"><B>Serial Preferred Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock and to
designate the rights, preferences and privileges of each series
of preferred stock, which may be greater than the rights attached
 to the common stock. It will not be possible to state the actual
 effect of the issuance of any shares of preferred stock on the
rights of holders of common stock until the board of directors
determines the specific rights attached to that preferred stock.
The effects of issuing preferred stock could include one or more
of the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	restricting dividends on the common stock;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	diluting the voting power of the common stock;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	impairing the liquidation rights of the common stock; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	delaying or preventing a change of control of AML.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There will be no shares of preferred stock outstanding
immediately after this offering, and we have no current plan to
issue any shares of preferred stock outstanding.

<P align="left"><B>Options</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2000, options to purchase a total of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock were
outstanding, of which
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;have
vested. The exercise prices of the vested options range from
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. In
 addition, &nbsp;&nbsp;&nbsp;of the outstanding options have an
exercise price equal to the initial public offering price of our
common stock.

<P align="left"><B>Anti-Takeover Effects of Provisions of Delaware Law and our
Certificate of Incorporation and Bylaws</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some provisions of our certificate of incorporation and bylaws
may be deemed to have an anti-takeover effect and may delay or
prevent a tender offer or takeover attempt that a stockholder
might consider to be in its best interest, including those
attempts that might result in a premium over the market price for
 the shares held by stockholders.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These provisions include:

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Classified Board of
Directors</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors is divided into three classes of directors
 serving staggered three-year terms. As a result, approximately
one-third of the board of directors is elected each year. These
provisions, when coupled with the provision of our certificate of
 incorporation authorizing the board of directors to fill vacant
directorships or increase the size of the board of directors, may
 deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by
filling the vacancies created by this removal with its own
nominees.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Cumulative Voting</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation expressly denies our
stockholders the right to cumulative voting in the election of
directors. As a result, stockholders may not aggregate their
votes for a single director.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Stockholder Action;
Special Meeting of Stockholders</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation eliminates the ability of
stockholders to act by written consent. It further provides that
special meetings of our stockholders may be called only by the
chairman of the board of directors, the president or a majority
of the board of directors. As a result, stockholders must rely on
 management to call a special meeting or wait until the next
annual meeting to hold a vote on extraordinary matters like a
significant transaction.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Advance Notice
Requirements for Stockholder Proposals and Directors Nominations
</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of
stockholders, must provide timely notice in writing. To be
timely, a stockholder&#146;s notice must be delivered to or
mailed and received at our principal executive offices not less
than 90&nbsp;days prior to the anniversary date of the
immediately preceding annual meeting of stockholders. However, in
 the event that the annual meeting is called for a date that is
not within 30&nbsp;days before or after that anniversary date,
notice by the stockholder in order to be timely must be received
not later than the close of business on the tenth day following
the date on which notice of the date of the annual meeting was
mailed to stockholders or made public, whichever first occurs.
Our bylaws also specify requirements as to the form and content
of a stockholder&#146;s notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of
stockholders or from making nominations for directors at an
annual meeting of stockholders.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Authorized But Unissued
Shares</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The authorized but unissued shares of common stock and preferred
stock will be available for future issuance without stockholder
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 shares of common
stock and preferred stock could render more difficult or
discourage an attempt to obtain control of AML by means of a
proxy contest, tender offer, merger or otherwise.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Amendments; Supermajority
 Vote Requirements</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on
any matter is required to amend a corporation&#146;s certificate
of incorporation or by-laws, unless either a corporation&#146;s
certificate of incorporation or bylaws require a greater
percentage. Our certificate of incorporation imposes
supermajority vote requirements in connection with business
combination transactions and the amendment of provisions of our
certificate of incorporation and bylaws,

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<DIV align="left">
including those provisions relating to the classified board of
directors, action by written consent and the ability of
stockholders to call special meetings.
</DIV>

<P align="left"><B>Transfer Agent and Registrar</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The transfer agent and registrar for our common stock is American
 Stock Transfer &#38; Trust Company. Its address is 40 Wall
Street, New York, New York 10005.

<P align="left"><B>Listing</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are applying to list our common stock on the Nasdaq National
Market under the symbol &#147;AMLS.&#148;

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<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->
<DIV align="left"><A NAME="015"></A></DIV>

<P align="center"><B>SHARES ELIGIBLE FOR FUTURE SALE</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no market for our common
stock. Future sales in the public markets of substantial amounts
of common stock, including shares issued on the exercise of
outstanding options, could adversely affect the market prices
prevailing from time to time for the common stock. It could also
impair our ability to raise capital through future sales of
equity securities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After completion of this offering, we will
have&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock
outstanding, assuming no exercise of the underwriters&#146;
over-allotment option and no exercise of outstanding options. All
 of the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock sold
in this offering will be freely transferable without restriction
or further registration under the Securities Act, except for any
of the shares that are acquired by affiliates as that term is
defined in Rule&nbsp;144 under the Securities Act.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shares acquired by affiliates and the remaining shares held by
existing shareholders are restricted securities as that term is
defined in Rule&nbsp;144 under the Securities Act. Restricted
securities may be sold in the public market only if registered or
 if they qualify for an exemption from registration under
Rule&nbsp;144, which is summarized below. The following table
illustrates the shares eligible for sale in the public market
assuming Credit Suisse First Boston Corporation does not release
any portion of the shares subject to lock-up agreements described
 below and under &#147;Underwriting.&#148;

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="10%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="75%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>NUMBER OF SHARES</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>DATE</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Upon the date of this prospectus subject, in some cases, to
	volume and manner of sale limitations under Rule&nbsp;144.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	After 90&nbsp;days from the date of this prospectus.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	After 180&nbsp;days from the date of this prospectus, subject, in
	 some cases, to volume and manner of sale limitations under
	Rule&nbsp;144.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	At various times after 180&nbsp;days after the date of this
	prospectus on expiration of applicable one year holding periods,
	subject to volume and manner of sale limitations under
	Rule&nbsp;144.</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left"><B>Lock-Up</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agreed that, without the prior written consent of Credit
Suisse First Boston, we will not, directly or indirectly, offer,
sell or otherwise dispose of any shares of capital stock or any
securities that may be converted into or exchanged for shares of
capital stock for a period of 180&nbsp;days from the date of this
 prospectus. Each of our officers, directors and substantially
all of our existing stockholders have also entered into an
agreement to the same effect.

<P align="left"><B>Rule&nbsp;144</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, Rule&nbsp;144 has the effect that, beginning
90&nbsp;days after the date of this prospectus, a person who has
beneficially owned ordinary shares for at least one year would be
 entitled to sell within any three month period a number of
shares that does not exceed the greater of:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	1% of the total number of shares of common stock then
	outstanding; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the average weekly trading volume of the common stock on The
	Nasdaq National Market during the four calendar weeks preceding
	the filing of notice on Form&nbsp;144 with respect to the sale.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales under Rule&nbsp;144 are also subject to manner of sale
provisions and notice requirements and to the availability of
current public information about us.

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<P align="left"><B>Rule&nbsp;144(k)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Rule&nbsp;144(k), a person who is not deemed to have been
one of our affiliates at any time during the 90&nbsp;days
preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, including the holding
 period of any prior owner which was not an affiliate, is
entitled to sell the shares without complying with the manner of
sale, public information, volume limitation or notice provisions
of Rule&nbsp;144. Therefore, unless otherwise restricted, shares
eligible for sale under Rule&nbsp;144(k) may be sold immediately
upon completion of this offering.

<P align="left"><B>Rule&nbsp;701</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;701, any of our employees, directors,
 officers, consultants or advisors who purchases ordinary shares
from us in connection with a compensatory stock or option plan or
 other written agreement before the effective date of this
prospectus is entitled to resell those shares 90&nbsp;days after
the effective date of this prospectus in reliance on
Rule&nbsp;144, without having to comply with the restrictions,
including the holding period, contained in Rule&nbsp;144.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rule&nbsp;701 permits affiliates to sell their Rule&nbsp;701
shares under Rule&nbsp;144 without complying with the holding
period requirements of Rule&nbsp;144. It permits non-affiliates
to sell their Rule&nbsp;701 shares in reliance on Rule&nbsp;144
without having to comply with the holding period, public
information, volume limitation or notice provisions of
Rule&nbsp;144. All holders of Rule&nbsp;701 shares are required
to wait until 90&nbsp;days after the date of this prospectus
before selling those shares.

<P align="left"><B>Stock Options</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the completion of this offering, we intend to file a
registration statement on Form&nbsp;S-8 under the Securities Act
covering shares of common stock issued or reserved for issuance
under our various stock option plans. The registration statement
will become effective automatically upon filing. As of
June&nbsp;30, 2000, options to
purchase&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock were
 issued and outstanding, of which
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;options
 had vested. Accordingly, shares registered under the
registration statement will, subject to vesting provisions and
Rule&nbsp;144 volume limitations applicable to our affiliates, be
 available for sale in the open market immediately after the
180-day lock-up agreements expire.

<P align="left"><B>Registration Rights</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The existing stockholders of the Company have certain
registration rights described under &#147;Certain Relationships
and Related Transactions&nbsp;&#151; Registration
Agreement.&#148;

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<!-- link1 "MATERIAL UNITED STATES TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS" -->
<DIV align="left"><A NAME="016"></A></DIV>

<P align="center"><B>MATERIAL UNITED STATES TAX CONSIDERATIONS</B>

<DIV align="center">
<B>FOR NON-UNITED STATES HOLDERS</B>
</DIV>

<P align="left"><B>General</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a general discussion of the principal U.S.
federal income and estate tax consequences of the ownership and
disposition of our common stock by a Non-U.S. Holder. For this
purpose, the term &#147;Non-U.S. Holder&#148; is defined as any
person or entity that is, for U.S. federal income tax purposes:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a foreign corporation or other entity taxable as a corporation;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a non-resident alien individual; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a foreign estate or trust.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If an entity treated as a partnership for U.S. federal income tax
 purposes holds our common shares, the tax treatment of each
partner will generally depend upon the status of the partner and
upon the activities of the partnership. If you are a partner of a
 partnership holding our common shares, you should consult your
tax advisor.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This discussion is based on currently existing provisions of the
Code, existing, temporary and proposed Treasury regulations
promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the date
 hereof and all of which are subject to change, possibly with
retroactive effect, or different interpretations. This discussion
 is limited to Non-U.S. Holders who hold shares of common stock
as capital assets within the meaning of section 1221 of the Code.
 Moreover, this discussion is for general information only and
does not address all of the tax consequences that may be relevant
 to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	particular Non-U.S. Holders in light of their personal
	circumstances;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	special tax rules that may apply to some Non-U.S. Holders,
	including banks, insurance companies, dealers in securities and
	traders in securities who elect to apply a market-to-market
	method of accounting;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	special tax rules that may apply to a Non-U.S. Holder that holds
	our common stock as part of a &#147;straddle,&#148;
	&#147;hedge&#148; or &#147;conversion transaction&#148;; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	to individuals who relinquish their U.S. citizenship or
	residence.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An individual may, subject to certain exceptions, be deemed to be
 a resident alien, as opposed to a nonresident alien, by virtue
of being present in the U.S. for at least 31&nbsp;days in the
calendar year and for an aggregate of at least 183&nbsp;days
during a three-year period ending in the current calendar year,
counting for these purposes all of the days present in the
current year, one-third of the days present in the immediately
preceding year, and one-sixth of the days present in the second
preceding year are counted. Resident aliens are subject to U.S.
federal income tax as if they were U.S. citizens and thus, are
not Non-U.S. Holders for purposes of this discussion.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have not and will not seek a ruling from the IRS with respect
to the U.S. federal income tax consequences described below, and
as a result, there can be no assurance that the IRS will not
disagree with or challenge any of the conclusions set forth in
this discussion.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Each prospective purchaser of common stock is advised to
consult a tax advisor with respect to current and possible future
 tax consequences of purchasing, owning and disposing of common
stock as well as any tax consequences that may arise under the
laws of any U.S. state, municipality or other taxing
jurisdiction, or non-U.S. taxing jurisdiction</B>.

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<P align="left"><B>Dividends</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not anticipate paying dividends on our common stock in the
foreseeable future. However, in the event that dividends are paid
 on shares of common stock, dividends paid to a Non-U.S. Holder
of common stock generally will be subject to withholding of U.S.
federal income tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. To claim the
benefit of a lower federal income tax rate under an income tax
treaty, a Non-U.S. Holder of common stock must properly file with
 the payor an IRS Form 1001 or an IRS Form&nbsp;W-8BEN, or
successor form, claiming an exemption from or reduction in
withholding under such tax treaty. A Form&nbsp;1001 is replaced
with a Form&nbsp;W-8BEN for payments after December&nbsp;31,
2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any dividends paid on shares of common stock to a Non-U.S. Holder
 will not be subject to withholding tax, but instead will be
subject to U.S. federal income tax on a net basis at applicable
graduated individual or corporate rates if:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	dividends are effectively connected with the conduct of a trade
	or business by the Non-U.S. Holder within the United States or,
	where a tax treaty applies, are attributable to a U.S. permanent
	establishment, or, in the case of an individual, a &#147;fixed
	base&#148; in the U.S., of the Non-U.S. Holder (collectively
	referred to as &#147;U.S. trade or business income&#148;); and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	an IRS Form&nbsp;4224 or a Form&nbsp;W-8ECI, or successor form,
	is filed with the payor.</TD>
</TR>

</TABLE>

<P align="left">
Any U.S. trade or business income received by a foreign
corporation may, under certain circumstances, be subject to an
additional &#147;branch profits tax&#148; at a rate of 30% or
such lower rate as may be specified by an applicable income tax
treaty. A Form&nbsp;4224 is replaced with a Form&nbsp;W-8ECI for
payments after December 31, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless the payor has knowledge to the contrary, dividends paid
prior to January&nbsp;1, 2001 to an address outside the United
States are presumed to be paid to a resident of such country for
purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. However,
recently finalized Treasury Regulations pertaining to U.S.
federal withholding tax, the &#147;Final Withholding Tax
Regulations&#148;,provide that a Non-U.S. Holder must comply with
 certification procedures, or, in the case of payments made
outside the United States with respect to an offshore account,
certain documentary evidence procedures, directly or under
specified circumstances through an intermediary, to obtain the
benefits of a reduced rate under an income tax treaty with
respect to dividends paid after December&nbsp;31, 2000. In
addition, the Final Withholding Tax Regulations will require a
Non-U.S. Holder who provides an IRS Form&nbsp;W-8BEN or successor
 form, as discussed above, also to provide its U.S. taxpayer
identification number.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Non-U.S. Holder of common stock eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain
a refund of any excess amounts withheld by filing an appropriate
claim for refund with the IRS.

<P align="left"><B>Gain on Disposition of Common Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Non-U.S. Holder generally will not be subject to U.S. federal
income tax with respect to gain recognized on a sale or other
disposition of common stock unless:

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(1)&nbsp; the gain is a U.S. trade or business income;
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="4%"></TD>
	<TD width="93%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	in the case of a Non-U.S. Holder who is an individual and holds
	the common stock as a capital asset, such holder is present in
	United States for 183 or more days in the taxable year of the
	sale or other disposition and certain other conditions are met;
	or</TD>
</TR>

</TABLE>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="4%"></TD>
	<TD width="93%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	We are or have been a &#147;U.S. real property holding
	corporation,&#148; or a &#147;USRPHC,&#148; for U.S. federal
	income tax purposes at any time within the shorter of the
	five-year period preceding the disposition or the Non-U.S.
	Holding period for its common stock as discussed below.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An individual Non-U.S. Holder who falls under clause
(1)&nbsp;above will, unless an applicable treaty provides
otherwise, be taxed on his or her net gain derived from the sale
under regular graduated U.S. federal income tax rates. An
individual Non-U.S. Holder who falls under clause (2)&nbsp;above
will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by certain U.S. capital losses.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Non-U.S. Holder that is a foreign corporation falling under
clause (1) above will be taxed on its gain under regular
corporate U.S. federal income tax rates and may be subject to an
additional branch profits tax equal to 30% of its
&#147;effectively connected earnings and profits&#148; within the
 meaning of the Internal Revenue Code, for the taxable year, as
adjusted for certain items, unless it qualifies for a lower rate
under an applicable income tax treaty.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A corporation is a USRPHC if the fair market value of the U.S.
real property interests held by the corporation is 50% or more of
 the aggregate fair market value of its U.S. and foreign real
property interests and any other assets used or held for use by
the corporation in a trade or business. Based on our current and
anticipated assets, we believe that we are not currently, and are
 likely not to become, a USRPHC. However, since the determination
 of USRPHC status is based upon the composition of our assets
from time to time, and because there are uncertainties in the
application of certain relevant rules, there can be no assurance
that we will not become a USRPHC. If we were to become a USRPHC,
then gain on the sale or other disposition of common stock by a
Non-U.S. Holder generally would be subject to U.S. federal income
 tax unless both
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the common stock was &#147;regularly traded&#148; on an
	established securities market within the meaning of applicable
	Treasury regulations; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the Non-U.S. Holder actually or constructively owned 5% or less
	of the common stock during the shorter of the five-year period
	preceding such disposition or the Non-U.S. Holder&#146;s holding
	period.</TD>
</TR>

</TABLE>

<P align="left">
Non-U.S. Holders should consult their tax advisors concerning any
 U.S. tax consequences that may arise if we were to become a
USRPHC.

<P align="left"><B>Federal Estate Tax</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Common stock owned or treated as owned by an individual Non-U.S.
Holder at the time of death will be included in such
holder&#146;s gross estate for U.S. federal estate tax purposes,
and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise.

<P align="left"><B>Information Reporting and Backup Withholding Tax</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We must report annually to the IRS and to each Non-U.S. Holder
the amount of dividends paid to each holder and the tax withheld
with respect to dividends, regardless of whether withholding was
required. Copies of the information returns reporting such
dividends and withholding may also be made available by the IRS
to the tax authorities in the country in which the Non-U.S.
Holder resides under the provisions of an applicable income tax
treaty or certain other agreements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Backup withholding is imposed at the rate of 31% on certain
payments to persons that fail to furnish identifying information
to the payer. Backup withholding generally will not apply to
dividends paid prior to January&nbsp;1, 2001 to a Non-U.S. Holder
 at an address outside the United States unless the payer has
knowledge that the payee is a U.S. person. In the case of
dividends paid after December&nbsp;31, 2000, the Final
Withholding Tax Regulations provide that a Non-U.S. Holder
generally will be subject to withholding tax at a 31% rate unless
 specified certification procedures, or, in the case of payments
made outside the United States with respect to an offshore
account, documentary evidence procedures, are

<P align="center">65

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<DIV align="left">
complied with, directly or under certain circumstances through an
 intermediary. Backup withholding and information reporting
generally will also apply to dividends paid on common stock at
addresses inside the United States to Non-U.S. Holders that fail
to provide identifying information in the manner required. The
Final Withholding Tax Regulations provide presumptions under
which a Non-U.S. Holder would be subject to backup withholding
and information reporting unless certification from the holder of
 the Non-U.S. Holder&#146;s Non-U.S. status is provided.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Payment of the proceeds of a sale of common stock effected by or
through a U.S. office of a broker is subject to both backup
withholding at the rate of 31% and information reporting unless
the beneficial owner provides the payer with its name and address
 and certifies under penalties of perjury that it is a Non-U.S.
Holder, or otherwise establishes an exemption. In general, backup
 withholding and information reporting will not apply to a
payment of the proceeds of a sale of common stock by or through a
 foreign office of a broker. If, however, such broker is, for
U.S. federal income tax purposes, a U.S. person, a controlled
foreign corporation, or a foreign person that derives 50% or more
 if its gross income for certain periods from the conduct of a
trade or business in the United States, or, in addition, for
periods after December&nbsp;31, 2000, a foreign partnership that
at any time during its tax year either is engaged in the conduct
of a U.S. trade or business or has as partners one or more U.S.
persons that, in the aggregate, hold more than 50% of the income
or capital interest in the partnership, such payments will be
subject to information reporting, but not backup withholding,
unless such broker has documentary evidence in its records that
the beneficial owner is a Non-U.S. Holder and other specified
conditions are met or the beneficial owner otherwise establishes
an exemption.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Final Withholding Tax Regulations unify current certification
 procedures and forms and clarify reliance standards. Except as
noted above with respect to foreign brokers that are
partnerships, the Final Withholding Tax Regulations do not
significantly alter the substantive withholding and information
reporting requirements but do alter the procedures for claiming
the benefits of an income tax treaty and change the certification
 procedures relating to the receipt by intermediaries of payments
 on behalf of the beneficial owner of shares of common stock.
Non-U.S. Holders should consult their own tax advisors regarding
the effect, if any, of the Final Withholding Tax Regulations on
their particular situations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Backup withholding is not an additional tax. Any amounts withheld
 under the backup withholding rules generally will be allowed as
a refund or a credit against the Non-U.S. Holder&#146;s U.S.
federal income tax liability provided the required information is
 furnished in a timely manner to the&nbsp;IRS.

<P align="center">66

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<DIV align="left"><A NAME="017"></A></DIV>

<P align="center"><B>UNDERWRITING</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms and subject to the conditions contained in an
underwriting agreement, dated
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2000, we have agreed to sell to the underwriters named below, for
 whom Credit Suisse First Boston Corporation, Banc of America
Securities LLC and First Union Securities, Inc. are acting as
representatives, the following respective numbers of shares of
common stock.

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="81%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number of</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="2"><FONT size="2"><B>Underwriter</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="2"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Credit Suisse First Boston Corporation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Banc of America Securities LLC</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	First Union Securities, Inc.&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriting agreement provides that the underwriters are
obligated to purchase all the shares of common stock in the
offering if any are purchased, other than those shares covered by
 the over-allotment option described below. The underwriting
agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be
increased or the offering of common stock may be terminated.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have granted to the underwriters a 30-day option to purchase
on a pro rata basis up to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
 shares from us at the initial public offering price less the
underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters propose to offer the shares of common stock
initially at the public offering price on the cover page of this
prospectus and to selling group members at that price less a
concession of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. The
underwriters and selling group members may allow a discount of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share on sales to other
broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may
be changed by the representatives.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes the compensation and estimated
expenses we will pay.

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="32%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Per Share</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Total</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Without</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>With</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Without</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>With</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Over-allotment</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Over-allotment</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Over-allotment</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Over-allotment</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Underwriting Discounts and Commissions paid by us</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Expenses payable by us</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters do not intend to confirm sales to any accounts
over which they exercise discretionary authority.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Affiliates of Banc of America Securities LLC and First Union
Securities, Inc. have provided and will in the future likely
provide us with various financial services in the ordinary course
 of their business. In particular, an affiliate of First Union
Securities, Inc. is a lender under our senior credit facility. As
 a result of our use of the net proceeds of the offering to repay
 indebtedness under the senior credit facility, this affiliate
will receive more than 10% of the net offering proceeds. The
offering therefore is being conducted in accordance with the
applicable provision of Rule&nbsp;2720 of the National
Association of Securities Dealers, Inc. Conduct Rules.
Rule&nbsp;2720 requires that the initial public offering price of
 the shares of common stock not be higher than that recommended
by a &#147;qualified independent underwriter&#148; meeting
certain standards. Accordingly, Credit Suisse First Boston
Corporation is assuming the responsibilities of acting as the
qualified independent underwriter in pricing the offering and
conducting due diligence. The initial public

<P align="center">67
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<DIV align="left">
offering price of the shares of common stock is no higher than
the price recommended by Credit Suisse First Boston Corporation.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any shares of our
 common stock or securities convertible into or exchangeable or
exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of
Credit Suisse First Boston Corporation for a period of
180&nbsp;days after the date of this prospectus, except issuances
 pursuant to the exercise of employee stock options outstanding
on the date hereof or pursuant to our 2000 Employee Stock
Purchase Plan.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our officers, directors and substantially all of our stockholders
 have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any
shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock,
enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of
ownership of our common stock, whether any of these transactions
are to be settled by delivery of our common stock or such other
securities, in cash or otherwise, or publicly disclose the
intention to make any offer, sale, pledge or disposition, or
enter into any transaction, swap, hedge or other arrangement,
without, in each case, the prior written consent of Credit Suisse
 First Boston Corporation for a period of 180 days after the date
 of this prospectus.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters have reserved for sale, at the initial public
offering price up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of the
common stock for employees, directors and other persons
associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for
sale to the general public in the offering will be reduced to the
 extent these persons purchase the reserved shares. Any reserved
shares not so purchased will be offered by the underwriters to
the general public on the same terms as the other shares.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments which the
underwriters may be required to make in that respect.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are applying to list our shares of common stock on The Nasdaq
Stock Market&#146;s National Market under the symbol
&#147;AMLS.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common stock. The initial public offering price for the common
stock will be negotiated by us and representatives of the
underwriters. Among the principal factors to be considered in
determining the initial public offering price will be:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	market conditions for initial public offerings;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the history of and prospects for our business, our past and
	present operations;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our past and present earnings and current financial position;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	an assessment of our management;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the market of securities of companies in businesses similar to
	ours; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the general condition of the securities markets.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There can be no assurance that the initial public offering price
will correspond to the price at which the common stock will trade
 in the public market subsequent to the offering or that an
active trading market will develop and continue after the
offering.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the offering the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids in accordance with
Regulation&nbsp;M under the Securities Exchange Act of 1934.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Stabilizing transactions permit bids to purchase the underlying
	security so long as the stabilizing bids do not exceed a
	specified maximum.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Over-allotment involves sales by the underwriters in excess of
	the number of shares the underwriters are obligated to purchase,
	which creates a syndicate short position. The short position may
	be either a covered short position or a naked short position. In
	a covered short position, the number of shares over-allotted by
	the underwriters is not greater than the number of shares that
	they may purchase in the over-allotment option. In a naked short
	position, the number of shares involved is greater than the
	number of shares in the over-allotment option. The underwriters
	may close out any short position by either exercising their
	over-allotment option and/or purchasing shares in the open
	market.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Syndicate covering transactions involve purchases of the common
	stock in the open market after the distribution has been
	completed in order to cover syndicate short positions. In
	determining the source of shares to close out the short position,
	 the underwriters will consider, among other things, the price of
	 shares available for purchase in the open market as compared to
	the price at which they may purchase shares through the
	over-allotment option. If the underwriters sell more shares than
	could be covered by the over-allotment option, a naked short
	position, the position can only be closed out by buying shares in
	 the open market. A naked short position is more likely to be
	created if the underwriters are concerned that there could be
	downward pressure on the price of the shares in the open market
	after pricing that could adversely affect investors who purchase
	in the offering.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Penalty bids permit the representatives to reclaim a selling
	concession from a syndicate member when the common stock
	originally sold by the syndicate member is purchased in a
	stabilizing or syndicate covering transaction to cover syndicate
	short positions.</TD>
</TR>

</TABLE>

<P align="left">
These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding a
 decline in the market price of the common stock. As a result the
 price of the common stock may be higher than the price that
might otherwise exist in the open market. These transactions may
be effected on The Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A prospectus in electronic form may be made available on the web
sites maintained by one or more of the underwriters participating
 in this offering. The representatives may agree to allocate a
number of shares to underwriters for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters that will make Internet
distributions on the same basis as other allocations.

<P align="center">69

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<!-- link1 "NOTICE TO CANADIAN RESIDENTS" -->
<DIV align="left"><A NAME="018"></A></DIV>

<P align="center"><B>NOTICE TO CANADIAN RESIDENTS</B>

<P align="left"><B>Resale Restrictions</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The distribution of the common stock in Canada is being made only
 on a private placement basis exempt from the requirement that we
 prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are
made. Any resale of the common stock in Canada must be made under
 applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made
under available statutory exemptions or under a discretionary
exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice
 prior to any resale of the common stock.

<P align="left"><B>Representations of Purchasers</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
By purchasing common stock in Canada and accepting a purchase
confirmation a purchaser is representing to us and the dealer
from whom the purchase confirmation is received that
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the purchaser is entitled under applicable provincial securities
	laws to purchase the common stock without the benefit of a
	prospectus qualified under those securities laws;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	where required by law, that such purchaser is purchasing as
	principal and not as agent; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the purchaser has reviewed the test above under Resale
	Restrictions.</TD>
</TR>

</TABLE>

<P align="left"><B>Rights of Action (Ontario Purchasers)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The securities being offered are those of a foreign issuer and
Ontario purchasers will not receive the contractual right of
action prescribed by Ontario securities law. As a result, Ontario
 purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission
or rights of action under the civil liability provisions of the
U.S. federal securities laws.

<P align="left"><B>Enforcement of Legal Rights</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of the issuer&#146;s directors and officers as well as the
experts named herein may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect
service of process within Canada upon the issuer or such persons.
 All or a substantial portion of the assets of the issuer and
such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer
or such persons in Canada or to enforce a judgement obtained in
Canadian courts against such issuer or persons outside of Canada.

<P align="left"><B>Notice to British Columbia Residents</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A purchaser of common stock to whom the <I>Securities Act </I>
(British Columbia) applies is advised that such purchaser is
required to file with the British Columbia Securities Commission
a report within ten days of the sale of any common stock acquired
 by the purchaser pursuant to this offering. The report must be
in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from
us. Only one report must be filed for common stock acquired on
the same date and under the same prospectus exemption.

<P align="left"><B>Taxation and Eligibility for Investment</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Canadian purchasers of common stock should consult their own
legal and tax advisors with respect to the tax consequences of an
 investment in the common stock in their particular circumstances
 and about the eligibility of the common stock for investment by
the purchaser under relevant Canadian legislation.

<P align="center">70

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "LEGAL MATTERS" -->
<DIV align="left"><A NAME="019"></A></DIV>

<P align="center"><B>LEGAL MATTERS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of the legal matters in connection with the issuance of the
common stock will be passed upon for us by Kirkland &#38; Ellis
(a partnership including professional corporations), Chicago,
Illinois. The underwriters have been represented by Latham &#38;
Watkins, Washington, D.C. Kirkland &#38; Ellis has, from time to
time, represented, and may continue to represent, some of the
underwriters in connection with various legal matters and GTCR
and some of their affiliates in connection with legal matters. In
 addition, Latham&nbsp;&#38; Watkins has, from time to time,
represented and may continue to represent affiliates of GTCR in
connection with legal matters.

<!-- link1 "EXPERTS" -->
<DIV align="left"><A NAME="020"></A></DIV>

<P align="center"><B>EXPERTS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements of American Medical
Laboratories, Incorporated and subsidiaries as of
December&nbsp;31, 1998 and 1999, and for each of the years in the
 three year period ended December&nbsp;31, 1999 included in this
prospectus and registration statement have been included herein
in reliance upon the report of KPMG LLP, independent certified
public accountants, appearing elsewhere in this prospectus, given
 on the authority of that firm as experts in accounting and
auditing.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements of APL Healthcare Group, Inc.
and affiliates as of December&nbsp;31, 1997 and 1998 and
September&nbsp;30, 1999, and for each of the years in the three
year period ended December&nbsp;31, 1998 and for the nine month
period from January&nbsp;1, 1999 to September&nbsp;30, 1999
included in this prospectus and registration statement have been
included herein in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere in
this prospectus, given on the authority of that firm as experts
in accounting and auditing.

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->
<DIV align="left"><A NAME="021"></A></DIV>

<P align="center"><B>WHERE YOU CAN FIND MORE INFORMATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the SEC a registration statement on
Form&nbsp;S-1 under the Securities Act for the common stock
offered by this prospectus. This prospectus, which is a part of
the registration statement, does not contain all of the
information in the registration statement or the exhibits and
schedules which are part of the registration statement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For more information about our company and the common stock
offered by this prospectus, we refer you to the registration
statement and the exhibits and schedules filed as part of the
registration statement. You may read and copy any document we
file at the SEC&#146;s public reference room at 450 Fifth Street,
 N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from the
SEC&#146;s world wide web site at http://sec.gov.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we will become subject to the
information and periodic reporting requirements of the Securities
 and Exchange Act and will file periodic reports, proxy
statements and other information with the SEC. These periodic
reports, proxy statements and other information will be available
 for inspection and copying at the SEC&#146;s public reference
rooms and the web site of the SEC.

<P align="center">71
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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "INDEX TO FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="022"></A></DIV>

<P align="center"><B>INDEX TO FINANCIAL STATEMENTS</B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="87%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	American Medical Laboratories, Incorporated</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Annual Financial Statements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Independent Auditors&#146; Report</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consolidated Balance Sheets as of December 31, 1998 and 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consolidated Statements of Operations for the period
	January&nbsp;1, 1997 to May&nbsp;1, 1997, the period May&nbsp;2,
	1997 to December&nbsp;31, 1997 and the years ended
	December&nbsp;31, 1998 and 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consolidated Statement of Changes in Redeemable Preferred Stock
	and Stockholders&#146; Equity for the period January&nbsp;1, 1997
	 to May&nbsp;1, 1997, the period May&nbsp;2, 1997 to
	December&nbsp; 31, 1997 and the years ended December&nbsp;31,
	1998 and 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consolidated Statements of Cash Flows for the period
	January&nbsp;1, 1997 to May&nbsp;1, 1997, the period May&nbsp;2,
	1997 to December&nbsp;31, 1997 and the years ended
	December&nbsp;31, 1998 and 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Notes to Consolidated Financial Statements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-8</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="6">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Interim Financial Statements (unaudited)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Condensed Consolidated Balance Sheet as of June 30, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-27</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Condensed Consolidated Statements of Operations for the six
	months ended June&nbsp;30, 1999 and 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-28</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Condensed Consolidated Statements of Cash Flows for the six
	months ended June&nbsp;30, 1999 and 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-29</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Notes to Condensed Consolidated Financial Statements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-30</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="6">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	APL Healthcare Group, Inc. and Affiliates</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Financial Statements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Independent Auditors&#146; Report</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-32</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Combined Balance Sheets as of December&nbsp;31, 1997 and 1998 and
	 September&nbsp;30, 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-33</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Combined Statements of Operations for the years ended
	December&nbsp;31, 1996, 1997 and 1998 and the nine months ended
	September&nbsp;30, 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-34</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Combined Statements of Stockholders&#146; Deficit for the years
	ended December&nbsp;31, 1996, 1997 and 1998 and the nine months
	ended September&nbsp;30, 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-35</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Combined Statements of Cash Flows for the years ended
	December&nbsp;31, 1996, 1997 and 1998 and the nine months ended
	September&nbsp;30, 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-36</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Notes to Combined Financial Statements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-37</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-1

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>INDEPENDENT AUDITORS&#146; REPORT</B>

<P align="left">
The Stockholders and Board of Directors

<DIV align="left">
American Medical Laboratories, Incorporated:
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying consolidated balance sheets of
American Medical Laboratories, Incorporated and subsidiaries as
of December&nbsp;31, 1998 and 1999, and the related consolidated
statements of operations, changes in redeemable preferred stock
and stockholders&#146; equity and cash flows for each of the
years in the three year period ended December&nbsp;31, 1999.
These consolidated financial statements are the responsibility of
 the Company&#146;s management. Our responsibility is to express
an opinion on these consolidated financial statements based on
our audits.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the consolidated financial statements referred to
 above present fairly, in all material respects, the consolidated
 financial position of American Medical Laboratories,
Incorporated and subsidiaries as of December&nbsp;31, 1998 and
1999, and the results of their operations and their cash flows
for each of the years in the three year period ended
December&nbsp;31, 1999, in conformity with generally accepted
accounting principles.

<P align="right">
KPMG
LLP&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

<P align="left">
McLean, Virginia

<DIV align="left">
April&nbsp;7, 2000
</DIV>

<P align="center">F-2

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>

<P align="center">
<B>CONSOLIDATED BALANCE SHEETS</B>

<DIV align="center">
<B>December&nbsp;31, 1998 and 1999</B>
</DIV>

<DIV align="center">
<B>(in thousands, except share data)</B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="69%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>ASSETS</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Current assets:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">869</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accounts receivable, less allowance for doubtful accounts of $904
	 in 1998 and $1,314 in 1999 (notes&nbsp;7 and 15)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,798</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,802</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,692</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,456</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Receivable from affiliate (note&nbsp;5)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">306</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">680</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Notes receivable from officers and directors (note&nbsp;13)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Income tax receivable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,603</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred income taxes (note 12)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">718</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,704</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Prepaid expenses and other current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,221</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,955</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,791</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,069</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Restricted cash (note&nbsp;7)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,485</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Property, plant and equipment, net (notes&nbsp;3 and 7)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,254</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,485</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Notes receivable from officers and directors (note&nbsp;13)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,760</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred income taxes (note&nbsp;12)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">412</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,594</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Other assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">131</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,863</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Intangible assets, net (notes&nbsp;4 and 6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,190</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,322</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45,263</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">202,093</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="11" align="left" valign="top"><FONT size="2">
	<B>LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS&#146;
	 EQUITY</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Current liabilities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Bank overdraft</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">306</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accounts payable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,959</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,932</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Notes payable and capital lease obligations (note&nbsp;7)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,249</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,315</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accrued expenses (note&nbsp;8)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,063</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,079</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accrued income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">745</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred income taxes (note&nbsp;12)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,211</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,352</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total current liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,533</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,678</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred income taxes (note&nbsp;12)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">315</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,751</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Notes payable and capital lease obligations, less current portion
	 (note&nbsp;7)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,224</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">114,154</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Notes payable to shareholders (notes&nbsp;6 and 7)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,500</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Investment in affiliate (note&nbsp;5)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">812</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,627</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Other liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,355</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,890</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,239</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">191,600</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Redeemable preferred stock (note&nbsp;10):</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Class&nbsp;A redeemable cumulative 10% preferred stock, $0.01 par
	 value, 60,000 shares authorized, 8,672 and 1,491 shares issued
	and outstanding in 1998 and 1999, respectively, stated at
	liquidation value</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,161</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,909</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Stockholders&#146; equity (note&nbsp;11):</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Common stock; $0.01 par value, 25,000,000 shares authorized,
	18,864,255 and 20,671,191 shares issued and outstanding in 1998
	and 1999, respectively</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">207</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Additional paid-in capital</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,802</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Retained earnings</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,485</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,575</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total stockholders&#146; equity</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,863</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,584</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Commitments and contingencies (notes&nbsp;5, 6, 7, 9, 13, 14, 15
	and 16)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45,263</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">202,093</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements.

<P align="center">F-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>

<P align="center">
<B>CONSOLIDATED STATEMENTS OF OPERATIONS</B>

<DIV align="center">
<B>Period from January&nbsp;1, 1997 to May&nbsp;1, 1997, period
from May&nbsp;2, 1997</B>
</DIV>

<DIV align="center">
<B>to December&nbsp;31, 1997, and years ended December&nbsp;31,
1998 and 1999</B>
</DIV>

<DIV align="center">
<B>(in thousands, except share data)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="40%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Predecessor</B></FONT></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>May 2, 1997</B></FONT></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>January 1, 1997</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>to</B></FONT></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>to</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>December 31,</B></FONT></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>May 1, 1997</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Net revenue</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">28,340</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">59,234</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">102,729</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">143,436</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Operating expenses:</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="2" align="left" valign="top"><FONT size="2">
        Cost of services</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">20,055</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">41,748</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">69,888</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">96,067</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="2" align="left" valign="top"><FONT size="2">
        Selling, general and administrative</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">6,151</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">13,071</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">23,131</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">33,575</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="2" align="left" valign="top"><FONT size="2">
        Depreciation and amortization</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">524</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,073</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">2,170</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">4,803</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Total operating expenses</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">26,730</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">55,892</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">95,189</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">134,445</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Operating income</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,610</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">3,342</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">7,540</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">8,991</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Interest expense</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">130</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">619</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">927</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">4,578</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Other (income)&nbsp;expense</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">(49</FONT></TD>
        <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">331</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Share in loss of affiliate (note 5)</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">165</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">694</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">443</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">815</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Income before income taxes and extraordinary item</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,364</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,698</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">6,156</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">3,498</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Provision for income taxes (note 11)</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">612</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">683</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">2,197</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,820</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Income before extraordinary item</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,015</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">3,959</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,678</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Extraordinary item&nbsp;&#151; loss on early extinguishment of
        debt, net of tax benefit of $261,000 (note 7)</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">442</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Net income</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,015</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">3,959</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,236</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Less dividends on preferred stock (note 10)</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">566</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">923</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">462</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Income applicable to common stockholders</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">449</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">3,036</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">774</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Net income per common share&nbsp;&#151; basic and diluted:</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="2" align="left" valign="top"><FONT size="2">
        Income before extraordinary item, less preferred dividends</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.16</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.06</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="2" align="left" valign="top"><FONT size="2">
        Extraordinary item</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">(0.02</FONT></TD>
        <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Net income per common share</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.16</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Weighted-average common shares outstanding</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">18,596,525</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">18,864,255</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">19,102,026</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Diluted average common shares outstanding</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">18,596,525</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">19,569,464</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">19,813,351</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements.

<P align="center">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>

<P align="center">
<B>CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS&#146; EQUITY</B>

<DIV align="center">
<B>Period from January&nbsp;1, 1997 to May&nbsp;1, 1997, period
from May&nbsp;2, 1997 to</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, and years ended December&nbsp;31, 1998
 and 1999</B>
</DIV>

<DIV align="center">
<B>(in thousands, except share data)</B>
</DIV>

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="18%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="19"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="19"><FONT size="2"><B>Stockholders&#146; Equity</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Class A</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="19"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Redeemable</B></FONT></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Preferred Stock</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Common Stock</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Additional</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Notes Receivable</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Paid-in</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Treasury</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>from Stockholders</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Capital</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Stock</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>and Benefit Plan</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Predecessor</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1996</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">342,300</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">342</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,307</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(434</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Effect of adjustments relating to the acquisition of all
	outstanding stock by Successor and resulting change in basis of
	accounting (note 1)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(342,300</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(342</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,307</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">434</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, May&nbsp;1, 1997</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Successor</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of common stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,793,335</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">178</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">178</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,099</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,099</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Exercise of stock options</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">573</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">573</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,070,920</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued dividends on redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">566</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1997</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,672</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,238</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,864,255</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued dividends on redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">923</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1998</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,672</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,161</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,864,255</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Repurchase of treasury stock (note 11)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,690</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Retirement of treasury stock (note 11)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(344,783</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,690</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Redemption of preferred stock (note 10)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,181</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,714</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of stock related to acquisition (note 6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,151,719</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,616</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued dividends on redeemable preferred stock (note 10)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">462</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,491</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,909</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,671,191</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">207</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,802</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>

<P align="right">[Additional columns below]

<P>[Continued from above table, first column(s) repeated]

<TABLE width="40%" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="42%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="13%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="13%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Stockholders&#146; Equity</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Total</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Retained</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Stockholders&#146;</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Earnings</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Equity</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Predecessor</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1996</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,575</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,790</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Effect of adjustments relating to the acquisition of all
	outstanding stock by Successor and resulting change in basis of
	accounting (note 1)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(16,327</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(17,542</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, May&nbsp;1, 1997</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Successor</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of common stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">356</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Exercise of stock options</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued dividends on redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(566</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(566</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,015</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,015</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1997</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">449</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">827</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued dividends on redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(923</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(923</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,959</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,959</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1998</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,485</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,863</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Repurchase of treasury stock (note 11)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,690</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Retirement of treasury stock (note 11)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,684</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Redemption of preferred stock (note 10)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of stock related to acquisition (note 6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,637</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued dividends on redeemable preferred stock (note 10)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(462</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(462</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,236</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,236</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1999</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,575</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,584</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>

<P align="center">
See accompanying notes to consolidated financial statements.

<P align="center">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>

<P align="center">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B>

<P align="center">
<B>Period from January&nbsp;1, 1997 to May&nbsp;1, 1997, period
from May&nbsp;2, 1997 to December&nbsp;31, 1997,</B>

<DIV align="center">
<B>years ended December&nbsp;31, 1998 and 1999</B>
</DIV>

<DIV align="center">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="40%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Predecessor</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>period from</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January&nbsp;1, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May&nbsp;2, 1997 to</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>December&nbsp;31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May&nbsp;1, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash flows from operating activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,015</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,959</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,236</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Adjustments to reconcile net income to net cash provided by
	operating activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">524</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,073</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,170</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,803</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Provision for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">172</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,530</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,259</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,817</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(909</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(205</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">649</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,723</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Share in loss of affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">165</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">694</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">443</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">815</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net loss (gain)&nbsp;on disposal of property, plant and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(26</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Changes in:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accounts receivable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,992</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,625</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,681</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,229</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(249</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(441</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,769</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Prepaid expenses and other current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(377</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">338</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(64</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">268</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Receivable from affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(263</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(374</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Income tax receivable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,603</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Other assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(273</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accounts payable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(939</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,196</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(113</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,174</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(520</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,151</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">725</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">309</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,521</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">802</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,578</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(746</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Other liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">127</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">420</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">536</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net cash provided by (used in) operating activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,393</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,974</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,464</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,710</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash flows from investing activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Net proceeds from disposal of property, plant and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,329</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,166</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Purchase of property, plant and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(175</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,564</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,948</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,464</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Change in restricted cash</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,218</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(267</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,485</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Payment related to business acquisition</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Acquisitions of businesses, net of cash acquired</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(22,929</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,193</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(83,460</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net cash provided by (used in) investing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,154</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,545</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,388</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(88,431</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash flows from financing activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Borrowings on notes payable and capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59,943</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">96,628</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">181,192</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Payments on notes payable and capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,216</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(55,428</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(90,806</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,343</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Issuance of shareholder notes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,760</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Proceeds from shareholder notes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Payments on obligations relating to acquisition</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(87</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Cost of purchase and redemption of preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,672</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,714</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Proceeds from issuance of common stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">377</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Cost of purchase and retirement of treasury stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,690</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Debt issuance costs paid</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(212</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(24</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,845</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Bank overdraft</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">93</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">213</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(306</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net cash provided by (used in) financing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,216</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,445</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,924</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">87,590</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net increase in cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,545</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,126</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">869</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents, beginning of period</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,581</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,126</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents, end of period</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,126</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">869</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center"><B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV>&nbsp;</DIV>

<DIV align="center">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS&nbsp;&#151; (Continued)
</B>
</DIV>

<P align="center">
<B>Period from January&nbsp;1, 1997 to May&nbsp;1, 1997, period
from May&nbsp;2, 1997 to December&nbsp;31, 1997,</B>

<DIV align="center">
<B>years ended December&nbsp;31, 1998 and 1999</B>
</DIV>

<DIV align="center">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="40%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Predecessor</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>period from</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January&nbsp;1, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May&nbsp;2, 1997 to</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>December&nbsp;31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May&nbsp;1, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Supplemental disclosure of cash flow information:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Cash paid for interest</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">347</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">626</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">914</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,543</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Cash paid for income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,125</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,017</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Supplemental schedule of noncash investing and financing
	activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Acquisitions accounted for as a purchase:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Assets acquired</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,298</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,079</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">135,281</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Less:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Liabilities assumed (including capital lease obligations
	disclosed in note 6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,369</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,886</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46,184</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Issuance of stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,637</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Acquisitions, net of cash acquired</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,929</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,193</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,460</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements.

<P align="center">F-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>

<DIV align="center">
<B>Notes to Consolidated Financial Statements</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left"><B>Note 1&nbsp;&#151; Organization</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
American Medical Laboratories, Incorporated and its subsidiaries
(the Company) is a clinical laboratory testing company. The
Company&#146;s primary source of revenue is derived from the
performance of medical laboratory tests used by physicians to
diagnose, treat and monitor diseases and other medical
conditions. These tests include esoteric testing as well as
routine clinical testing. The Company&#146;s customers include
physicians, managed care organizations, hospitals, employers and
other clinical laboratories. The Company operates in one
reportable segment, the medical laboratory industry. The
Company&#146;s main laboratory facilities are located in
Chantilly, Virginia and Las Vegas, Nevada. The Company also
maintains patient and service centers in various states
throughout the United States.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;2, 1997, AML Inc., a Delaware corporation, acquired
all of the outstanding stock of Medical Laboratories Corporation,
 a Virginia corporation (Predecessor). The purchase price,
including related costs, was approximately $23.0&nbsp;million.
The excess of the purchase price over the fair value of the net
assets acquired was $5.6&nbsp;million. The accompanying 1997
financial statements include the operations, cash flows and
changes in stockholders&#146; equity in two separate statements,
one of which presents the Company for the period from May&nbsp;2,
 1997 to December&nbsp;31, 1997, and the other presents the
Predecessor for the period from January&nbsp;1, 1997 to
May&nbsp;1, 1997.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
American Medical Laboratories, Incorporated is a Delaware holding
 company which was incorporated in 1999. During 1999, the
stockholders of AML Inc., contributed all their outstanding stock
 of AML Inc. to American Medical Laboratories, Incorporated in
exchange for the same share class and amounts of stock in
American Medical Laboratories, Incorporated. The ownership
interests in American Medical Laboratories, Incorporated were the
 same as the ownership interests in AML Inc. prior to the
exchange of shares. Accordingly, the accompanying American
Medical Laboratories, Incorporated financial statements include
the historical financial information of AML Inc. as if the
exchange of shares occurred as of the beginning of the periods
presented.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, American Medical Laboratories,
Incorporated acquired all of the stock of APL Healthcare Group,
Inc. (APL). This business combination was accounted for by the
purchase method of accounting (see note&nbsp;6). Simultaneously
with the purchase of stock of APL, Robert R. Belliveau M.D.,
Thorne J. Butler, M.D. Associated Pathologists, Chartered
(APC)&nbsp;sold, assigned, transferred and delivered
substantially all of its assets to APL, and the members of APL
Properties, LLC (APL Properties) transferred all of the LLC
interests to APL. APC is a professional corporation that employs
pathologists licensed to practice medicine in Nevada and other
states. APL Properties is a limited liability company, formerly
owned by six stockholders of APC, that owns the building that APL
 occupies in Las Vegas, Nevada. Prior to these transactions APL,
APC, and APL Properties were commonly controlled. On
October&nbsp;13, 1999, APL entered into a practice management
agreement with APC to provide management services to APC. This
practice management agreement gives APL a controlling financial
interest in APC and therefore APC has been combined with APL for
financial reporting purposes.

<P align="left"><B>Note 2&nbsp;&#151; Summary of Significant Accounting Policies
</B>

<P align="left"><B>(a)&nbsp;&nbsp;<I>Principles of Consolidation</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying consolidated financial statements include the
accounts of American Medical Laboratories, Incorporated, and its
wholly owned subsidiaries, AML Inc. (AML), Medical

<P align="center">F-8
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">
Laboratories Corporation, APL Healthcare Group, Inc. and APL
Properties, LLC. The accompanying consolidated financial
statements also include the accounts of APC, in which APL has a
controlling financial interest. All significant intercompany
balances and transactions have been eliminated in consolidation.

<P align="left"><B>(b)&nbsp;&nbsp;<I>Use of Estimates</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 consolidated financial
statements. Estimates also affect the reported amounts of net
revenue and expenses during the reporting period. Actual results
could differ from those estimates.

<P align="left"><B>(c)&nbsp;&nbsp;<I>Cash and Cash Equivalents</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and cash equivalents are comprised of cash in banks and
highly liquid investments with original maturities of three
months or less.

<P align="left"><B>(d)&nbsp;&nbsp;<I>Restricted Cash</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restricted cash consists of lock box accounts which are
restricted to pay down a revolving credit facility. In
April&nbsp;1999, this restriction was lifted as a result of the
refinancing of the Company&#146;s credit facility (see note 7).

<P align="left"><B>(e)&nbsp;&nbsp;<I>Revenue Recognition</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company operates in one reportable segment, the medical
laboratory industry. Revenue from laboratory tests is recorded on
 the accrual basis at the time test results are reported at the
estimated net realizable amounts from patients, third party
payors and others for services rendered. The Company is
reimbursed for services under fee schedules, contractual and
other payor arrangements. Final adjustments to the estimated net
realizable amounts are based on final payments from third party
payors.

<P align="left"><B>(f)&nbsp;&nbsp;<I>Accounts Receivable</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounts receivable include billed and unbilled revenue for
testing performed, and are presented net of an allowance for
doubtful accounts and contractual allowances. The allowance for
doubtful accounts is an estimate based upon actual historical
trends and management&#146;s judgment.

<P align="left"><B>(g)&nbsp;&nbsp;<I>Property, Plant and Equipment</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment are stated at cost, or if acquired
under capital leases, at the present value of the future minimum
lease payments. Depreciation and amortization are computed using
the straight-line method. The estimated useful lives are as
follows:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="70%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="13%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="13%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Estimated useful lives</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Building</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Office furniture and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7-12 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Laboratory furniture and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5-12 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Computer equipment and software</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2-7 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Leasehold improvements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Life of the lease</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Vehicles</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.5-5 years</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-9
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenditures for repairs and maintenance, which do not materially
 extend the useful lives of property, plant and equipment, are
charged directly to expense. Equipment under capital leases is
amortized over the estimated useful lives or the term of the
lease, if shorter.

<P align="left"><B>(h)&nbsp;&nbsp;<I>Capitalized Software Costs</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company capitalizes purchased software, which is ready for
service and capitalizes software development costs incurred on
significant projects. Research and development costs and other
computer software maintenance costs related to software
development are expensed as incurred. Capitalized software costs
are amortized using the straight-line method over the estimated
useful life of the underlying system, generally two to five
years.

<P align="left"><B>(i)&nbsp;&nbsp;<I>Intangible Assets</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Intangible assets, consisting of goodwill and other intangibles
are amortized on a straight-line basis over the expected periods
to be benefited, 20&nbsp;years for goodwill and customer lists,
3&nbsp;years related to certain patents and over the life of the
non-compete agreements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated
 useful life of goodwill and other intangibles might warrant
revision or that the remaining balance of goodwill and other
intangibles may not be recoverable. When factors indicate that
goodwill, other intangibles and other long-lived assets should be
 evaluated for possible impairment, the Company uses an estimate
of undiscounted future net cash flows over the remaining life of
goodwill, other intangibles and other long-lived assets to
determine if impairment has occurred. If this review indicates
that the cost of the recorded assets will not be recoverable, the
 Company writes down the cost to estimated fair value.

<P align="left"><B>(j)&nbsp;&nbsp;<I>Cost of Borrowing</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenses directly related to the issuance of debt are deferred
and amortized over the terms of the related debt by the interest
method.

<P align="left"><B>(k)&nbsp;&nbsp;<I>Inventory</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventory consists principally of purchased laboratory and
medical supplies and is stated at the lower of cost (first-in,
first-out) or market value.

<P align="left"><B>(l)&nbsp;&nbsp;<I>Investment</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company records its 49&nbsp;percent-owned affiliate on the
equity method of accounting.

<P align="left"><B>(m)&nbsp;&nbsp;<I>Interest Rate Swap</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has an interest rate swap agreement to manage
interest rate exposure. The agreement is accounted for on an
accrual basis. Amounts to be paid or received under this
agreement are recognized over the life of the related debt and
are included in interest income or expense.

<P align="left"><B>(n)&nbsp;&nbsp;<I>Accrued Loss on Capitated Contracts</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Losses under laboratory testing contracts with managed care
organizations are recognized when it is probable that the
expected future costs under a contract will exceed the
anticipated future revenues

<P align="center">F-10
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">
from the contract. The loss contracts were recorded in
conjunction with the APL acquisition on October&nbsp;13, 1999.
The unamortized balance of these loss accruals totaled
approximately $1.2 million at December&nbsp;31, 1999.

<P align="left"><B>(o)&nbsp;&nbsp;<I>Income Taxes</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes are accounted for in accordance with Financial
Accounting Standards Board Statement No.&nbsp;109 (Statement
109). Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and
laws that are expected to apply to taxable income in the years in
 which those temporary differences are expected to be recovered
or settled.

<P align="left"><B>(p)&nbsp;&nbsp;<I>Net Income Per Common Share</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic net income per common share is computed by dividing net
income, less accrued preferred stock dividends, by the
weighted-average number of common shares outstanding and diluted
net income per common share is computed using the
weighted-average number of common shares outstanding and dilutive
 stock options, using the treasury stock method.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table reconciles the weighted-average common shares
 used in the basic net income per common share calculation and
the weighted-average common shares and common share equivalents
used in the diluted net income per common share calculation:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="57%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Weighted-average common shares (basic)</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">18,596,525</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">18,864,255</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">19,102,026</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Employee stock option equivalent shares</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">705,209</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">711,325</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Weighted-average common shares and common shares equivalents
        (diluted)</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">18,596,525</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">19,569,464</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">19,813,351</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>(q)&nbsp;&nbsp;<I>Fair Value of Financial Instruments</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair value of cash and cash equivalents, restricted cash,
accounts receivable, receivable from affiliate, shareholder loans
 receivable, accounts payable, accrued expenses, and capital
lease obligations are equivalent to their carrying value due to
the short-term maturity of those instruments. The carrying values
 of the Company&#146;s revolving credit facility and long-term
debt (see note 7) are considered to be representative of their
respective values as their interest rates are based on market
rates.

<P align="left"><B>(r)&nbsp;&nbsp;<I>Stock Option Plan</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for stock-based compensation in accordance
with the provisions of Accounting Principles Board
(APB)&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock Issued to
 Employees, </I>and related interpretations, and complies with
the disclosure provisions of SFAS No.&nbsp;123, &nbsp;<I>Accounting for
 Stock-Based Compensation</I>. Under APB 25, compensation is
based on the difference, if any, on the date of grant between the
 fair value of the Company&#146;s stock and the exercise price.

<P align="center">F-11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left"><B>Note 3&nbsp;&#151; Property, Plant and Equipment</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment consists of the following at
December&nbsp;31:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="74%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Land</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,091</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Buildings</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,964</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Office furniture and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">672</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,593</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Laboratory furniture and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,373</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,679</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Computer equipment and software</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,487</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,926</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Leasehold improvements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,479</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Vehicles</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">61</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">782</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,726</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29,514</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Less accumulated depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,472</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,029</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Property, plant and equipment, net</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,254</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,485</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 4&nbsp;&#151; Intangible Assets</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Intangible assets consist of the following at December&nbsp;31:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="73%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Customer lists</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">64,965</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Non-compete agreements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">530</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,332</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Patents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,309</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Goodwill</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,021</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,854</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,551</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,460</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Less accumulated amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">361</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,138</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Intangible assets, net</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,190</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,322</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 5&nbsp;&#151; Investment in Affiliate-Shared Laboratory
Services, L.L.C.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a 49&nbsp;percent ownership in Shared Laboratory
Services, L.L.C. (SLS). The remaining 51&nbsp;percent is shared
equally among four hospitals in the Norfolk and Virginia Beach,
Virginia area. All five owners have equal voting power on day to
day operating matters. SLS provides core laboratory services for
the four hospitals as well as community outreach services. The
Company provides laboratory testing services to SLS. As part of
the agreement, the Company has guaranteed 49&nbsp;percent of $3.9
 million of SLS debt ($3.7 million outstanding at
December&nbsp;31, 1999). Since the Company has guaranteed the
debt of SLS, the Company has provided for its share of additional
 losses to the extent of the Company&#146;s exposure under the
guarantee. The Company recorded its share of SLS losses of
approximately $694,000 for the period from May&nbsp;2, 1997 to
December&nbsp;31, 1997, and $443,000 and $815,000 for the years
ended December&nbsp;31, 1998 and 1999, respectively. The Company
has outstanding receivables from SLS of approximately $306,000
and $680,000 at December&nbsp;31, 1998 and 1999, respectively,
for lab work referred to AML and billing services provided to
SLS.

<P align="center">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s net investment, classified as a liability, is
summarized as follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="76%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Initial investment</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">490</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">490</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accumulated losses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,302</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,117</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(812</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,627</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Summarized unaudited financial information for SLS is as follows
as of December&nbsp;31:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="75%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Current assets</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,859</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,108</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Noncurrent assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,280</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,028</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total assets</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,139</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,136</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Current liabilities</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,805</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,044</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Noncurrent liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,156</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,519</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total liabilities</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,961</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,563</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="67%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Years ended December 31,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net laboratory service revenue</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">736</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,620</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,251</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net loss</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,689</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,025</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,605</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 6&nbsp;&#151; Acquisitions</B>

<P align="left"><B>(a)&nbsp;&nbsp;<I>Providence Laboratory Associates</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;5, 1998, the Company purchased certain assets and
liabilities of Providence Laboratory Associates (PLA). The
business combination was accounted for as a purchase. The
purchase price exceeded the fair value of net assets acquired by
approximately $5.3&nbsp;million, which is being amortized on a
straight-line basis over 20&nbsp;years.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The purchase price of approximately $4.2&nbsp;million, including
acquisition costs, has been allocated to the fair value of assets
 and liabilities acquired as follows (amounts in thousands):

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="84%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">117</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Property and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">548</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">147</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Non-compete agreements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">530</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Goodwill</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,737</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(568</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accrued liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,318</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,193</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Contingency payments of $2.0&nbsp;million, $1.0&nbsp;million of
which was paid on August&nbsp;10, 1999, were allocated to the
purchase in 1999. The remaining $1.0&nbsp;million contingent
payment is expected to be paid in 2000. In 1999, the Company also
 increased goodwill related to the PLA purchase by

<P align="center">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">
approximately $700,000 as a result of a change in estimate
relating to a liability assumed on a non-cancelable lease
obligation for a building that the Company no longer utilized.

<P align="left"><B>(b)&nbsp;&nbsp;<I>APL Healthcare Group, Inc. and Affiliates
</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, the Company purchased all of the
outstanding capital stock of APL. The acquisition of APL has been
 recorded in the Company&#146;s consolidated financial statements
 under the purchase method of accounting and the operating
results of APL have been included in the Company&#146;s
consolidated results of operations from the date of acquisition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The acquisition was effected through the payment of approximately
 $64.3 million in cash, assumption of debt of approximately
$17.8&nbsp;million, the issuance of $17.5&nbsp;million in
convertible subordinated promissory notes to the former
shareholders of APL and the issuance of common stock of the
Company preliminarily valued at $5.6&nbsp;million.
$10.0&nbsp;million of the cash consideration has been placed in
escrow to cover any potential unrecorded loss contingencies that
may develop. While the Company has not yet finalized the
valuation of the common stock issued and related purchase price
allocation, an estimate of the purchase price has been allocated
to tangible and intangible assets acquired and liabilities
assumed based on the estimated fair market value at the date of
acquisition and the balance of $18.0&nbsp;million was recorded as
 goodwill and is being amortized over 20&nbsp;years on a
straight-line basis. The portion identified as identifiable
intangibles includes customer lists, non-compete agreements and a
 patent. These intangibles were valued at $71.0 million and are
being amortized on a straight-line basis over their estimated
useful lives, between 3-20&nbsp;years. The Company does not
believe that the final allocation of purchase price will produce
materially different results from those reflected herein.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The purchase price, including acquisition costs of approximately
$2.0&nbsp;million, was allocated as follows (amounts in
thousands):

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="86%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Cash</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">526</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Receivables</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,593</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,996</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Plant, property, and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,549</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Deferred tax asset</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,313</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Other assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">714</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Customer list and other intangibles</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71,076</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Goodwill</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,040</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Notes payable and capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,148</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accounts payable, accrued expenses and other liabilities assumed</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(24,415</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">107,244</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the initial purchase price, the APL acquisition
agreement provided for a purchase price adjustment based on a net
 worth calculation of the acquired entity as of the date of
closing. The Company calculated the net worth adjustment to be
approximately $2.4&nbsp;million in favor of the former owners of
APL and has reflected this adjustment as an increase to the
purchase price as of the date of acquisition. The former owners
of APL have disputed the calculation of the net worth adjustment
by the Company claiming the net worth adjustment to be
approximately $3.6&nbsp;million. The dispute concerning the
calculation of the net worth adjustment is subject to resolution
as set forth in the acquisition agreement and is not expected to
provide materially different results from those reflected herein.

<P align="center">F-14
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 1999, the Company has recorded as accrued
 expenses $10.0&nbsp;million in acquisition liabilities that
consist of $6.6&nbsp;million in assumed liabilities,
$2.4&nbsp;million for the net worth adjustment described above
and a $1.0&nbsp;million contingency payment related to the PLA
acquisition. Subsequent to December&nbsp;31, 1999, the Company
has paid approximately $9.0&nbsp;million of these accrued
acquisition liabilities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following unaudited pro forma results of operations for the
years ended December&nbsp;31, 1997, 1998, and 1999 have been
prepared as if the acquisition of PLA occurred on May&nbsp;2,
1997, and the acquisition of APL occurred on January&nbsp;1,
1998.

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="58%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Years ended</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May&nbsp;2, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to December&nbsp;31,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>(in thousands, except per share data)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Revenue</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">69,019</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">197,979</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,636</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net income (loss) before extraordinary item</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">796</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,642</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(92</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Less dividends on preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">566</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">923</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">462</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma net income (loss) applicable to common shareholders
	before extraordinary item</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">230</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,565</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(554</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Basic net income (loss)&nbsp;per share to common shareholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.01</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.12</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.03</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Diluted net income (loss)&nbsp;per share to common shareholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.01</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.12</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.03</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The historical financial results of the Company for 1997, 1998
and 1999, have been adjusted primarily for the historical results
 of PLA in 1997 and 1998 and APL in 1998 and 1999, an increase in
 interest expense due to the additional debt incurred to purchase
 APL, the elimination of salaries and bonuses in excess of
contractual obligations of the former owners and key members of
management of APL, an increase in amortization of intangible
assets and goodwill, and the pro forma tax effects of the
acquisitions of PLA and APL.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma information presented above does not
purport to be indicative of the results that actually would have
been obtained if the combined operations had been conducted
during the periods presented or of future operations of the
combined operations.

<P align="center">F-15
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left"><B>Note 7&nbsp;&#151; Notes Payable and Capital Lease Obligations
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notes payable and capital lease obligations consist of the
following at December&nbsp;31:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="73%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Term A note to Bankers Trust Company (as agent) bearing interest
	at Eurodollar rate plus 3.25% payable monthly (9.75% at
	December&nbsp;31, 1999), principal payable in quarterly
	installments of $2.0&nbsp;million beginning June&nbsp;30, 2000,
	$2.5&nbsp;million beginning December&nbsp;2001,
	$3.25&nbsp;million beginning December&nbsp;2002, and
	$3.75&nbsp;million beginning December&nbsp;2003 through
	October&nbsp;13, 2004.</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Term B note to Bankers Trust Company (as agent) bearing interest
	at Eurodollar rate plus 3.875% payable monthly (10.375% at
	December&nbsp;31, 1999), principal payable in quarterly
	installments of $325,000 beginning June&nbsp;2000, $163,000
	beginning December&nbsp;2000, and $10.3&nbsp;million beginning
	December&nbsp;2004 through April&nbsp;13, 2006.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Revolving note to Bankers Trust Company (as agent) for up to
	$25.0&nbsp;million, bearing interest at prime plus 2.25% (10.70%
	weighted-average interest rate for 1999), principal due
	October&nbsp;13, 2004.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,100</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Note payable to Bank of America; monthly payments of $31,000
	including interest at 8.39% at December&nbsp;31, 1999; remaining
	principal balance plus remaining interest due May&nbsp; 1, 2007;
	collateralized by certain real property and the personal
	guarantee of the former APL shareholders.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,466</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Note payable to Premium Financing Specialist; interest at 7.76%
	at December&nbsp;31, 1999; remaining balance plus remaining
	interest due January&nbsp;2000.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Term Note to Heller Business Credit, bearing interest at
	lender&#146;s base rate plus 0.75% payable monthly (8.50% at
	December&nbsp;31, 1998), originally due May&nbsp;2, 2000, with
	earlier prepayments required beginning March&nbsp;31, 1999, if
	certain criteria are met. Facility was paid in full on
	October&nbsp;13, 1999.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,875</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Revolving Note to Heller Business Credit for up to $17.75&nbsp;
	million, consisting of the following at December&nbsp;31, 1998:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Base rate loans bearing interest at lender&#146;s base rate
	payable monthly (7.75% at December&nbsp;31, 1998), principal due
	May&nbsp;2, 2000. Revolver was paid in full on October&nbsp;13,
	1999.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,307</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	LIBOR loan bearing interest at LIBOR plus 2.25% payable monthly
	(7.47% at December&nbsp;31, 1998), principal due May&nbsp;2,
	2000. Facility was paid in full on October&nbsp;13, 1999.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Capex Revolving Note to Heller Business Credit, for up to
	$8.5&nbsp;million bearing interest at lender&#146;s base rate
	plus 0.75% (9.1% weighted average interest rate for 1998), due in
	 monthly principal installments of $57,000, plus interest through
	 December&nbsp;1999, and monthly principal installments of
	$36,000, plus interest, from January&nbsp;2000 through
	April&nbsp; 2000 and the remaining principal balance of $615,000
	due May&nbsp;2, 2000. Revolver was paid in full on
	October&nbsp;13, 1999.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,445</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="76%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Various capital lease obligations for laboratory equipment,
	furniture and office equipment and vehicles; monthly payments
	totaling $121,000 at December&nbsp;31, 1999 with interest ranging
	 from 6% to 12%; remaining principal balance plus unpaid interest
	 with varying maturity dates through June&nbsp;2004.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">846</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">849</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,473</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">121,469</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Less current portion</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,249</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,315</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,224</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">114,154</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>(a)&nbsp;&nbsp;<I>Term Notes and Revolving Credit Agreements
</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;2, 1997, the Company entered into a
$20.0&nbsp;million credit agreement with Heller Financial, Inc.
The commitment consisted of a term loan of $2.25&nbsp;million and
 an accounts receivable based line of credit for up to
$17.75&nbsp;million. The credit agreement was secured by the
Company&#146;s assets. As of December&nbsp;31, 1998, the Company
had pledged approximately $1.5&nbsp;million of cash as collateral
 on the outstanding revolving note which was considered
restricted cash. On April&nbsp;30, 1998, the Company entered into
 a loan agreement to increase the capital advances of its Capex
loan from $500,000 to $8.5&nbsp;million. In April&nbsp;1999, the
Company refinanced its credit agreement with Heller Financial,
Inc., which consisted of a term loan of $20.0&nbsp;million,
payable in quarterly installments through December&nbsp;31, 2003
and a revolving facility of $15.0&nbsp;million, payable by
December&nbsp;31, 2003. On October&nbsp;13, 1999, the Company
repaid all outstanding debt related to its credit agreement with
Heller Financial, Inc. Commitment fees paid under these
agreements totaled approximately $28,000, $39,000 and $31,000 in
1997, 1998 and 1999, respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, the Company entered into a
$140.0&nbsp;million senior credit facility with the Bankers Trust
 Company. The senior credit facility consists of a Term A loan of
 $50.0&nbsp;million, a Term B loan of $65.0&nbsp;million, a
revolving line of credit of $25.0&nbsp;million of which
$2.1&nbsp;million was drawn as of December&nbsp;31, 1999. APL
entered into a $2.5&nbsp;million line of credit agreement on
December&nbsp;28, 1999 with the Bankers Trust Company in favor of
 the state of Nevada, Department of Insurance, as beneficiary, of
 which $0 was drawn as of December&nbsp;31, 1999.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior credit facility is secured by the Company&#146;s
underlying assets. Under the terms and conditions of the senior
credit facility, the Company is subject to certain financial and
reporting covenants. The Company was in full compliance with the
financial covenants at December&nbsp;31, 1999. Commitment fees
under this senior credit facility totaled approximately $26,000
in 1999.

<P align="left"><B>(b)&nbsp;&nbsp;<I>Notes Payable to Stockholders</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notes payable to stockholders consists of the following at
December 31:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="72%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Notes payable to the former stockholders of APL; interest at 10%
	per annum; payable semi-annually on June&nbsp;30 and
	December&nbsp;31; principal balance due on October&nbsp;13, 2006;
	 subject to prepayment at the time of an initial public offering
	or sale of the Company; subordinated to all other debt of the
	Company.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,500</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notes payable to stockholders are subject to prepayment
without penalty at the Company&#146;s option and at the note
holders&#146; option from the date of consummation of an initial
public offering or sale of the Company until the seventh
anniversary of the date of the notes. The note holders&#146;
prepayment options are subject to receiving the consent of the
holders of the firm and revolving notes described above and the
underwriters of the initial public offering.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These notes are convertible at the option of the note holders
into shares of the Company&#146;s common stock simultaneously
with an initial public offering at a share value equal to 80% of
the price per share paid by the public in the initial public
offering.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Maturities of notes payable and capital lease obligations are as
follows:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="64%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Notes payable</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Capital leases</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2000</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,956</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">414</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2001</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,248</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">257</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2002</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,506</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">140</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2003</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,265</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">121</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2004</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,255</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Thereafter</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71,890</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">138,120</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">967</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Less interest payments</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">118</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">138,120</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">849</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>(c)&nbsp;&nbsp;<I>Extraordinary Item&nbsp;&#151; Early
Extinguishment of Debt</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In conjunction with the acquisition of APL, the Company repaid
the entire amount outstanding under its then existing credit
agreement with Heller Financial, Inc. The extraordinary loss
recorded in 1999 represented approximately $703,000 ($442,000,
net of tax) of deferred financing costs written off in connection
 with the early extinguishment of the related credit agreement.

<P align="left"><B>(d)&nbsp;&nbsp;<I>Interest Rate Swap Agreement</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into an interest rate swap agreement to
reduce its exposure to adverse fluctuations in interest rates
related to the Company&#146;s outstanding term notes payable. The
 Company does not utilize financial instruments for trading or
other speculative purposes. The agreement entitles the Company,
on a quarterly basis, to receive a LIBOR-based floating rate of
interest and pay a fixed rate of interest of 6.6&nbsp;percent.
The interest rate swap has a total notional amount of
$58.0&nbsp;million and expires on December&nbsp;23, 2002.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The differential to be paid or received under the swap agreement
is accrued as the interest rates change and is recognized over
the life of the agreement. As a result of the swap agreement,
interest expense increased by approximately $67,000 in 1999. The
Company is exposed to credit loss in the event of nonperformance
by the other party to the interest rate swap agreement. The
Company, however, does not anticipate nonperformance by the
counterparty.

<P align="center">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left"><B>Note 8&nbsp;&#151; Accrued Expenses</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accrued expenses consists of the following at December&nbsp;31:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="78%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued salaries, bonus, and payroll withholding</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,737</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,206</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued sick leave and vacation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,946</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,166</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,730</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,519</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued loss on capitated contracts (note&nbsp;2)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,223</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued acquisition liabilities (note&nbsp;6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,026</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Declared contributions (note&nbsp;14)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,650</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,939</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,063</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,079</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 9&nbsp;&#151; Lease Commitments</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has an operating lease for its Chantilly, Virginia
laboratory facility. The lease is for 20&nbsp;years with two
five-year renewal options. The lease requires annual lease
payments of approximately $3.9 million, plus property taxes,
through 2004. Beginning in 2005 and through the remainder of the
lease, a 2.5&nbsp;percent annual escalator applies.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also leases various equipment, patient and service
center facilities, and other office space under noncancelable
lease arrangements expiring at various dates through
December&nbsp;2005.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Future minimum lease payments under these noncancelable operating
 leases are as follows (amounts in thousands):

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="87%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2000</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,099</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2001</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,592</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2002</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,836</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2003</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,296</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2004</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,060</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Thereafter</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55,461</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">80,344</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total rent expense under all operating leases was approximately
$1.9 million for the period from January&nbsp;1, 1997 to
May&nbsp;1, 1997, $4.2 million for the period from May&nbsp;2,
1997 to December&nbsp;31, 1997, and $6.5 million and $6.9 million
 for the years ended December&nbsp;31, 1998 and 1999,
respectively.

<P align="left"><B>Note 10&nbsp;&#151; Redeemable Class&nbsp;A Preferred Stock
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Certificate of Incorporation authorizes the
issuance of 60,000 shares of Class&nbsp;A redeemable preferred
stock with a par value of $0.01 per share. As of
December&nbsp;31, 1999, 1,491 shares have been issued for $1,000
per share or approximately $1.5 million. Dividends accrue at the
rate of 10&nbsp;percent per annum on the sum of the liquidation
value ($1,000 per share) plus all accumulated and unpaid
dividends thereon. Accumulated and unpaid preferred stock
dividends totaled approximately $1.5 million or $171.75 per share
 and $418,000 or $280.73 per share as of December&nbsp;31, 1998
and 1999, respectively. All Class&nbsp;A preferred shares must be
 redeemed by the Company on December&nbsp;31, 2007 at a price
equal to the liquidation value plus all accrued and unpaid
dividends. The Company may redeem any or all of the shares at any
 time prior to that date. In

<P align="center">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">
addition, the Company shall, at the request of a majority of the
Class&nbsp;A preferred stockholders, redeem the shares at the
liquidation value plus accrued dividends at the time of a Public
Offering or if a change in ownership of the Company, as defined,
were to occur. Under certain circumstances, including bankruptcy
and failure to pay all accrued preferred dividends by
December&nbsp;31, 2003, the preferred stockholders may require
their shares to be immediately redeemed or they may gain voting
majority of the Company&#146;s Board of Directors. The Company
may not pay dividends on common stock without the consent of a
majority of preferred stockholders. Preferred stockholders shall
be entitled to 1,750 votes per share on all matters to be voted
on by the Company&#146;s stockholders.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;5, 1999, AML repurchased and retired 7,181.46 shares
of Class&nbsp;A preferred stock. The aggregate redemption price
was approximately $8.7 million, of which approximately $7.2
million related to the aggregate liquidation value of the shares
and the remaining $1.5 million related to accrued and unpaid
dividends.

<P align="left"><B>Note 11&nbsp;&#151; Stockholders&#146; Equity</B>

<P align="left"><B>(a)&nbsp;&nbsp;<I>Common Stock</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Certificate of Incorporation authorizes the
issuance of 25.0 million shares of common stock, with a par value
 of $.01 per share. On December&nbsp;16, 1998, the Company
effected a five-for-one stock split on the Company&#146;s common
stock. All common stock and common stock per share amounts were
retroactively restated for all periods presented to reflect this
split. At December&nbsp;31, 1999, 20,671,191 shares of common
stock have been issued for $.01 per share or $206,711. Common
stockholders may cast one vote per share regarding matters to be
voted on by the Company&#146;s stockholders.

<P align="left"><B>(b)&nbsp;&nbsp;<I>Treasury Stock</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 1999, the Company repurchased and retired 344,783 shares
of common stock at an aggregate cost of $1.7 million. The
difference between the cost of treasury shares retired and the
original issue price was charged as a reduction to retained
earnings (see note&nbsp;13(b)).

<P align="center">F-20
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left"><B>Note 12&nbsp;&#151; Income Taxes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provision for income taxes on income before income taxes and
extraordinary item consists of the following:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="41%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Predecessor</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January&nbsp;1, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May&nbsp;2, 1997 to</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to May&nbsp;1, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>December&nbsp;31, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Current:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Federal</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,212</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">738</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,304</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	State</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">309</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">150</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total current</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,521</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">888</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,548</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Federal</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(828</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(154</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">575</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,650</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	State</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(81</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(51</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">75</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">170</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total deferred</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(909</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(205</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">650</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,820</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">612</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">683</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,198</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,820</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The tax benefit associated with the extraordinary charge from the
 early extinguishment of debt is $261,000. A reconciliation of
tax expense computed at the statutory federal tax rate on income
from operations before income taxes and extraordinary item to the
 actual income tax expense is as follows:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="44%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Predecessor</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January 1, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>May 2, 1997 to</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to May 1, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>December 31, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Tax provision computed at the statutory rate</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">464</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">673</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,093</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,224</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	State income taxes, net of federal income tax provision</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">230</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Intangibles amortization and other book expenses not deductible
	for tax purposes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">483</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(86</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(173</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total income tax expense</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">612</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">683</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,197</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,820</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes reflect temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.

<P align="center">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant components of deferred tax assets and liabilities as
of December&nbsp;31, 1998 and 1999 are as follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="70%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred tax assets:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Bad debt reserves</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(72</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(992</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accrued compensation costs</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(337</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,464</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Investment in affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(120</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(247</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Book in excess of tax depreciation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(292</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred rent</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(459</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Reserves and other non-deductible accruals</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(525</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(309</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(214</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net operating loss carryforwards</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(397</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total deferred tax assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,130</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,298</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred tax liabilities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Prepaid expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">600</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,511</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">611</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">942</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accelerated depreciation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,542</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accelerated amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">315</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">370</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Loss contingency</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">540</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">198</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total deferred tax liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,526</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,103</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net deferred tax liabilities (assets)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">396</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,195</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 1999, the Company had net operating loss
carryforwards available for federal and state income tax purposes
 of approximately $1.0&nbsp;million, which expire in 2019. The
annual utilization of these net operating loss carryforwards may
be subject to certain limitations under the Internal Revenue
Code.

<P align="left"><B>Note 13&nbsp;&#151; Related Party Transactions</B>

<P align="left"><B>(a)&nbsp;&nbsp;<I>Notes Receivable from Officers and Directors
</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company held various notes receivable from officers and
directors of the Company with balances totaling approximately
$56,000 and $2.8&nbsp;million at December&nbsp;31, 1998 and 1999,
 respectively. These notes bear interest rates ranging from
8&nbsp;percent to 10&nbsp;percent, which are compounded annually,
 commencing on December&nbsp;31, 1999. The notes are payable on
the earlier of December&nbsp;31, 2005 or in the event of the sale
 of the Company, at the time of the sale. The loans are
collateralized by the stockholders&#146; interest in the Company,
 totaling 4,163,871 shares of the Company&#146;s common stock,
and 944.93 shares of the Company&#146;s Class&nbsp;A redeemable
preferred stock.

<P align="left"><B>(b)&nbsp;&nbsp;<I>Repurchase of Common Stock</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 1999, the Company repurchased approximately 293,779
shares of common stock from the Chairman and Chief Executive
Officer of the Company for approximately $1.4&nbsp;million in
cash. In August 1999, the Company repurchased 51,004 shares of
common stock from an officer of the Company for $250,000 in cash.

<P align="center">F-22

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left"><B>(c)&nbsp;&nbsp;<I>Professional Services Agreement with
Stockholder</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into a professional services agreement
with a stockholder of the Company, whereby the stockholder is to
provide financial and management consulting services to the
Company for up to $150,000 per year. The agreement stipulates a
one-percent investment fee to be paid to the stockholder at the
time of certain debt or equity financings. The agreement also
includes a success fee to be paid to the stockholder upon the
earlier of the sale of the Company at an aggregate implied common
 equity value of at least $40.0 million or upon the consummation
of a public offering. The success fee will be equal to
$1.4&nbsp;million plus 8&nbsp;percent interest per year,
compounded annually, from October&nbsp;1999 through the date of
payment.

<P align="left"><B>Note 14&nbsp;&#151; Employee Benefit Plans</B>

<P align="left"><B>(a)&nbsp;&nbsp;<I>Cash Deferred Profit-Sharing Plan</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has various employee benefit plans including a cash
deferred profit-sharing plan and a 401(k) plan for employees. The
 Company made contributions to these plans of approximately
$116,000 during the period from May&nbsp;2, 1997 to
December&nbsp;31, 1997, and $565,000 and $829,000 for the years
ended December&nbsp;31, 1998 and 1999, respectively. The
Predecessor made contributions of approximately $76,000 during
the period from January&nbsp;1, 1997 to May&nbsp;1, 1997.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December&nbsp;1998 and 1999, the Company&#146;s Board of
Directors declared a $1.7&nbsp;million and $1.9&nbsp;million
contribution, respectively, to the cash deferred profit-sharing
plan for the years ended December&nbsp;30, 1999 and 2000, and
recorded a related liability. The contribution is recorded as a
deferred compensation asset and is amortized to compensation
expense ratably during the year following declaration as the
services of employees are rendered to the Company.

<P align="left"><B>(b)&nbsp;&nbsp;<I>Stock Option Plan</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company adopted an amended stock option plan (the
&#147;Plan&#148;) in October&nbsp;1999. The Plan was originally
adopted by AML Inc. in May&nbsp;1997. Options to purchase common
stock under the Plan are granted to employees of the Company at
prices determined by the Board of Directors. Options to purchase
up to 1,514,325 shares of common stock may be granted under the
Plan.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company applies APB Opinion No.&nbsp;25 in accounting for its
 Plan. Options to purchase common stock under the Plan are
granted to employees at prices which are at or exceed fair market
 value as determined by the Board of Directors. Options vest
beginning one year after date of grant over a five-year period.
No options shall be granted or shares of common stock issued
under the Plan after December&nbsp;31, 2006. Had the Company
determined compensation costs based on the fair value

<P align="center">F-23

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">
at the grant date for its stock options under SFAS No. 123, the
Company&#146;s net income would have been reduced to the pro
forma amounts indicated below:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="54%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Years ended</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period May 2, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>to December 31, 1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>(in thousands, except per share data)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net income available to common shareholders:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	As reported</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">449</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,036</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">774</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">449</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,027</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">713</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net income per share:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	As reported</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.16</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.16</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="72%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Dividend yield</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Risk-free interest rate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.5</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Expected volatility</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Expected holding period in years</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of the status of the Company&#146;s stock options as of
 December&nbsp;31, 1997, 1998, and 1999 and changes during the
years then ended is presented below.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes information about stock options
outstanding at December&nbsp;31, 1999:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="40%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>average</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>average</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>average</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>exercise</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>exercise</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>exercise</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>price</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>price</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>price</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Outstanding at beginning of year</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">370,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">365,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">722,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Granted</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">362,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.90</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Exercised</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Forfeited</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Outstanding at end of year</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">365,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">722,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">845,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.74</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Options exercisable at end of year</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">253,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Weighted-average fair value of options granted during the year</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.10</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.67</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes information about stock options
outstanding at December&nbsp;31, 1999:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="20%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="13"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="13"><FONT size="2"><B>Outstanding</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Options Exercisable</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="13"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted-</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted-</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted</B></FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>average</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>average</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>average</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="5"><FONT size="2"><B>Exercise</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>remaining</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>exercise</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>exercise</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>prices</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>contractual life</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>price</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>price</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="right" valign="top"><FONT size="2">
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">720,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">253,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="right" valign="top"><FONT size="2">
	4.90</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.90</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="right" valign="top"><FONT size="2">
	$0.02 &#150; $4.90</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">845,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.74</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">253,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 15&nbsp;&#151; Concentrations of Credit Risk</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company grants credit without collateral to its customers,
which are composed primarily of health care providers, Medicare
and other health plans. The mix of receivables from patients and
third-party payors at December&nbsp;31, 1998 and 1999, was as
follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="77%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Medicare</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Blue Cross Blue Shield</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Private Insurers</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	All others (none greater than 5%)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 16&nbsp;&#151; Contingencies</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is involved in legal actions and disputes arising in
the ordinary course of business. With respect thereto, the
Company believes that it has adequate legal defenses and
insurance coverage and believes that their ultimate outcome will
not have a material adverse effect on the Company&#146;s
financial position.

<P align="center">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
</B>
</DIV>

<DIV align="center">
<B>Notes to Consolidated Financial Statements&nbsp;&#151;
(Continued)</B>
</DIV>

<DIV align="center">
<B>December&nbsp;31, 1997, 1998 and 1999</B>
</DIV>

<P align="left">


<P align="center"><B>AMERICAN MEDICAL LABORATORIES,</B>

<DIV align="center">
<B>INCORPORATED AND</B>
</DIV>

<DIV align="center">
<B>SUBSIDIARIES</B>
</DIV>

<P align="center"><B>UNAUDITED CONDENSED CONSOLIDATED</B>

<DIV align="center">
<B>FINANCIAL STATEMENTS</B>
</DIV>

<P align="center"><B>AS OF JUNE 30, 2000 AND</B>

<DIV align="center">
<B>FOR THE SIX MONTHS ENDED</B>
</DIV>

<DIV align="center">
<B>JUNE 30, 1999 AND</B>
</DIV>

<DIV align="center">
<B>JUNE 30, 2000</B>
</DIV>

<P align="left">


<P align="center">F-26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>American Medical Laboratories, Incorporated</B>

<DIV align="center">
<B>Unaudited Condensed Consolidated Balance Sheet</B>
</DIV>

<DIV align="center">
<B>June 30, 2000</B>
</DIV>

<DIV align="center">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="78%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>Assets</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Current assets:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,008</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accounts receivable, less allowance for doubtful accounts of
	$2,263 in 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58,864</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,222</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Receivable from affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Income tax receivable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,845</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Prepaid expenses and other current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,214</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71,249</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Property, plant, and equipment, net</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,015</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Intangible assets, net</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">96,889</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Notes receivable from officers and directors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,760</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,346</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Other assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,093</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">202,352</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>Liabilities, Redeemable Preferred Stock and Stockholders&#146;
	 Equity</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Current liabilities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accounts payable</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,982</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Notes payable and capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,887</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accrued expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,363</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Declared contribution</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">136</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accrued income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">92</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,422</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total current liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46,882</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,594</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Notes payable and capital lease obligations, less current portion</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">118,432</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Notes payable to shareholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,500</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Investment in affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,911</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Other liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,819</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189,138</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,004</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Stockholders&#146; equity</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,210</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">202,352</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See notes to unaudited condensed consolidated statements.

<P align="center">F-27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>American Medical Laboratories, Incorporated</B>

<DIV align="center">
<B>Unaudited Condensed Consolidated Statements of Operations</B>
</DIV>

<DIV align="center">
<B>(in thousands, except per share data)</B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="56%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Six months</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Six months</B></FONT></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>ended</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>ended</B></FONT></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>June 30, 1999</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>June 30, 2000</B></FONT></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Net revenue</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">58,609</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">129,895</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Operating expenses:</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Cost of services</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">38,530</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">83,816</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Selling, general and administrative</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">14,077</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">27,070</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Depreciation and amortization</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,356</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">6,425</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD colspan="2" align="left" valign="top"><FONT size="2">
        Total operating expenses</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">53,963</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">117,311</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Operating income</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">4,646</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">12,584</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Interest expense</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">835</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">7,602</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Other (income) expense</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">(13</FONT></TD>
        <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Share in loss of affiliate</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">407</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">284</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Income before income taxes and extraordinary item</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">3,417</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">4,698</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Provision for income taxes</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,338</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">2,152</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Income before extraordinary item</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">2,079</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">2,546</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Extraordinary item&nbsp;&#151; loss on early extinguishment of
        debt, net of tax benefit of $39,836</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">67</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Net income</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">2,012</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">2,546</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Less dividends on preferred stock</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">375</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">95</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Income applicable to common stockholders</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">1,637</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">2,451</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Net income per common share&nbsp;&#151; basic:</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Income before extraordinary item, less preferred dividends</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.12</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Extraordinary item</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Net income</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.12</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Net income per common share&nbsp;&#151; diluted:</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Income before extraordinary item, less preferred dividends</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.11</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD></TD>
        <TD colspan="3" align="left" valign="top"><FONT size="2">
        Extraordinary item</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left" valign="top"><FONT size="2">
        Net income</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">0.11</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Weighted-average common shares outstanding</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">18,749,080</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">20,807,765</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

<TR>
        <TD colspan="4" align="left" valign="top"><FONT size="2">
        Diluted average common shares outstanding</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">19,426,013</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">21,332,500</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="4"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="4" noshade></TD>
        <TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See notes to unaudited condensed consolidated statements.

<P align="center">F-28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>American Medical Laboratories, Incorporated</B>

<DIV align="center">
<B>Unaudited Condensed Consolidated Statement of Cash Flow</B>
</DIV>

<DIV align="center">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="68%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Six months</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>ended</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>June 30,</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash flows from operating activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,012</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,546</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Adjustments to reconcile net income to net cash provided by
	operating activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,356</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,425</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Provision for doubtful accounts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,182</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,710</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Deferred income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">946</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,020</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Share in loss of affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">407</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">284</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">172</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net changes in operating assets and liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,845</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,323</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net cash provided by operating activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,058</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,834</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash flow from investing activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Purchases of property and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,003</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,172</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net proceeds from sale of assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Investment in affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(350</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Payments related to business acquisition</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(10,026</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Change in restricted cash</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,485</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net cash used in investing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,511</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,548</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash flows used in financing activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Borrowings on notes payable and capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49,465</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,361</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Payments on notes payable and capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(35,261</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(18,511</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Issuance of stockholder notes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,510</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Proceeds from stockholder notes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Proceeds from exercise of common stock options</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cost of purchase of preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,714</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cost of purchase and retirement of treasury stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,440</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Debt issuance costs paid</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(612</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Bank overdraft</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(306</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net cash provided by financing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">678</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,853</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net increase in cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,225</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">139</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents, beginning of period</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">869</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents, end of period</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,225</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,008</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Supplemental disclosures of cash flow information:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash paid for interest for the six-month period ended</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">836</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,064</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Taxes paid for the six-month period ended</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,538</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See notes to unaudited condensed consolidated statements.

<P align="center">F-29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>American Medical Laboratories, Incorporated</B>

<DIV align="center">
<B>Notes to Unaudited Condensed Consolidated Financial Statements
</B>
</DIV>

<P align="left"><B>Note 1&nbsp;&#151; Summary of Significant Accounting Policies
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial statement note disclosures, normally included in
financial statements prepared in conformity with generally
accepted accounting principles, have been omitted in these
unaudited condensed consolidated financial statements pursuant to
 the Form&nbsp;10Q rules and regulations of the Securities and
Exchange Commission. However, in the opinion of the Company, the
disclosures contained herein are adequate to make the information
 presented not misleading when read in conjunction with the notes
 to consolidated financial statements of the Company for the year
 ended December&nbsp;31, 1999.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements reflect all
adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the Condensed Consolidated Balance
Sheet at June&nbsp;30, 2000, the Condensed Consolidated
Statements of Operations for the six months ended June&nbsp;30,
1999 and 2000, and the Condensed Consolidated Statements of Cash
Flows for the six months ended June&nbsp;30, 1999 and 2000.

<P align="left"><B>Note 2&nbsp;&#151; Redeemable Preferred Stock and
Stockholders&#146; Equity</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The changes in redeemable preferred stock are as follows (amounts
 in thousands):

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="89%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Balance at December&nbsp;31, 1999</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,909</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued dividends on redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">95</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Balance at June&nbsp;30, 2000</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,004</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The changes in stockholders&#146; equity are as follows (amounts
in thousands):

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="87%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Balance at December&nbsp;31, 1999</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,584</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,546</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued dividends on redeemable preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(95</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Stock based compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">172</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Stock options exercised</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Balance at June&nbsp;30, 2000</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,210</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 3&nbsp;&#151; Stock-based Compensation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for stock-based compensation in accordance
with the provisions of Accounting Principles Board
(&#147;APB&#148;) No.&nbsp;25, <I>Accounting for Stock Issued to
Employees</I>, and related interpretations, and complies with the
 disclosure provisions of SFAS No.&nbsp;123, <I>Accounting for
Stock-Based Compensation.</I> Under APB&nbsp;25, compensation is
based on the difference, if any, on the date of grant between the
 fair value of the Company&#146;s stock and the exercise price.
These amounts are amortized over the respective vesting periods
of the individual stock options, generally four years. In
connection with the grant of stock options to employees, the
Company has recorded gross deferred compensation expense of
approximately $1.7&nbsp;million and related amortization of
approximately $172,000 for the six months ended June&nbsp;30,
2000. This deferred compensation is subject to reduction for any
employee who terminates employment prior to the expiration of
such employee&#146;s option vesting period.

<P align="center">F-30
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>American Medical Laboratories, Incorporated</B>
</DIV>

<DIV align="center">
<B>Notes to Unaudited Condensed Consolidated Financial
Statements&nbsp;&#151; (Continued)</B>
</DIV>

<P align="left"><B>Note 4&nbsp;&#151; Notes Payable</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October 13, 1999, the Company entered into a
$140.0&nbsp;million senior credit facility with the Bankers Trust
 Company. The senior credit facility consists of a Term A loan of
 $50.0&nbsp;million, a Term B loan of $65.0&nbsp;million, a
revolving line of credit of $25.0&nbsp;million of which
$10.8&nbsp;million was drawn as of June 30, 2000 (weighted
interest rate of 11.22% at June 30, 2000). Total outstanding debt
 under this senior credit facility was approximately
$123.5&nbsp;million at June 30, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms and conditions of the senior credit facility, the
 Company is subject to certain financial and reporting covenants.
 For the three month period ended June 30, 2000, the Company was
not in compliance with the senior leverage ratio covenant in the
senior credit facility. The Company received a waiver from the
lender for this noncompliance. The Company was in compliance with
 all other debt covenants at June 30, 2000.

<P align="center">F-31

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>INDEPENDENT AUDITORS&#146; REPORT</B>

<P align="left">
The Board of Directors and Stockholders

<DIV align="left">
APL Healthcare Group, Inc.:
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying combined balance sheets of APL
Healthcare Group, Inc. and affiliates as of December&nbsp;31,
1997 and 1998 and September&nbsp;30, 1999, and the related
combined statements of operations, changes in stockholders&#146;
deficit and cash flows for each of the years in the three year
period ended December&nbsp;31, 1998 and for the nine months ended
 September&nbsp;30, 1999. These combined financial statements are
 the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these combined
financial statements based on our audits.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the financial
position of APL Healthcare Group, Inc. and affiliates as of
December&nbsp;31, 1997 and 1998 and September&nbsp;30, 1999, and
the results of their operations and their cash flows for each of
the years in the three year period ended December&nbsp;31, 1998
and for the nine months ended September&nbsp;30, 1999, in
conformity with generally accepted accounting principles.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	KPMG LLP</TD>
</TR>

</TABLE>

<P align="left">
McLean, Virginia

<DIV align="left">
December&nbsp;23, 1999
</DIV>

<P align="center">F-32

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>

<P align="center">
<B>COMBINED BALANCE SHEETS</B>

<DIV align="center">
<B>December&nbsp;31, 1997 and 1998 and September&nbsp;30, 1999
</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="51%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September&nbsp;30,</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>ASSETS</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Current assets:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,201,797</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,380,848</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,047,459</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accounts receivable, less allowance for doubtful accounts of
	$2,443,085 in 1997, $3,037,295 in 1998 and $5,190,203 in 1999
	(notes 6 and 12)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,329,958</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,665,164</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,074,719</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,969,391</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,773,697</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,020,128</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Prepaid expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">422,905</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">449,402</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">682,994</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">222,385</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,204</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">382,978</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred income taxes (note 10)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,926,615</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,073,051</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,414,315</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,208,278</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Property, plant and equipment, net (notes 3 and 6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,163,579</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,514,536</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,322,247</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Investment in affiliate (note 4)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">513,950</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">459,850</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">419,344</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Other assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">204,828</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">85,847</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45,503</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Intangible assets, net (note 5)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,964</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55,437</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,070</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,039,372</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,529,985</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,030,442</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>LIABILITIES AND STOCKHOLDERS&#146; DEFICIT</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Current liabilities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accounts payable</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,022,764</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,175,282</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,420,302</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Line of credit (note 6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,179,923</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Notes payable and capital lease obligations (notes 6 and 8)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,442,089</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,897,835</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,020,979</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Notes payable to stockholders (note 6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,029,104</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,568,606</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,323,962</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Dividends payable to stockholders (note 14)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">308,750</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accrued expenses (note 7)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,179,271</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,726,709</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,472,531</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Income tax payable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">258,483</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total current liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,931,711</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,368,432</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,726,447</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Notes payable and capital lease obligations, less current portion
	 (notes 6 and 8)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,419,369</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,582,277</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,260,064</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Notes payable to stockholders, less current portion (note 6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,905,895</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,395,420</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,657,566</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred income taxes (note 10)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">61,827</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Accrued loss on capitated contracts (note 2)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,412,377</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,774,752</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,872,982</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,731,179</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,120,881</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,517,059</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Stockholders&#146; deficit (note 13):</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Common stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,708</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,251</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,251</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Stock-based deferred compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,773,408</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,200,655</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Additional paid-in capital</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,471</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,645,040</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,678,142</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accumulated deficit</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,760,986</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,469,779</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,971,355</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,691,807</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,590,896</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(486,617</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Commitments and contingencies (notes 8, 11, 12 and 16)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,039,372</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,529,985</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,030,442</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to combined financial statements.

<P align="center">F-33
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>

<P align="center">
<B>COMBINED STATEMENTS OF OPERATIONS</B>

<DIV align="center">
<B>Years ended December&nbsp;31, 1996, 1997 and 1998</B>
</DIV>

<DIV align="center">
<B>and nine months ended September&nbsp;30, 1999</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="43%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Nine months</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Years ended December 31,</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>ended</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1996</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net revenue</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70,263,230</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,004,431</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,729,555</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">78,414,890</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Expenses:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Operating</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44,614,120</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,076,200</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56,286,320</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49,859,848</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Selling, general and administrative</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,574,833</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,329,568</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,815,687</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,107,984</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,845,750</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,133,562</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,531,353</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,907,385</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Interest expense</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">910,234</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,296,390</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,353,409</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">979,488</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Provision for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,173,235</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,978,911</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,846,141</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,850,311</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other, net (note 15)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,798,629</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,302</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,220</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,700</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63,319,543</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">72,825,933</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,858,130</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70,707,716</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Income before income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,943,687</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,178,498</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,871,425</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,707,174</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Provision for income taxes (note 10)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">639,178</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">931,050</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,619,306</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,304,509</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,247,448</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,252,119</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,707,174</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to combined financial statements.

<P align="center">F-34

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>

<P align="center">
<B>COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS&#146; DEFICIT
</B>

<DIV align="center">
<B>Years ended December&nbsp;31, 1996, 1997 and 1998</B>
</DIV>

<DIV align="center">
<B>and nine months ended September&nbsp;30, 1999</B>
</DIV>

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="17%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="31"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>APC</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="31"><FONT size="2"><B>APL</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Common Stock</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="31"><FONT size="2"><B>Common Stock</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="31"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Class A</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Class A</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Class A-1</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Class A-2</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Class B</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1995</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,314</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,314</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1996</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,314</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,314</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1997</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,314</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,314</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of restricted common stock to executives (note 13)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">857</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">857</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Recapitalization of existing shares (note 13)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,314</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,314</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,940</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,940</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1998</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,940</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,940</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">857</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">857</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Amortization of deferred compensation (note 13)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, September&nbsp; 30, 1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,940</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,940</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">857</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">857</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>

<P align="right">[Additional columns below]

<P>[Continued from above table, first column(s) repeated]

<TABLE width="70%" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="26%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Additional</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Total</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Deferred</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Paid-in</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Retained</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Stockholders&#146;</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Compensation</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Capital</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Deficit</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Deficit</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1995</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,471</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,763,543</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,694,364</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,304,509</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,304,509</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,502,400</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,502,400</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1996</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,471</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,961,434</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,892,255</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,247,448</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,247,448</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,047,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,047,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1997</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,471</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,760,986</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,691,807</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of restricted common stock to executives (note 13)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,773,408</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,582,255</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,809,704</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Recapitalization of existing shares (note 13)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,686</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,252,119</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,252,119</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,960,912</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,960,912</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, December&nbsp; 31, 1998</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,773,408</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,645,040</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,469,779</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,590,896</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,208,750</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,208,750</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,707,174</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,707,174</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Amortization of deferred compensation (note 13)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,572,753</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,966,898</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,394,145</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Balance, September&nbsp; 30, 1999</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,200,655</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,678,142</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,971,355</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(486,617</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>

<P align="center">
See accompanying notes to combined financial statements.

<P align="center">F-35

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">

<P align="center"><B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>

<P align="center">
<B>COMBINED STATEMENTS OF CASH FLOWS</B>

<DIV align="center">
<B>Years ended December&nbsp;31, 1996, 1997 and 1998 and the</B>
</DIV>

<DIV align="center">
<B>nine months ended September&nbsp;30, 1999</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="39%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1996</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash flows from operating activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Net income</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,304,509</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,247,448</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,252,119</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,707,174</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Adjustments to reconcile net income to net cash provided by
	operating activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Depreciation and amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,845,750</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,133,562</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,531,353</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,907,385</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Amortization of loss on capitated contracts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,685,385</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,646,037</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,637,625</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,948,736</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Provision for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,173,235</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,978,911</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,846,141</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,850,311</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">606,079</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">595,816</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,877,789</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Stock compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,809,704</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,394,145</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net loss on disposal of property, plant and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">61,089</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,360</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">34,307</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,325</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Changes in:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accounts receivable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,698,498</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,405,194</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,181,347</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(14,259,866</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(186,227</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(546,414</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">195,694</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(246,431</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Prepaid expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(178,880</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">286,485</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(26,497</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(233,592</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Other current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">126,733</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(72,799</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">77,181</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(237,774</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Other assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(61,142</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">40,906</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">118,981</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">40,344</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accounts payable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">416,681</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">332,065</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">152,518</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,245,020</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">831,722</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,481,570</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">547,438</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(254,178</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Income tax payable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,099</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">335,234</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(258,483</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued loss on capitated contracts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">201,872</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,046,966</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Other liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(45,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(35,800</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net cash provided by operating activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,745,637</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,761,113</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,339,273</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,249,803</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash flows from investing activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Net proceeds from disposal of property, plant and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,748</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,341</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,950</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Purchase of property, plant and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,967,481</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,127,768</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,125,059</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,504,888</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Investment in affiliate</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(175,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Acquisition of business</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(225,500</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net cash used in investing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,161,233</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,271,427</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,115,109</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,504,888</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash flows from financing activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Borrowings on notes payable and capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,306,353</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,195,053</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,212,631</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,320,604</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Payments on notes payable and capital lease obligations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,708,398</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,433,992</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,296,832</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,678,831</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Borrowings on line of credit</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,589,007</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,265,172</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,390,955</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,180,050</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Payments on line of credit</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,589,007</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(18,265,172</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(17,390,955</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(18,000,127</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Dividends paid</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,502,400</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,047,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,960,912</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(900,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Increase (decrease)&nbsp;in bank overdraft</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,950</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,950</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net cash used in financing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,902,495</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,287,889</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,045,113</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,078,304</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net increase (decrease)&nbsp;in cash</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(318,091</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,201,797</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,179,051</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,333,389</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents, beginning of period</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">318,091</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,201,797</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,380,848</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents, end of period</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,201,797</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,380,848</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,047,459</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Supplemental disclosure of cash flow information:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Cash paid for interest</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,151,409</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,518,517</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,648,466</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,252,460</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="5" align="left" valign="top"><FONT size="2">
	Supplemental schedule of non-cash investing and financing
	activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Investment in affiliate acquired through note payable</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">365,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Capital lease obligation incurred for property and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">731,881</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">176,660</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to combined financial statements.

<P align="center">F-36
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>

<DIV align="center">
<B>Notes to Combined Financial Statements</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left"><B>Note 1&nbsp;&#151;&nbsp;Organization</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying combined financial statements include the
accounts of APL Healthcare Group, Inc. (&#147;APL&#148;), Robert
R. Belliveau, M.D., Thorne J. Butler, M.D., Associated
Pathologists, Chartered (&#147;APC&#148;) and APL Properties, LLC
 (&#147;APL Properties&#148;) (collectively &#147;the
Company&#148;). These entities are combined for financial
statement purposes as all three entities are under common voting
control.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
APL is a medical laboratory located in Las Vegas, Nevada. APL was
 incorporated in Nevada in 1965. APL provides esoteric, specialty
 and routine testing to hospitals, physicians and other
laboratories. APL&#146;s services are used by healthcare
providers in the detection, diagnosis, evaluation, monitoring and
 treatment of diseases and other medical conditions.
Approximately 90&nbsp;percent of APL&#146;s business is with
customers in Nevada.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
APC is a privately held professional services firm incorporated
in Nevada in 1968. APC currently provides pathology services to
acute care hospitals primarily in Nevada and to APL.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
APL Properties was formed by six shareholders of APC in 1997 and
owns the building that APL occupies in Las Vegas, Nevada. APL
Properties leases the building to APL and collects rental income.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, the Company completed a securities
purchase agreement with another independent laboratory company
whereby the Company sold all of its capital stock for
approximately $105.2&nbsp;million plus ten percent of the equity
of the combined new company. The transaction was effected through
 receipt of approximately $54.3&nbsp;million in cash, repayment
of all existing debt of approximately $17.8&nbsp;million (except
for a note payable to Bank of America with a balance of
approximately $3.5&nbsp;million at September&nbsp;30, 1999),
receipt of cash placed in escrow of $10.0&nbsp;million, issuance
of $17.5&nbsp;million of subordinated promissory notes, and the
issuance of approximately 2.2&nbsp;million shares of the
acquiror&#146;s, common stock to the stockholders.

<P align="left"><B>Note 2&nbsp;&#151; Summary of Significant Accounting Policies
</B>

<P align="left"><B>(a)&nbsp;&nbsp;<I>Principles of Combination</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All significant intercompany accounts and transactions have been
eliminated in combination.

<P align="left"><B>(b)&nbsp;&nbsp;<I>Net revenue</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company operates in one reportable segment, the medical
laboratory industry. Revenue from laboratory tests is recorded at
 the time the tests are resulted and is reported at the estimated
 net realizable amounts from patients, third party payors and
others for services rendered. The Company is reimbursed for
services under fee schedules, contractual and other payor
arrangements. Adjustments to the estimated net realizable amounts
 are based on final payments from third party payors. Revenue
from laboratory directorship services is recorded as earned under
 contractual arrangements with hospitals.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Losses under laboratory testing contracts with managed care
organizations are recognized when it is probable that the
expected future costs under a contract will exceed the
anticipated future revenues from the contract. During 1995, 1996
and 1999, the Company recorded losses of $11,845,252, $201,872
and $1,046,966, respectively, associated with three managed care
contracts. The Company did not record any losses on laboratory
testing contracts during 1997 or 1998. The unamortized balance of
 these accrued losses totaled $5,412,377, $2,774,472 and
$1,872,982 at December&nbsp;31, 1997 and 1998, and
September&nbsp;30, 1999, respectively.

<P align="center">F-37
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left"><B>(c)&nbsp; <I>Cash and Cash Equivalents</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and cash equivalents are comprised of cash in banks and
highly liquid investments with original maturities of three
months or less.

<P align="left"><B>(d)&nbsp; <I>Fair Value of Financial Instruments</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amounts of accounts receivable, other assets,
accounts payable and accrued expenses approximate their fair
market values as of December&nbsp;31, 1997 and 1998 and
September&nbsp;30, 1999, due to the relatively short duration of
these financial instruments. The carrying amounts of the
Company&#146;s indebtedness approximate their fair values as of
December&nbsp;31, 1997 and 1998 and September&nbsp;30, 1999 as
they bear interest at rates that approximate market rates.

<P align="left"><B>(e)&nbsp; <I>Accounts Receivable</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounts receivable include billed and unbilled revenue for
testing performed and are presented net of allowances for
doubtful accounts and contractual allowances. The allowance for
doubtful accounts is an estimate based upon actual historical
trends and management&#146;s judgment.

<P align="left"><B>(f)&nbsp; <I>Property, Plant and Equipment</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment are stated at cost, or if acquired
under capital leases, at the present value of the future minimum
lease payments. Depreciation and amortization are computed using
the straight-line method. The estimated useful lives are as
follows:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="70%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="13%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="13%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Estimated useful lives</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Building</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Laboratory equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5-12 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Computer equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5-7 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Leasehold improvements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Furniture and fixtures</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5-12 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Software</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3-5 years</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Transportation equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3-5 years</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenditures for repairs and maintenance, which do not materially
 extend the useful lives of property, plant and equipment, are
charged directly to expense. Equipment under capital leases is
amortized over the estimated useful lives or the term of the
lease, if shorter.

<P align="left"><B>(g)&nbsp; <I>Inventory</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventory consists principally of purchased laboratory and
medical supplies and is stated at the lower of cost (first-in,
first-out method) or market value.

<P align="left"><B>(h)&nbsp; <I>Intangible Assets</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Intangible assets, consisting of goodwill and noncompete
agreements, are carried at cost and are amortized on a
straight-line basis over 5&nbsp;years. The Company evaluates the
recoverability of goodwill by determining whether the
amortization of the goodwill balance over its remaining life can
be recovered through undiscounted operating cash flows of the
acquired operation.

<P align="left"><B>(i)&nbsp; <I>Investment in Affiliate</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company records its 49&nbsp;percent owned investment in
affiliate on the equity method of accounting.

<P align="center">F-38

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left"><B>(j)&nbsp; <I>Income Taxes</I></B>

<P align="left"><B><I>&nbsp;&nbsp;APL</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes are accounted for in accordance with Financial
Accounting Standards Board Statement No.&nbsp;109
(&#147;Statement 109&#148;) for the years ended December&nbsp;31,
 1996 and 1997. Under the asset and liability method of
Statement&nbsp;109, deferred tax assets and liabilities are
determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that are expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective July&nbsp;1, 1998, APL changed its tax status from a
taxable to a non-taxable enterprise (C to an S&nbsp;Corporation).
 Under Statement&nbsp;109, deferred tax assets and liabilities
are eliminated when a taxable enterprise becomes a non-taxable
enterprise. The effect of eliminating the deferred tax assets was
 charged to income tax expense upon conversion.

<P align="left"><B><I>&nbsp;&nbsp;APC</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For all periods presented in the accompanying combined financial
statements, APC is considered an S Corporation as defined under
certain sections of the Internal Revenue Code. Accordingly, the
accompanying combined financial statements do not include a
provision for income taxes for APC.

<P align="left"><B><I>&nbsp;&nbsp;APL Properties</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For all periods presented in the accompanying combined financial
statements, APL Properties is a partnership; as such, all income
tax attributes are passed through to the partners. Accordingly,
the accompanying combined financial statements do not include a
provision for income taxes for APL Properties.

<P align="left"><B>(k)&nbsp; <I>Accounting for Stock Based Compensation</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for stock-based compensation using the
intrinsic value based method of accounting prescribed by APB
Opinion No.&nbsp;25, <I>Accounting for Stock Issued to Employees
</I>.

<P align="left"><B>(l)&nbsp; <I>Use of Estimates</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amount of
 assets and liabilities and disclosure of contingent assets and
liabilities at the date of the combined financial statements.
Estimates also affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
 from those estimates.

<P align="center">F-39

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left"><B>Note 3&nbsp;&#151;&nbsp;Property, Plant and Equipment</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment consists of the following:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="54%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September&nbsp;30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Land</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">491,347</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">491,347</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">491,347</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Building</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,122,153</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,099,768</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,099,768</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Laboratory equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,500,249</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,624,648</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,128,700</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Computer equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,739,763</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,513,933</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,916,611</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Leasehold improvements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,048,610</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,049,219</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,310,803</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Furniture and fixtures</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,396,179</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,435,907</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,622,038</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Software</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">947,222</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,387,263</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,589,333</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Transportation equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,060,778</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,225,454</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,251,396</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,306,301</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,827,539</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,409,996</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Less accumulated depreciation and amortization (including amounts
	 applicable to property and equipment acquired under capital
	leases of $175,948, $280,009 and $352,318 at December&nbsp;31,
	1997 and 1998 and September&nbsp;30, 1999, respectively</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,142,722</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,313,003</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,087,749</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,163,579</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,514,536</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,322,247</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 4&nbsp;&#151;&nbsp;Investment in Affiliate</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 1997, the Company purchased a 49&nbsp;percent share in LMC
 Laboratory Sciences, LLC (&#147;LMC LLC&#148;) from LMC
Laboratories, Inc. (&#147;LMC Inc.&#148;). LMC Inc. owns the
remaining 51&nbsp;percent share of LMC LLC and has full voting
control of LMC LLC.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company paid $175,000 in cash and signed a secured promissory
 note for $365,500 to LMC Inc. The note is payable in five equal
annual installments of $94,900 including interest. The
outstanding balance of this note was $365,500, $304,887 and
$238,599 at December&nbsp;31, 1997 and 1998 and September 30,
1999, respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is the exclusive provider of laboratory testing
services for LMC LLC. The Company is entitled to a percentage of
net revenues billed from LMC LLC for testing services provided as
 well as 49&nbsp;percent of the net income from LMC LLC. Revenue
earned by the Company for performing laboratory testing services
totaled $337,054, $430,096 and $369,103 in 1997, 1998 and 1999,
respectively. The Company received a distribution of $0 in 1997,
$29,830 in 1998 and $27,004 in 1999 for its 49&nbsp;percent
interest in the net income of LMC LLC. The Company recorded this
distribution as revenue in the accompanying combined financial
statements. The Company has a liability recorded of $22,382,
$30,000 and $50,000 at December&nbsp;31, 1997 and 1998 and
September&nbsp;30, 1999, respectively, to LMC LLC for testing
revenues earned but not remitted to LMC LLC. The Company is
amortizing its investment in LMC LLC over the 10&nbsp;year term
of the agreement. The investment, classified separately on the
balance sheet, was $513,950, $459,850 and $419,344 at and
December&nbsp;31, 1997 and 1998 and September&nbsp;30, 1999,
respectively.

<P align="center">F-40

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left"><B>Note 5&nbsp;&#151;&nbsp;Intangible Assets</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Intangible assets consist of the following at December&nbsp;31:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="58%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Goodwill</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">135,773</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">135,773</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">135,773</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Non-compete</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">155,773</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">155,773</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">155,773</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Less accumulated amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71,809</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,336</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">120,703</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Intangible assets, net</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,964</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55,437</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,070</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 6&nbsp;&#151;&nbsp;Notes Payable and Capital Lease
Obligations</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notes payable and capital lease obligations consist of the
following:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="55%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to Bank of America; monthly payments of $31,425
	including interest at 8.39%; remaining principal balance plus
	remaining interest due May&nbsp; 1, 2007; collateralized by
	certain real property and the personal guarantee of the
	stockholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,616,572</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,544,495</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,479,150</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Non-revolving line of credit with term repayment option with Bank
	 of America for up to $3.5&nbsp;million bearing interest at LIBOR
	 plus 2% payable monthly (7.31% at September&nbsp;30, 1999);
	monthly principal payments of $58,333 beginning December&nbsp;10,
	 1999, and remaining principal balance plus remaining interest
	due November&nbsp;10, 2004; collateralized by receivables,
	equipment, furniture and the personal guarantee of the
	stockholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,319,689</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,166,299</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to Bank of America; monthly payments of $198,945
	through July&nbsp;1, 2000 including interest at 7.25%; monthly
	payments decrease to $142,150, $103,315 and $69,400 on
	August&nbsp;1, 2000, September&nbsp;1, 2001 and September&nbsp;1,
	 2002, respectively; remaining principal balance plus remaining
	interest due August&nbsp;1, 2003; collateralized by receivables,
	equipment, furniture, and the personal guarantee of the
	stockholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,738,258</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,271,119</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-41

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="55%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Non-revolving line of credit with term repayment option with Bank
	 of America for up to $2&nbsp;million; monthly payments of
	$41,760 including interest at lender&#146;s reference rate plus
	.5% (9% at December 31, 1997); remaining principal balance plus
	remaining interest due July&nbsp;1, 2001; collateralized by
	receivables, equipment, furniture and the personal guarantee of
	the stockholders. On September&nbsp;30, 1998, this facility was
	deleted and refinanced into the 7.25% note payable described
	above</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,500,875</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to Bank of America; monthly payments of $64,100
	including interest at lender&#146;s reference rate plus .5% (9%
	at December 31, 1997); remaining principal balance plus remaining
	 interest due June&nbsp; 30, 2000; collateralized by receivables,
	 equipment, furniture and the personal guarantee of the
	stockholders. On September&nbsp;30, 1998, this facility was
	deleted and refinanced into the 7.25% note payable described
	above</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,643,230</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Non-revolving line of credit with term repayment option with Bank
	 of America for up to $2.5&nbsp; million; monthly payments of
	$52,200 including interest at lender&#146;s reference rate plus
	.5% (9% at December 31, 1997); remaining principal balance plus
	remaining interest due August&nbsp;1, 2002; collateralized by
	receivables, equipment, furniture and the personal guarantee of
	the stockholders. On September&nbsp;30, 1998, this facility was
	deleted and refinanced into the 7.25% note payable described
	above</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,741,906</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Non-revolving line of credit with term repayment option with Bank
	 of America for up to $3.5&nbsp;million bearing interest at
	lender&#146;s reference rate plus .25% (8.75% at
	December&nbsp;31, 1997); monthly principal payments of $72,660
	beginning September&nbsp; 1, 1998 and remaining principal balance
	 plus remaining interest due August&nbsp;1, 2003; collateralized
	by receivables, equipment, furniture and the personal guarantee
	of the stockholders. On September&nbsp;30, 1998, this facility
	was deleted and refinanced into the 7.25% note payable described
	above</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,095,053</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-42

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="55%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to GE Capital; monthly payments of $39,228 including
	 interest at 30 day commercial paper rate plus 2.36% (8.26% at
	December&nbsp;31, 1997); remaining principal balance plus
	remaining interest due December 31, 1998; collateralized by
	equipment and the personal guarantee of the stockholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">427,152</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to GE Capital; monthly payments of $10,064 including
	 interest at 30 day commercial paper rate plus 2.36% (7.8% at
	December&nbsp;31, 1998); remaining principal balance plus
	remaining interest due August&nbsp;29, 1999; collateralized by
	equipment and the personal guarantee of the stockholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">187,122</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86,512</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to GE Capital; monthly payments of $15,098 including
	 interest at 30 day commercial paper rate plus 2.36% (7.8% at
	December&nbsp;31, 1998); remaining principal balance plus
	remaining interest due August&nbsp;4, 1999; collateralized by
	equipment and the personal guarantee of the stockholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">280,914</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,359</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to GE Capital; monthly payments of $9,966 including
	interest at 7.875%; remaining principal balance plus remaining
	interest due June&nbsp; 23, 2003; collateralized by equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">442,925</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">387,209</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to LMC Laboratories, Inc.; annual payments of
	$94,900; imputed interest at 9%; remaining principal balance due
	June&nbsp;1, 2002; collateralized by a security interest in the
	Company&#146;s ownership in LMC LLC</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">365,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">304,887</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">238,599</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to a former stockholder; monthly payments of $3,126
	including interest at prime (7.75% at December 31, 1998);
	remaining principal balance plus unpaid interest due
	January&nbsp;1999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">166,490</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">147,298</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Note payable to Premium Financing Specialists; monthly payments
	of $54,326 including interest at 7.76%; remaining principal
	balance plus unpaid interest due January 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,141</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,934</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">213,949</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-43
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="55%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Various capital lease obligations for equipment; monthly payments
	 totaling $47,068 at September&nbsp;30, 1999 with interest at
	rates ranging from 7.5% to 10%; remaining principal balance plus
	unpaid interest with varying maturity dates through June&nbsp; 1,
	 2004</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">785,503</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">725,755</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">524,718</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,861,458</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,480,112</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,281,043</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Less current installments</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,442,089</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,897,835</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,020,979</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,419,369</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,582,277</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,260,064</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notes payable to stockholders consists of the following:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="57%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Notes payable to various stockholders; monthly payments totaling
	$289,522 with interest at rates ranging from 7% to 9%; remaining
	principal balance plus unpaid interest with varying maturity
	dates through 2003; subordinated to Bank of America debt;
	personally guaranteed by stockholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,934,999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,964,026</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,981,528</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Less current installments</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,029,104</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,568,606</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,323,962</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,905,895</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,395,420</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,657,566</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, all notes payable, except for the note
payable to Bank of America in the amount of $3,479,150, were paid
 off in conjunction with the purchase agreement. The note payable
 agreement with Bank of America is subject to financial
covenants. At September&nbsp;30, 1999, the Company was in
compliance with these covenants.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Maturities of the remaining notes payable and capital lease
obligations are as follows:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="70%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Notes</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Capital</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>payable</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>leases</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Three months ending December&nbsp;31, 1999</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,532</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,039</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Years ending December&nbsp;31:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,777</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">162,302</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2001</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">98,693</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,922</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2002</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">107,299</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">115,489</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2003</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,656</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">121,047</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Thereafter</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,044,193</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">34,823</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,479,150</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">598,622</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Less interest</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;&nbsp;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,904</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,479,150</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">524,718</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-44

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left"><B><I>&nbsp;&nbsp;Line of Credit</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 1997 and 1998 and September&nbsp;30,
1999, the Company had a $1.5&nbsp;million revolving line of
credit with Bank of America. The agreement bears interest at
prime plus .5&nbsp;percent and is available through December 31,
1999. The weighted average interest rate was 8.96&nbsp;percent,
8.81 percent and 8.75&nbsp;percent at December&nbsp;31, 1997 and
1998 and September&nbsp;30, 1999, respectively. At
December&nbsp;31, 1997 and 1998, there was no balance outstanding
 on the line of credit. At September&nbsp;30, 1999 there was an
outstanding balance of $1,179,923 on the line of credit.

<P align="left"><B>Note 7&nbsp;&#151;&nbsp;Accrued Expenses</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accrued expenses consists of the following at:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="57%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued salaries, bonus, and payroll withholding</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,943,634</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,337,547</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,840,926</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued sick leave and vacation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,390,970</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,754,374</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,038,479</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Accrued expenses and other</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,844,667</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,634,788</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,593,126</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Total accrued expenses</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,179,271</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,726,709</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,472,531</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 8&nbsp;&#151;&nbsp;Lease Commitments</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company leases various equipment and office space under
noncancelable lease arrangements expiring at various dates
through June&nbsp;1, 2004.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Future minimum lease payments under these noncancelable operating
 leases are as follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="81%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Three months ending December&nbsp;31, 1999</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">250,570</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Year ending December&nbsp;31:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">796,468</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2001</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">597,291</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2002</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">728,515</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2003</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">114,905</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Thereafter</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,095</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,537,844</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total rent expense under all operating leases was $1,791,584,
$858,667 and $1,084,673 for the years ended December&nbsp;31,
1996, 1997 and 1998, respectively and $1,041,600 for the nine
months ended September&nbsp;30, 1999.

<P align="center">F-45

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into certain non-cancelable agreements in
 connection with certain capital leases that specify minimum
monthly payments for maintenance and reagent supplies. Future
payments under these non-cancelable agreements are as follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="81%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Three months ending December&nbsp;31, 1999</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">368,549</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Year ending December&nbsp;31:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,254,467</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2001</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">802,974</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2002</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">793,734</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2003</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">660,833</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Thereafter</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">99,139</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,979,696</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the years ended December&nbsp;31, 1996, 1997 and 1998, the
 Company incurred expenses under these agreements of $761,300,
$900,539, and 1,552,648, respectively and $1,407,963 for the nine
 months ended September 30, 1999.

<P align="left"><B>Note 9&nbsp;&#151;&nbsp;Employee Benefit Plan</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company sponsors a 401(k) plan for the benefit of all
qualified employees. Profit sharing contributions to the plan are
 discretionary and are determined annually by the Board of
Directors. Contributions for the years ended December&nbsp;31,
1996, 1997 and 1998 were $516,486, $582,555, and $593,347,
respectively, and $495,641 for the nine months ended
September&nbsp;30, 1999.

<P align="left"><B>Note 10&nbsp;&#151;&nbsp;Income Tax Expense</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For all periods presented, APC has elected to be taxed as an S
Corporation as defined under certain sections of the Internal
Revenue Code, which provide that, in lieu of corporation income
taxes, the stockholders separately account for their pro rata
shares of APC&#146;s items of income, deductions, losses and
credits. As a result of this election, no income taxes on
APC&#146;s book income have been recognized in the accompanying
combined financial statements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For all periods presented, APL Properties is a partnership; as
such, all income tax attributes are passed through to the
partners. Accordingly, no income taxes have been recognized in
the accompanying combined financial statements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
APL is taxed as a C&nbsp;Corporation for the years ended
December&nbsp;1996 and 1997 and as a result, income tax expense
and deferred tax assets and liabilities have been recognized in
the accompanying combined financial statements. For the year
ended December&nbsp;31, 1998, APL had a change in tax status
converting from a taxable to a nontaxable enterprise (C to an
S&nbsp;Corporation), effective July&nbsp;1, 1998. APL was in a
net deferred tax asset position at the date of the change in tax
status and recognized a charge to income tax expense of
$3,037,354 in 1998 as a result of eliminating its net deferred
tax assets.

<P align="center">F-46

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income tax expense consists of the following:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="63%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1996</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Federal</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">639,178</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">931,050</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,619,306</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	State</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">639,178</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">931,050</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,619,306</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="63%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1996</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Current</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,098</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">322,233</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(418,048</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Deferred</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">606,080</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">608,817</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,037,354</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">639,178</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">931,050</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,619,306</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A reconciliation of tax expense computed at the statutory federal
 tax rate of 34&nbsp;percent on income from continuing operations
 before income taxes to the actual income tax expense is as
follows:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="57%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1996</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Tax provision computed at the statutory rate</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,360,854</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,780,689</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,336,286</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Intangibles amortization and other book expenses not deductible
	for tax purposes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,960</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,866</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,351</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Income from non-taxable entities combined</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,735,636</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,867,505</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,764,683</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Elimination of APL&#146;s deferred tax assets due to change in
	tax status from a taxable to non-taxable enterprise</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,037,354</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Total income tax expense</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">639,178</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">931,050</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,619,308</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes reflect temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant components of deferred tax (assets)&nbsp;and
liabilities are as follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="78%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred tax assets:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued vacation</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(142,344</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued sick pay</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(316,572</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(172,513</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued loss on capitated contracts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,826,831</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Other</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(468,355</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total deferred tax assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,926,615</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred tax liabilities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accelerated depreciation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41,974</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Lease payments</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,853</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total deferred tax liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">61,827</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net deferred tax assets</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,864,788</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The valuation allowance on deferred tax assets and liabilities is
 $0 at December&nbsp;31, 1997 due to available qualified tax
planning strategies and the Company&#146;s projection of future
taxable income.

<P align="center">F-47

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left"><B>Note 11&nbsp;&#151;&nbsp;Insurance</B>

<P align="left"><B>(a)<I>&nbsp;Self Insurance</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is self-insured for medical claims for certain of its
 employees and for workers compensation up to predetermined
amounts. For claims in excess of those amounts, the Company
carries certain individual and aggregate stop-loss reinsurance
policies. In order to qualify to participate in a self-insured
workers compensation program, the Company has provided a
$2,500,000 letter of credit in favor of the State of Nevada. The
Company also has provided a $120,000 surety bond in favor of the
workers compensation carrier.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has accrued $213,000, $360,125 and $465,729 at
December&nbsp;31, 1997 and 1998 and September&nbsp;30, 1999
respectively, for incurred but not reported medical claims. The
Company has accrued $65,805, $73,685 and $71,256 at
December&nbsp;31, 1997 and 1998, and September&nbsp;30, 1999,
respectively, for estimated workers compensation liabilities.

<P align="left"><B>(b)<I>&nbsp;Medical Malpractice</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a claims-made professional insurance policy and
an occurrence basis general liability insurance policy to cover
medical malpractice claims and other incidents. On the
professional insurance policy, for the years ended
December&nbsp;31, 1997, 1998 and the nine months ended
September&nbsp;30, 1999 the Company was insured for individual
claims up to $1,000,000 with a total annual aggregate of up to
$5,000,000. Also, for the years ended December&nbsp;31, 1997,
1998 and the nine months ended September&nbsp;30, 1999, the
Company had excess insurance in the amount of $15,000,000 per
loss event with an aggregate of $15,000,000. On the general
insurance policy, for the years ended December&nbsp;31, 1997,
1998 and the nine months ended September&nbsp;30, 1999, the
Company was insured $1,000,000 per occurrence with a total annual
 aggregate of up to $2,000,000. Also, for the years ended
December&nbsp;31, 1997, 1998 and the nine months ended
September&nbsp;30, 1999, the Company had excess insurance in the
amount of $18,000,000 per loss event with an aggregate of
$18,000,000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are known claims and incidents that may result in the
assertion of additional claims, as well as claims from unknown
incidents that may be asserted arising from services provided to
clients. No accrual for possible losses attributable to incidents
 that may have occurred but that have not been reported to the
Company or insurance carrier has been made in the accompanying
combined financial statements because management believes such
amounts would be immaterial.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has provided two letters of credit in the amounts of
$150,000 and $100,000 in favor of the insurance carriers.

<P align="center">F-48

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left"><B>Note 12&nbsp;&#151;&nbsp;Concentrations of Credit Risk</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company grants credit without collateral to its customers,
which are comprised primarily of patients, health care providers,
 Medicare and other health plans. The mix of receivables from
patients and third party payors at December&nbsp;31, 1997 and
1998 and September&nbsp;30, 1999 was as follows:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="65%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>December 31,</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>September 30,</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1997</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1998</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>1999</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Medicare</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Valley Health System</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Private insurers</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	All others (none greater than 10%)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">61</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">64</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Note 13&nbsp;&#151;&nbsp;Stockholders&#146; Deficit</B>

<P align="left"><B>(a)<I>&nbsp;Common Stock</I></B>

<P align="left"><B><I>&nbsp;&nbsp;APL</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to June&nbsp;30, 1998, APL had authorized 25,000 shares of
Class&nbsp;A, voting common stock having a $1 par value per
share. On June&nbsp;30, 1998, the Company amended and restated
its Articles of Incorporation in order to effect a plan of
recapitalization in conjunction with its election to switch from
a &#147;C&#148;&nbsp;Corporation to an
&#147;S&#148;&nbsp;Corporation for federal income tax purposes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amended Articles of Incorporation authorized the following
shares, all with a par value of $1; Class&nbsp;A-1, voting: 1,000
 shares, Class&nbsp;A-2, non-voting: 23,000 shares, and
Class&nbsp;B, non-voting: 1,000 shares. Each outstanding
Class&nbsp;A-1 share is entitled to one vote per share on all
matters to be voted on by the stockholders of the Company. All
share classes have equal rights in all distributions either
declared by the Board of Directors or upon dissolution of the
Company. The recapitalization was effected by issuing one
Class&nbsp;A-1 share plus 99 Class&nbsp;A-2 shares for each
38.5714 existing common shares. After the recapitalization, there
 were 60 Class&nbsp;A-1 shares and 5,940 Class&nbsp;A-2 shares
outstanding.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company had a buy-sell agreement with its stockholders. In
the event of the death of a stockholder or termination of
employment, the remaining stockholders have the right to purchase
 all of the shares of the deceased or terminated stockholder.
However, if the remaining stockholders do not agree to purchase
the shares, then the Company shall purchase all of the shares.
The price to be paid for such shares is based upon a multiple of
annual revenue as defined in the agreement.

<P align="left"><B><I>&nbsp;&nbsp;APC</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
APC has authorized 2,500 shares of common stock having no par
value. The common shares may only be issued to an individual who
is licensed to practice medicine in the State of Nevada.

<P align="left"><B>(b)&nbsp;<I>Restricted Stock</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company granted 429 Class&nbsp;B common shares to two
executives on January&nbsp;1, 1998. The shares are subject to
forfeiture if employment terminates prior to the end of the
prescribed vesting period, which is seven years. The fair value
of the shares granted was determined to be the redemption amount
outlined in the employment agreements with the two executives.
The redemption amount of the stock is calculated on
January&nbsp;1 of each year. The fair value of the stock is
calculated as $7,582,255 and $2,615,357 on January&nbsp;1, 1998
and January&nbsp;1, 1999, respectively. The fair value is

<P align="center">F-49

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<DIV align="center">
<B>APL HEALTHCARE GROUP, INC. AND AFFILIATES</B>
</DIV>

<DIV align="center">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center">
<B>December 31, 1996, 1997 and 1998 and September 30, 1999</B>
</DIV>

<P align="left">
recorded as deferred compensation and is being amortized to
selling, general, and administrative expenses as earned over a
seven-year vesting period.

<P align="left"><B>Note 14&nbsp;&#151;&nbsp;Dividends</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dividends payable of $308,750 at September&nbsp;30, 1999
represents dividends declared in September&nbsp;1999 but not paid
 until October&nbsp;1999 by APC. There were no dividends payable
at December&nbsp;31, 1997 or 1998.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
APC declared dividends of $5,502,400, $6,047,000, and $9,360,912
in the years ended December&nbsp;31, 1996, 1997, and 1998,
respectively and $1,208,750 for the nine months ended
September&nbsp;30, 1999. Dividends per share were $13,965,
$15,348 and $23,759 in 1996, 1997 and 1998, respectively, and
$3,068 for the nine months ended September&nbsp;30, 1999.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
APL declared dividends of $600,000 in 1998. Dividends per share
were $88 in 1998. APL declared no dividends in 1996, 1997 or
1999.

<P align="left"><B>Note 15&nbsp;&#151;&nbsp;Sale of Certain Intangibles</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;31, 1996, the Company sold certain intangible assets
of the clinical veterinary laboratory practice to an unrelated
party for approximately $1,800,000 in cash. The assets sold
included customer account lists, patient lists and potential
patient lists, and other proprietary information used in
conjunction with the veterinary lab practice. The gain on sale of
 $1.8&nbsp;million was included in other income in 1996.

<P align="left"><B>Note 16&nbsp;&#151;&nbsp;Commitments and Contingencies</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;15, 1997, the Company was served with a
subpoena from the United States Attorney&#146;s Office for the
District of Arizona requesting numerous business documents
relating to the Company&#146;s operations since 1990. The
information sought by the government as well as conversations
with the United States Attorney&#146;s Office indicate that the
government is investigating the manner in which the Company added
 certain tests to test profiles and panels, the information
supplied to physician customers about such test add-ons, and the
manner in which such test add-ons and profiles were billed to
government health care programs such as Medicare, Medicaid, and
Champus. The Company has provided to the government all documents
 requested in the subpoena. On December&nbsp;16, 1998, the
government disclosed to the Company through legal counsel that
the investigation arises out of a complaint filed in the United
States District Court under the qui tam provisions of the False
Claims Act. The Company has not yet been served with the
complaint and is awaiting a decision by the United States
Attorney&#146;s Office as to whether they will intervene. The
Company plans to vigorously defend itself should a complaint be
served and believes that the ultimate outcome of this complaint
will not have a material adverse effect on the Company&#146;s
financial position.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is involved in legal actions and disputes arising in
the ordinary course of business. With respect thereto, the
Company believes that it has adequate legal defenses and
insurance coverage and believes that their ultimate outcome will
not have a material adverse effect on the Company&#146;s
financial position.

<P align="center">F-50

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<P align="center">
<IMG src="w40527amll5.gif" alt="AML LOGO">

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>PART II</B>

<P align="center"><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>

<P align="left"><B>Item&nbsp;13.&nbsp;&nbsp;Other Expenses of Issuance and
Distribution.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the estimated expenses to be
incurred in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts
and commissions, to be paid by the Registrant.

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="81%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	SEC registration fee</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,360</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	National Association of Securities Dealers, Inc. filing fee</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Nasdaq National Market listing fee</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Printing and engraving fees</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Legal fees and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accounting fees and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Blue Sky fees and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Trustee fees</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Miscellaneous</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="31%" align="left">
</DIV>

<DIV align="left">

</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
*&nbsp; To be included by amendment

<P align="left"><B>Item&nbsp;14.&nbsp;&nbsp;Indemnification of Directors and
Officers.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant is incorporated under the laws of the State of
Delaware. Section&nbsp;145 (&#147;Section&nbsp;145&#148;) of the
General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (the &#147;General Corporation
 Law&#148;), inter alia, provides that a Delaware corporation may
 indemnify any persons who were, are or are threatened to be
made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an
 officer, director, employee or agent of such corporation as a
director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including
attorneys&#146; fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed
 to be in or not opposed to the corporation&#146;s best interests
 and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify any persons who are, were or are
threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by
 reasons of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at
the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys&#146; fees), actually and
reasonably incurred by such person in connection with the defense
 or settlement of such action or suit, provided such person acted
 in good faith and in a manner he reasonably believed to be in or
 not opposed to the corporation&#146;s best interests, provided
that no indemnification is permitted without judicial approval if
 the officer, director, employee or agent is adjudged to be
liable to the corporation. Where an officer, director, employee
or agent is successful on the merits or otherwise in the defense
of any action referred to above, the corporation must indemnify
him against the expenses which such officer or director has
actually and reasonably incurred. Section&nbsp;145 further
authorizes a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against

<P align="center">II-1

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
any liability asserted against him and incurred by him in any
such capacity, arising out of his status as such, whether or not
the corporation would otherwise have the power to indemnify him
under Section&nbsp;145.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant&#146;s Certificate of Incorporation and By-laws
provide for the indemnification of officers and directors to the
fullest extent permitted by the General Corporation Law.
Registrant maintains a policy of directors and officers liability
 insurance covering certain liabilities incurred by its directors
 and officers in connection with the performance of their duties.

<P align="left"><B>Item&nbsp;15.&nbsp;&nbsp;Recent Sales of Unregistered
Securities.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the last three years, AML has issued the following
securities without registration under the Securities Act of 1933
as amended (the &#147;Securities Act&#148;):

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, Golder, Thoma, Cressey, Rauner Fund V,
L.P. and certain members of management and their affiliates
acquired a total of 18,519,477&nbsp;shares of common stock in
exchange for an equal number of shares of common stock of AML
Inc. and 1,491&nbsp;shares of preferred stock in exchange for an
equal number of shares of preferred stock of AML Inc.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;13, 1999, the sellers of APL acquired a total of
2,151,719 shares of common stock subordinated promissory notes in
 the aggregate principal amount of $17.5 million as a portion of
the purchase price of APL.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the last three years, certain employees acquired a total
of 198,008 shares of common stock for $.02 per share for an
aggregate purchase price of $3,960.16 through the exercise of
stock options.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The sales and issuances listed above were deemed exempt from
registration under the Securities Act by virtue of
Section&nbsp;4(2) and Rule&nbsp;701 thereof. Certain defined
terms used herein not otherwise defined have the meanings
ascribed to them in the prospectus, which forms a part of this
registration statement.

<P align="left"><B>Item&nbsp;16.&nbsp;&nbsp;Exhibits and Financial Statement
Schedules.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp; Exhibits.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reference is made to the attached Exhibit&nbsp;Index.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp; Financial Statement Schedules.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following financial statement schedules for the three years
ended December&nbsp;31, 1999 are included in this registration
statement.

<P align="left"><B>Item&nbsp;17.&nbsp;&nbsp;Undertakings.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to provisions
described in Item&nbsp;14 above, or otherwise, the Registrant has
 been advised that in the opinion of the SEC such indemnification
 is against public policy as expressed in the Securities 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 registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
 precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
 the final adjudication of such issue.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned Registrant hereby undertakes that:

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(1)&nbsp; For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule&nbsp;430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule&nbsp;424 (b)
(1) or (4)&nbsp;or 497

<P align="center">II-2
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<DIV align="left">
(h)&nbsp;under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(2)&nbsp; For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial <I>bona fide </I>offering thereof.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting
Agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.

<P align="center">II-3

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<P align="center"><B>SIGNATURES</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chantilly, State of
Virginia, on September&nbsp;29, 2000.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	American Medical Laboratories, Incorporated</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="2%"></TD>
	<TD width="60%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>By:&nbsp;</TD>
	<TD align="left">
	/s/ TIMOTHY J. BRODNIK</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<HR size="1" align="left"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="center">
	Name: Timothy J. Brodnik</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="center">
	Title: Chairman, President and</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="center">
	Chief Executive Officer</TD>
</TR>

</TABLE>

<P align="center"><B>POWER OF ATTORNEY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Timothy J. Brodnik, Steve
R. Pierce and Alvin Ezrin, and each of them, his/her true and
lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him/her and in his/her name,
 place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this
Registration Statement (and any registration statement filed
pursuant to Rule&nbsp;462(b) under the Securities Act of 1933, as
 amended, for the offering which this Registration Statement
relates), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any
of them, or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

<P align="center"><B>*&nbsp;&nbsp;*&nbsp;&nbsp;*&nbsp;&nbsp;*&nbsp;&nbsp;*</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form&nbsp;S-1 and Power
of Attorney have been signed by the following persons in the
capacity and on the dates indicated:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="43%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="34%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="17%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Signature</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Title(s)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Date</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="5">&nbsp;</TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	/s/ TIMOTHY J. BRODNIK<BR>
	<HR size="1">Timothy J. Brodnik</FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	Chairman, President and Chief Executive Officer (Principal
	Executive Officer) and Director</FONT></TD>
	<TD></TD>
	<TD align="right" valign="top"><FONT size="2">
	September&nbsp;29, 2000</FONT></TD>
</TR>

<TR>
	<TD colspan="5">&nbsp;</TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	/s/ STEVE R. PIERCE<BR>
	<HR size="1">Steve R. Pierce</FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	Chief Financial Officer<BR>
	(Principal Financial Officer)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="top"><FONT size="2">
	September&nbsp;29, 2000</FONT></TD>
</TR>

<TR>
	<TD colspan="5">&nbsp;</TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	/s/ ROBERT C. LOW<BR>
	<HR size="1">Robert C. Low</FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	Controller<BR>
	(Principal Accounting Officer)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="top"><FONT size="2">
	September&nbsp;29, 2000</FONT></TD>
</TR>

<TR>
	<TD colspan="5">&nbsp;</TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	/s/ JERROLD L. GLICK<BR>
	<HR size="1">Jerrold L. Glick</FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	Director</FONT></TD>
	<TD></TD>
	<TD align="right" valign="top"><FONT size="2">
	September&nbsp;29, 2000</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-4

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="43%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="34%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="17%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Signature</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Title(s)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Date</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	/s/ BRUCE V. RAUNER<BR>
	<HR size="1">Bruce V. Rauner</FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	Director</FONT></TD>
	<TD></TD>
	<TD align="right" valign="top"><FONT size="2">
	September&nbsp;29, 2000</FONT></TD>
</TR>

<TR>
	<TD colspan="5">&nbsp;</TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	/s/ DONALD J. EDWARDS<BR>
	<HR size="1">Donald J. Edwards</FONT></TD>
	<TD></TD>
	<TD align="center" valign="top"><FONT size="2">
	Director</FONT></TD>
	<TD></TD>
	<TD align="right" valign="top"><FONT size="2">
	September&nbsp;29, 2000</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-5

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>EXHIBIT INDEX</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="84%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exhibit</B></FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>No.</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Description</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**1.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Form of Underwriting Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**3.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Amended and Restated Certificate of Incorporation of AML.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**3.2</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Amended and Restated By-Laws of AML.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**4.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Form of certificate representing shares of Common Stock.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**4.2</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Credit Agreement dated October&nbsp;13, 1999, by and among AML
	and the lender banks named therein.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**5.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Opinion of Kirkland &#38; Ellis.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Form of AML 2000 Equity Incentive Plan.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.2</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Senior Management Agreement dated May&nbsp;2, 1997, among AML and
	 Timothy J. Brodnik.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.3</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Senior Management Agreement, dated May&nbsp;2, 1997, among AML
	and John E. Bergstrom.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.4</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stockholders Agreement, dated May&nbsp;2, 1997, among AML and
	certain AML stockholders.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Registration Agreement, dated May&nbsp;2, 1997, among AML and
	certain AML stockholders.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.6</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Professional Services Agreement, dated May&nbsp;2, 1997, among
	AML and Golder, Thoma, Cressey, Rauner Fund V, L.P.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consulting and Non-Competition Agreement, dated May&nbsp;2, 1997,
	 among AML and Jerrold L. Glick.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.8</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Pledge Agreements, dated May&nbsp;2, 1997, among AML and
	each person set forth on the Schedule of Glick Investors attached
	 thereto.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.9</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Pledge Agreement, dated May&nbsp;2, 1997, among AML and
	Timothy J. Brodnik.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.10</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Pledge Agreement, dated May&nbsp;2, 1997, among AML and
	John E. Bergstrom.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.11</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Redemption and Loan Agreement, dated April&nbsp;7, 1999,
	among AML and Timothy Brodnik.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.12</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Loan Agreement, dated April&nbsp;7, 1999, among AML and the
	persons set forth on the Schedule of Investors attached thereto.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.13</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Loan Agreement, dated April&nbsp;7, 1999, among AML and John E.
	Bergstrom.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.14</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Pledge Agreement, dated April&nbsp;7, 1999, among AML and
	the persons set forth on the Schedule of Glick Investors attached
	 thereto.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.15</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Pledge Agreement, dated April&nbsp;7, 1999, among AML and
	Timothy Brodnik.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.16</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Pledge Agreement dated April&nbsp;7, 1999, among AML and
	John E. Bergstrom.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.17</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Redemption Agreement, dated May&nbsp;5, 1999 among AML and
	Golder, Thoma, Cressey, Rauner Fund V, L.P.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.18</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Redemption and Loan Agreement, dated August&nbsp;31, 1999,
	among AML and John E. Bergstrom.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.19</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stock Pledge Agreement, dated August&nbsp;31, 1999, among AML and
	 John E. Bergstrom.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.20</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Employment Agreement, dated October&nbsp;13, 1999, among APL and
	John P. Schwartz.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.21</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Employment Agreement, dated October&nbsp;13, 1999, among APL and
	Craig Shanklin.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.22</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Form of Subordinated Notes, issued October&nbsp;13, 1999, to
	Sellers of APL.</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="84%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exhibit</B></FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>No.</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Description</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**10.23</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Practice Management Agreement, dated October&nbsp;13, 1999 among
	APL and Robert R. Belliveau, M.D., Thorne J. Butler, M.D.k,
	Associated Pathologists, Chartered.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**11.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Statement Regarding Computation of Earnings Per Share.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**21.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Subsidiaries.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consent of KPMG LLP.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">**23.3</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consent of Kirkland &#38; Ellis (included in Exhibit&nbsp;5.1).</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Powers of Attorney (included in Part II to the Registration
	Statement).</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">27.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Financial Data Schedule.</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="31%" align="left">
</DIV>

<DIV align="left">
**&nbsp; To be filed by Amendment.
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp; &#134;&nbsp;</TD>
	<TD align="left">
	The Registrant agrees to furnish supplementally to the Commission
	 a copy of any omitted schedule or exhibit to such agreement upon
	 request by the Commission.</TD>
</TR>

</TABLE>

<P align="center">II-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="right"><B>Schedule II</B>

<P align="center">
<B>American Medical Laboratories, Incorporated</B>

<DIV align="center">
<B>Valuation and Qualifying Accounts</B>
</DIV>

<DIV align="center">
<B>(Amounts in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="36%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Additions</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Balance at</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Charged to Costs</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Balance at</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Beginning of Period</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>and Expenses</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Deductions</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>End of Period</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Six months ended June&nbsp;30, 2000 (unaudited):</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Allowance for bad debts</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,314</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,710</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,761</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,263</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="18">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Year ended December&nbsp;31, 1999:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Allowance for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">904</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,817</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,407</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,314</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="18">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Year ended December&nbsp;31, 1998:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Allowance for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">755</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,259</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,110</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">904</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="18">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Period May 2, 1999 to<BR>
	December 31, 1999:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Allowance for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,530</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">775</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">755</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-8
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="right"><B>Schedule II</B>

<P align="center"><B>APL Healthcare Group, Inc. and Affiliates</B>

<DIV align="center">
<B>Valuation and Qualifying Accounts</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="39%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Additions</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Balance at</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Charged to Costs</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Balance at</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Beginning of Period</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>and Expenses</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Deductions</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>End of Period</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Nine months ended September&nbsp;30, 1999:<BR>
	Allowance for bad debts</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,037,295</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,850,311</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,697,403</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,190,203</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Year ended December&nbsp;31, 1998:<BR>
	Allowance for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,443,085</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,846,141</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,251,931</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,037,295</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Year ended December&nbsp;31, 1997:<BR>
	Allowance for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,808,595</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,978,911</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,344,421</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,443,085</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Year ended December&nbsp;31, 1996:<BR>
	Allowance for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,317,526</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,173,235</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,682,166</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,808,595</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-9
</BODY>
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s-1
Table of Contents
As filed with the Securities and Exchange Commission on
September 29, 2000
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
AMERICAN MEDICAL LABORATORIES, INCORPORATED
(Exact name of registrant as specified in its
charter)
Delaware
8071
54-1983356
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
14225 Newbrook Drive
Chantilly, VA 20153
Telephone: (703) 802-6900
(Address, including zip code, and telephone
number, including area code,
of registrant's principal executive
offices)
Timothy J. Brodnik
Chairman, President and Chief Executive Officer
14225 Newbrook Drive
Chantilly, VA 20153
Telephone: (703) 802-6900
(Name, address, including zip code, and
telephone number,
including area code, of agent for service)
Copies to:
Sanford E. Perl, Esq.
Gerald T. Nowak, Esq.
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Telephone: (312) 861-2000
John D. Watson, Jr., Esq.
Stuart S. Kurlander, Esq.
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
Telephone: (202) 637-2200
Approximate date of commencement of proposed
sale to the public:
As soon as
practicable after this Registration Statement becomes effective.
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 (the
"Securities Act"), check the following
box.  [   ]
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 this Form is a post-effective amendment filed
pursuant to Rule 462(d) 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.  [   ]
CALCULATION OF REGISTRATION FEE
Title of each class of
Proposed Maximum Aggregate
Amount of
securities to be registered
Offering Price(1)
Registration Fee(2)
Common Stock, par value $.01 per share
$115,000,000
$30,360
(1)
Includes shares of common stock that the
	underwriters have the option to purchase from the registrant to
	cover over-allotments, if any.
(2)
Estimated solely for the purpose of calculating
	the registration fee pursuant to Rule 457(o) under the
	Securities Act of 1933, as amended.
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 this
Registration Statement shall become effective on such date as the
 Commission, acting pursuant to said Section 8(a), may
determine.
Table of Contents
The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting
 an offer to buy these securities in any state where the offer or
 sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 2000
Shares
Common Stock
Prior to this offering, there has been no public market for our
common stock. The initial public offering price of our common
stock is expected to be between
$          and
$     per share. We are applying to list
 our common stock on The Nasdaq National Market under the symbol
"AMLS."
The underwriters have an option to purchase a maximum of
               additional
 shares from us to cover over-allotments of shares.
Investing in the common stock involves risks. See "Risk
Factors" on page 4.
Underwriting
Price to
Discounts and
Proceeds to
Public
Commissions
AML
Per Share
$
$
$
Total
$
$
$
Delivery of the shares of common stock will be made on or about
           ,
 2000.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
Credit Suisse First Boston
Banc of America Securities LLC
First Union Securities, Inc.
The date of this prospectus is
             ,
 2000.
Table of Contents
[Description of cover art:
Graphics — pictures of medical technicians performing
various tasks and a picture of our headquarters building.
Captions
— American Medical Laboratories
— The CLIENT is our reason for being here.]
TABLE OF CONTENTS
PROSPECTUS SUMMARY
RISK FACTORS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED CONSOLIDATED FINANCIAL DATA
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
PRINCIPAL STOCKHOLDERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DESCRIPTION OF CAPITAL STOCK
SHARES ELIGIBLE FOR FUTURE SALE
MATERIAL UNITED STATES TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
UNDERWRITING
NOTICE TO CANADIAN RESIDENTS
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INDEX TO FINANCIAL STATEMENTS
CONSENT OF KPMG
FINANCIAL DATA SCHEDULE
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY
1
RISK FACTORS
4
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
13
USE OF PROCEEDS
14
DIVIDEND POLICY
14
CAPITALIZATION
15
DILUTION
16
SELECTED CONSOLIDATED FINANCIAL DATA
17
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
	OPERATIONS
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
	AND RESULTS OF OPERATIONS
22
BUSINESS
30
MANAGEMENT
44
PRINCIPAL STOCKHOLDERS
53
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
55
DESCRIPTION OF CAPITAL STOCK
58
SHARES ELIGIBLE FOR FUTURE SALE
61
MATERIAL UNITED STATES TAX CONSIDERATIONS FOR NON-
UNITED STATES HOLDERS
63
UNDERWRITING
67
NOTICE TO CANADIAN RESIDENTS
70
LEGAL MATTERS
71
EXPERTS
71
WHERE YOU CAN FIND MORE INFORMATION
71
INDEX TO FINANCIAL STATEMENTS
F-1
You should rely only on the information contained in this
document or to which we have referred you. We have not authorized
 anyone to provide you with information that is different. This
document may only be used where it is legal to sell these
securities. The information in this document may only be accurate
 on the date of this document.
Dealer Prospectus Delivery Obligation
Until
          ,
2000 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer's obligation
to deliver a prospectus when acting as an underwriter and with
respect to unsold allotments or subscriptions.
Table of Contents
PROSPECTUS SUMMARY
This summary may not contain all of the information that may
be important to you. You should read the entire prospectus,
including the financial data and related notes, before making an
investment decision. Unless specifically indicated in this
prospectus or the context otherwise requires, the terms
"we," "us," "our," "AML"
and "company" refer to American Medical Laboratories,
Incorporated, a Delaware corporation, and its subsidiaries, and
the term "offering" refers to the offering of common
stock made pursuant to this prospectus.
AML
We are a leading national provider of esoteric laboratory testing
 services. Esoteric tests are clinical laboratory tests that are
more complex and typically priced higher than routine tests. We
market our esoteric testing services to hospitals and independent
 clinical laboratories nationwide. As of September 15, 2000,
 we provided our services to over 380 hospitals and 160
independent clinical laboratories in 31 states. Our two main
laboratories are located in metropolitan Washington, D.C. and
Las Vegas, Nevada. We are the leading provider of
comprehensive testing services in each of those markets. We seek
to achieve the highest levels of client satisfaction and foster
long-term relationships through superior customer service. We
believe our commitment to customer service has contributed to our
 99% client retention rate from January 1999 to June 2000. We
strengthen our offering by providing our clients advanced
information technology solutions, as well as other value-added
laboratory services.
According to Washington G-2 Reports, the U.S. clinical laboratory
 industry generated $31.8 billion of revenues in 1999, which
 represented approximately 3% of total healthcare expenditures. A
 growing market segment of the industry is esoteric testing,
which in 1998 represented approximately $2.0 billion of
revenues. We believe the growth in the esoteric testing market is
 driven by general advances in medical technology and the
accelerating pace of new genetic-based testing. We believe that,
due to the high degree of complexity and costs involved with
esoteric testing, many hospitals and independent clinical
laboratories use laboratories such as AML to perform these tests.
Hospitals and independent clinical laboratories choose us because
 we offer them superior service, excellent quality and rapid
turnaround time. In addition, unlike the laboratories that
provide comprehensive services on a national basis, we generally
do not compete with our clients for routine testing business in
their local markets. We believe that we offer our clients one of
the most complete esoteric testing service offerings available,
as well as access to the latest in innovative testing technology.
 We obtain this access through acquisition and licensure of new
testing technologies, which leverages external research in
esoteric testing and reduces our development time and costs.
In October 1999, we acquired APL Healthcare Group, the leading
laboratory services provider in Nevada. With this purchase, we
acquired a full service laboratory facility in Las Vegas, Nevada
that complements the geographic reach of our Chantilly, Virginia
facility and enhances our position as a nationwide provider of
esoteric testing services. We have been successful in attracting
a wide range of clients for our esoteric testing services,
including Kaiser Permanente, Consorta Catholic Health Resource
Partners, Health Trust Purchasing Group and Massachusetts General
 Hospital. We are currently performing more than 330,000 total
tests per week. For the six months ended June 30, 2000 and
for the year ended December 31, 1999 on a pro forma basis,
we had net revenue of $129.9 million and
$225.6 million, respectively, and Adjusted EBITDA of
$19.2 million and $27.3 million, respectively.
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Our Business Strategy
The principal elements of our business strategy include:
•
expanding our position as a leading national provider of esoteric
	 testing services;
•
maintaining our comprehensive offering of esoteric tests;
•
growing our leadership position in our core geographic markets;
•
enhancing our competitive position by providing the highest
	levels of client service; and
•
strengthening our customer relationships with value-added
	services.
Our principal executive office is located at 14225 Newbrook
Drive, Chantilly, Virginia 20153 and our telephone number is
(703) 802-6900. We maintain a world wide web site at
aml.com
. Our website and the information it contains
are not a part of this prospectus.
The Offering
Common stock offered
shares
Common stock to be outstanding after this offering
shares
Over-allotment option
shares
Use of proceeds
Net proceeds from this offering will be approximately
	$                                          
 million.
	 We intend to use the net proceeds to repay outstanding
	indebtedness.
Proposed Nasdaq National Market symbol
AMLS
The common stock to be outstanding after this offering does not
include:
•
shares
	 issuable upon the exercise of outstanding options, with a
	weighted average exercise price of
	$     per share; and
•
additional
	 shares of common stock expected to be reserved for future
	grants, awards or sale under our 2000 Equity Incentive Plan or
	sale under the 2000 Employee Stock Purchase Plan.
Unless we indicate otherwise, the information in this prospectus
does not reflect the exercise by the underwriters of their option
 to purchase up to
          additional
 shares of common stock from us to cover over-allotments.
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Summary Historical and Pro Forma Condensed
Consolidated Financial Data
The following summary historical and pro forma condensed
consolidated financial data should be read in conjunction with
"Selected Consolidated Financial Data," "Unaudited
 Pro Forma Condensed Consolidated Statements of Operations,"
 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated
financial statements of AML and APL included elsewhere in this
prospectus. The consolidated statement of operations data set
forth below for the years ended December 31, 1998 and 1999
are derived from our audited consolidated financial statements,
which appear elsewhere in this prospectus.
The summary pro forma condensed consolidated financial data
give effect to the acquisition of APL, which occurred on
October 13, 1999, and related transactions, and assumes that
 those transactions occurred on January 1, 1999. The summary
 pro forma condensed financial data do not purport to represent
what our results would actually have been if those transactions
had in fact occurred on that date, nor does this data purport to
project our results for any future period.
Six Months
Ended June 30,
Unaudited
Year Ended
Pro Forma
December 31,
Year Ended
(unaudited)
December 31,
Actual
Pro Forma
Actual
1998
1999
1999
1999
1999
2000
(in thousands, except per share data)
Consolidated Statement of Operations Data:
Net revenue
$
102,729
$
143,436
$
225,636
$
58,609
$
110,094
$
129,895
Operating income
7,540
8,991
15,627
4,646
9,066
12,584
Net income (loss)
3,959
1,236
(534
)
2,012
507
2,546
Net income (loss) to common shareholders before extraordinary
	item
3,036
1,216
(554
)
1,704
199
2,451
Net income (loss) to common shareholders
3,036
774
(996
)
1,637
132
2,451
Net income (loss) per common share:
Basic
$
$
$
$
$
$
Diluted
$
$
$
$
$
$
Weighted average common shares outstanding:
Basic
Diluted
Other Financial Data:
Adjusted EBITDA(1)
$
9,696
$
13,694
$
27,293
$
6,015
$
15,079
$
19,181
Adjusted EBITDA as a % of net revenue
9.4
%
9.5
%
12.1
%
10.3
%
13.7
%
14.8
%
As of
June 30, 2000
Actual
As Adjusted(2)
Consolidated Balance Sheet Data:
Cash and cash equivalents
$
1,008
Total assets
202,352
Total debt
145,819
Redeemable preferred stock
2,004
Total stockholders' equity
11,210
(1)
Adjusted EBITDA is defined as EBITDA adjusted to
	exclude stock-based compensation expense. Stock-based
	compensation expense for the six-month period ended June 30,
	 2000 was $172 and zero for all other periods presented. EBITDA
	consists of net income before interest expense, income taxes,
	equity in income (loss) of affiliates, depreciation and
	amortization and extraordinary items. EBITDA and Adjusted EBITDA
	should not be considered as measures of financial performance
	under GAAP. Items excluded from EBITDA and Adjusted EBITDA are
	significant components in understanding and assessing financial
	performance. We present Adjusted EBITDA, which is a non-GAAP
	measure, to enhance the understanding of our operating results.
	Adjusted EBITDA should not be considered in isolation or as an
	alternative to net income, cash flows generated from operations,
	investing or financing activities, or other financial statement
	data presented in the consolidated financial statements as an
	indicator of financial performance or liquidity. Because Adjusted
	 EBITDA is not a measurement determined in accordance with GAAP
	and is thus susceptible to varying calculations, Adjusted EBITDA
	as presented may not be comparable to other similarly titled
	measures of other companies.
(2)
As adjusted to give effect to the sale by us of
	      shares of common stock in
	this offering, assuming an offering price of
	$      per share, the midpoint of
	the range set forth on the cover page of this prospectus and the
	application of the net proceeds of this offering, the redemption
	of       shares of our redeemable
	preferred stock with an aggregate liquidation value of
	$        ; and the
	conversion of $      aggregate
	principal amount of convertible subordinated notes into shares of
	 our common stock at
	$                                        per
	 share, and the payment of all accrued interest on the
	convertible subordinated notes and the repayment of the remaining
	 principal of $      of convertible
	 subordinated notes.
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RISK FACTORS
You should carefully consider the following factors in
addition to the other information set forth in this prospectus,
including the financial statements and related notes, before
investing in the common stock offered hereby. The risks and
uncertainties described below are not the only ones facing us.
Additional risks and uncertainties that we do not presently know
about or that we currently believe are immaterial may also impair
 our business. If any of the following risks actually occurs, our
 business, financial condition or results of operations will
likely suffer. In such case, the trading price of our common
stock could decline, and you may lose all or part of your
investment.
Risks Related to Our Industry
We could incur significant fines and other penalties as a
result of the extensive, complex and sometimes unpredictable,
government regulation of our industry.
The clinical laboratory industry is subject to significant
governmental regulation at the federal, state and local levels.
Specifically, we are subject to a number of certification and
licensing regulations as well as federal, state and local
legislation regarding:
•
fraud and abuse;
•
billing for our services;
•
kickbacks;
•
referrals;
•
rebates and fee splitting;
•
the handling and disposal of medical specimens, hazardous waste
	and controlled substances;
•
consumer protection;
•
privacy and confidentiality;
•
health care plans;
•
various licensure and certification laws, such as managed care
	and third-party administrator laws; and
•
employee safety.
Although we believe that we are in compliance, in all material
respects, with the statutes, regulations and other requirements
applicable to our laboratory operations, the clinical laboratory
industry is subject to complex and extensive regulations. Many of
 these statutes and regulations have not been interpreted by the
courts. We are unable to predict what additional federal or state
 legislation or regulatory initiatives may be enacted in the
future relating to our business or the health care industry in
general, or what effect such legislation or regulations might
have on us. We also cannot provide any assurance that federal or
state governments will not impose additional restrictions or
adopt interpretations of existing laws that could have a material
 adverse effect on us. Therefore, we cannot assure you that
applicable statutes and regulations might not be interpreted or
applied by a regulatory or judicial authority in a manner that
would adversely affect us.
Potential sanctions for violation of these statutes and
regulations include significant fines and criminal penalties and
the loss of various licenses, certificates and authorizations,
which in turn can lead to denial of the right to conduct business
 or an exclusion from participation in federal or state health
care programs. The revocation or loss of one or more of our
laboratory licenses would have a material adverse effect on us.
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In addition, we are subject to licensing and regulation under
federal, state and local laws and regulations relating to the
protection of the environment and human health and safety,
including those relating to the handling, transportation and
disposal of medical specimens, infectious and hazardous waste and
 radioactive materials, and the safety and health of laboratory
employees. The sanctions for failure to comply with these
regulations may include denial of the right to conduct business,
significant fines and criminal penalties. The loss of a license,
imposition of a fine, incurrence of liability under, or future
changes in, such federal, state and local laws and regulations,
or in the interpretation of current laws and regulations, could
have a material adverse effect on us.
The independent clinical laboratory industry in the United
States is highly competitive, which could adversely affect our
operations.
The independent clinical laboratory industry in the United States
 is highly competitive and has experienced intense price
competition over the past several years.
Independent clinical laboratories generally fall into one of four
 separate categories:
•
larger laboratories that provide a broad range of tests and
	services nationwide;
•
niche laboratories that typically offer fewer tests and services
	and generally focus on a segment of the clinical laboratory
	testing market;
•
laboratories that are affiliated with large medical centers or
	universities; and
•
smaller, generally local, laboratories with fewer resources than
	larger laboratories.
Our primary competitors include large independent laboratories,
such as Quest Diagnostics and Laboratory Corporation of America.
We also compete with niche laboratories such as Specialty
Laboratories, Impath and Athena Diagnostics, as well as
laboratories affiliated with educational institutions such as
Mayo Medical Laboratories and Associated Regional University
Pathologists, in the esoteric testing market. In the toxicology
testing business, we compete with Quest Diagnostics, Laboratory
Corporation of America, Psychemedics and PharmChem. Many of our
competitors have significantly greater resources than we do. In
addition, in our core geographic markets where we provide a
comprehensive service offering, hospitals compete with us by also
 providing routine testing services to physicians. We may not be
able to compete successfully with our existing or potential new
competitors and competitive pressures faced by us may materially
and adversely affect us. For more details, see
"Business — Competition."
Changes in reimbursement policies for clinical laboratory
services may reduce our revenues.
Government payors, such as Medicare and Medicaid, as well as
private insurers and large employers, have taken steps and may
continue to take steps to control the cost, use and delivery of
health care services. For the six months ended June 30,
2000, approximately 5.9% of our total net revenue was received
under Medicare and approximately 0.8% was received from Medicaid
or other federal or state health care programs. Any efforts on
the part of these or other payors to reduce reimbursement for our
 laboratory testing services could reduce our revenue and
adversely affect our operating results.
Our business depends on continued participation in these programs
 and we are generally required by law to accept reimbursement
from Medicare and Medicaid as payment in full for covered tests
performed for Medicare and Medicaid beneficiaries. In an effort
to address increasing health care costs, legislative and
regulatory changes continue to be introduced with an objective of
 reducing amounts paid for laboratory services under the Medicare
 and Medicaid programs. Recent examples include:
•
federal legislation or proposed legislation to reduce ceilings on
	 Medicare reimbursement for laboratory testing services;
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•
a presidential proposal for a 30% reduction in the Medicare
	reimbursement rates for certain commonly ordered laboratory
	tests;
•
changes in the number of tests which can be concurrently ordered
	and billed for;
•
a presidential proposal for a 20% co-payment from Medicare and
	Medicaid patients;
•
limits on the ability of laboratories to bill for tests unless
	the tests are considered to be medically necessary and properly
	documented by the ordering physician; and
•
requirements in the 1997 Balanced Budget Act that the U.S. Health
	 Care Finance Administration, or HCFA, conduct and complete by
	2002 five Medicare bidding demonstrations involving various types
	 of medical services. HCFA is expected to include a laboratory
	demonstration project in a metropolitan statistical area as part
	of the legislative mandate. Competitive bidding for laboratory
	tests is still under review. If competitive bidding were
	implemented on a regional or national basis for laboratory
	testing, it could materially adversely affect the clinical
	laboratory industry and our business.
Due to these legislative and regulatory changes, we may receive
lower reimbursement from Medicare or Medicaid or we may not be
reimbursed for a portion of our Medicare and Medicaid related
testing.
Our operations may be adversely affected by the increasing
role and pricing structure of managed-cost health care
organizations.
We may experience declines in average revenue per test processed
as managed care organizations maintain or strengthen their
significant role in the health care insurance market. Managed
care organizations typically negotiate capitated payment
contracts. Under this type of contract, a laboratory receives a
fixed monthly fee per covered individual, regardless of the
number or cost of tests performed per covered individual and
regardless of the number or cost of tests performed during the
month, excluding certain tests, such as esoteric tests.
Traditionally, laboratory service agreements with managed care
organizations have been competitively priced due to the volume of
 testing involved and the expectation that a laboratory would
capture not only the volume of testing to be covered under the
contract, but also the additional fee-for-service business from
patients of participating physicians who are not covered by the
managed care plan. However, if the number of patients covered
under managed care plans continues to increase, there will be
less fee-for-service business and, accordingly, less high margin
business to offset the lower margin managed care business.
Furthermore, physicians increasingly are affiliated with more
than one managed care organization, which may decrease the
likelihood of any particular independent laboratory capturing
their fee-for-service business.
As a participating provider in managed care plans, a physician
may be required to refer laboratory tests to specific
laboratories, depending on the plan in which each covered patient
 is enrolled. Laboratories that are not authorized to perform
tests under a given physician's managed care plan or plans
may also fail to capture that physician's fee-for-service
business. The increase in managed care has also slowed the growth
 in utilization of routine laboratory testing services.
The complexities of billing may affect our revenue and cash
flow.
Billing for laboratory services is complicated. Laboratories have
 a mix of various payors, such as individual patients, insurance
companies, Medicare, Medicaid, doctors, hospitals, laboratories
and employer groups. All of these payors have different billing
requirements. Most of our bad debt expense is the result of the
inability to collect from financially impaired clients and
individual patients.
Billing complications include, but are not limited to, the
following:
•
disputes between payors as to which party is responsible for
	payment;
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•
disparity in coverage among various payors;
•
assuring adherence to specific billing requirements;
•
disparity in information requirements among payors; and
•
high volume/low dollar claims.
We may experience some or all of these billing complications and
do not know what impact, if any, they would have on our financial
 condition and results of operations.
We must rapidly adapt to technology changes and even if we do,
 these changes may allow our customers to perform their own tests
 in a cost-effective manner.
The clinical laboratory testing industry is subject to rapid and
significant changes in technology. The effect of technological
changes on our business cannot be predicted. We believe our
future success will depend, in part, on our ability to anticipate
 or adapt to such changes and to offer, on a timely basis,
services that meet customer demands. We may not be able to obtain
 access to new technologies on a timely basis or on satisfactory
terms. Any failure by us to obtain new technologies could cause
us to lose customers and market share. In addition, advancing
technology may enable other clinical laboratories, hospitals,
physicians or other medical providers to perform tests in their
offices or hospitals in various departments without requiring the
 services of outside laboratories. If these or other advances in
technology result in a decreased demand for our services, our
testing volume and revenue would be impaired.
We may be subject to professional liability litigation, which
may be costly to defend and result in significant monetary
damages.
Providers of laboratory testing services may from time to time be
 subject to lawsuits alleging negligence or other similar legal
claims. These lawsuits could involve claims for substantial
damages and be costly to defend. We maintain liability insurance,
 subject to limits and deductibles, for professional liability
claims. While there can be no assurance, we believe that the
levels of coverage are adequate to cover currently estimated
exposures to professional liability claims. Although we believe
that we will be able to obtain adequate insurance coverage in the
 future at acceptable costs, we may not be able to do so, or we
may incur liabilities in excess of policy limits. In addition,
litigation could also have an adverse impact on our reputation
and therefore, our client base.
Risks Related to Our Business
Failure in our information technology systems could
significantly increase turnaround time, reduce our production
capacity, and otherwise disrupt our operations, which may reduce
our customer base and result in lost net revenue.
Our success depends, in part, on the continued and uninterrupted
performance of our information technology, or IT, systems.
Sustained or repeated system failures that interrupt our ability
to process test orders, deliver test results or perform tests in
a timely manner would reduce significantly the attractiveness of
our services to our customers. Our business, results of
operations and financial condition could be materially and
adversely affected by any damage or failure that interrupts or
delays our operations.
Our computer systems are vulnerable to damage from a variety of
sources, including telecommunications failures, malicious human
acts and natural disasters. Moreover, despite network security
measures, some of our servers are potentially vulnerable to
physical or electronic break-ins, computer viruses and similar
disruptive problems, in part because they are located at a
third-party's facility and we cannot control the maintenance
 and operation of our third-party data centers. Despite the
precautions we have taken, unanticipated problems affecting our
systems could cause interruptions in our IT systems. Our
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insurance policies may not adequately compensate us for any
losses that may occur due to any failures in our systems. See
"Business — Information Technology."
If we fail to acquire licenses for new or improved testing
technologies, we may not be able to use new esoteric testing
methods, which could impair our ability to successfully achieve
our core business strategy.
Our ability to grow our esoteric testing business will depend, in
 part, on our ability to license new or improved testing
technologies on favorable terms. We may not be able to negotiate
acceptable licensing arrangements and we cannot be certain that
such arrangements will yield commercially successful esoteric
tests. If we are unable to license these testing technologies at
competitive rates, our research and development costs may
increase as a result. In addition, if we are unable to license
new or improved testing methods, our methods may be outdated when
 compared with our competition and our testing volume and revenue
 may be materially and adversely affected.
We compete with some of our customers. If they reduce or
discontinue purchasing our laboratory testing services for
competitive reasons, it will reduce our revenue.
We compete with some of our customers, such as Quest Diagnostics,
 Laboratory Corporation of America, Mayo Medical Laboratories and
 Associated Regional University Pathologists in the esoteric
testing market. These organizations often refer tests to us that
they either cannot or elect not to perform themselves. These
parties may no longer refer tests to us because they wish to
develop and market tests similar to ours. If independent
laboratories decide to reduce or discontinue purchases of our
tests for competitive reasons, it will adversely affect our
revenue.
If group purchasing organizations do not continue our
contracts, we may lose an important mechanism to further
penetrate the hospital customer base.
Many of our existing and potential hospital customers are part of
 group purchasing organizations, or GPOs. GPOs typically pool
independent hospitals together for the purpose of negotiating
with providers of health care services for the price of those
services to participating hospitals, including prices for
laboratory testing. These GPOs provide compliance incentives to
their participating hospitals to utilize clinical laboratories
which have contracts with GPOs.
We are aggressively seeking to expand our relationships with
GPOs. We do not know if we will be able to retain our accounts
with GPO-affiliated hospitals if an agreement with a GPO is
terminated or not renewed. If any GPO-affiliated hospital no
longer uses our services, it will adversely affect our net
revenue. In addition, if we are unable to attract new hospital
customers because a GPO contract is terminated, it may adversely
affect our ability to grow our business.
Infringement on the intellectual property rights of others may
 give rise to costly litigation, which may cause us to pay
substantial damages or prohibit us from performing certain tests.
Other companies or individuals, including our competitors, may
obtain patents or other proprietary rights that would prevent,
limit or interfere with our ability to develop, perform or sell
our tests. As a result, we may be found to infringe on the
proprietary rights of others. We could incur substantial costs in
 defending any litigation. An adverse result in an intellectual
property litigation could force us to do any of the following:
•
cease developing, performing, or selling products or services
	that incorporate the challenged intellectual property;
•
obtain and pay for licenses from the holder of the infringed
	intellectual property right;
•
redesign or reengineer our tests; or
•
pay substantial damages.
In the event that there is a successful infringement claim
against us and we fail to obtain the necessary licenses on
commercially reasonable terms, we may be required to reengineer
our tests. Any
8
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efforts to reengineer our tests could substantially increase our
costs, force us to interrupt product sales or delay new test
releases.
We may have difficulty integrating APL into our company.
On October 13, 1999, we acquired APL, an independent
laboratory in Nevada with approximately 1,300 employees. We
are continuing to integrate the business practices, financial
reporting systems and compliance programs of APL with our
company. If this integration is not successful or is more
expensive than we anticipate, it could result in inconsistent
operating and financial practices throughout our organization.
Our overall profitability in turn could be adversely affected.
Our business could be adversely affected as a result of future
 acquisitions.
In order to remain competitive, we may find it necessary to
acquire additional businesses. At this time, we have no specific
understanding, commitments or agreements with respect to any
acquisitions. If we identify an appropriate acquisition
candidate, we may not be successful in negotiating acceptable
terms of the acquisition, financing the acquisition, or
integrating the acquired business into our existing business and
operations. Completing an acquisition and integrating an acquired
 business will significantly divert management time and
resources. If we consummate any significant acquisitions using
stock or other securities as consideration, your equity in us
could be significantly diluted. If we make any significant
acquisitions using cash consideration, we may be required to use
a substantial portion of our available cash or to incur
substantial indebtedness. Acquisition financing may not be
available on favorable terms, if at all. In addition, we may be
required to amortize significant amounts of goodwill and other
intangible assets in connection with future acquisitions, which
would harm our operating results.
Our success largely depends on the services of our senior
management and senior technical management and the loss of any
one of them could have a material adverse effect on our business.
Our success is largely dependent on the skills, experience and
efforts of our senior management and senior technical management.
 The loss of services of our Chairman, President and Chief
Executive Officer, Timothy J. Brodnik, or one or more members of
our senior management or senior technical management could have a
 material adverse effect on us. We do not maintain "key
man" life insurance policies on any of our senior management
 or senior technical management. We cannot assure you that we
will be able to continue to employ key personnel. Failure to
retain or attract key personnel could have an adverse affect on
us.
The loss of our skilled personnel could have a material
adverse effect on our research and development, marketing and
sales efforts.
Our competitiveness will depend in large part upon whether we can
 attract and retain skilled technical and marketing personnel.
Competition for skilled personnel is intense in both Nevada and
metropolitan Washington, D.C. We do not know if we will be
successful in attracting and retaining the technical and
marketing personnel we require to develop and market new test
services and to continue to grow and operate profitably. If we
cannot attract skilled personnel, we may not be able to operate
successfully in the future.
Our principal stockholder may exercise its control in a manner
 adverse to your interests.
Upon completion of this offering, our principal stockholder,
Golder, Thoma, Cressey, Rauner Fund V, L.P., or GTCR, and one of
its affiliates will own approximately
     % of our outstanding common stock.
By virtue of this stock ownership, GTCR has the power to direct
our affairs and will likely be able to determine the outcome of
all matters required to be submitted to stockholders for
approval, including the election of a majority of our directors,
any merger, consolidation or sale of all or substantially all of
our
9
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assets and amendment of our certificate of incorporation.
Transactions could be difficult or impossible to complete without
 the support of GTCR, and the interests of GTCR may not be the
same as those of our other stockholders. It is possible that GTCR
 will exercise control over us in a manner adverse to your
interests. See "Principal Stockholders."
Risks Related to This Offering
Provisions of our charter documents and Delaware law may make
it difficult to acquire our company and could adversely affect
the price of our common stock.
Provisions of our certificate of incorporation and by-laws may
have the effect of delaying, deferring or preventing a change in
control of our company not approved by our board of directors.
These provisions would limit the circumstances in which a premium
 may be paid for our common stock in proposed transactions or a
proxy contest for control of the board may be initiated. These
provisions provide for:
•
a classified board of directors;
•
a prohibition on stockholder action through written consents;
•
a requirement that special meetings of stockholders be called
	only by our chief executive officer or the board of directors;
•
advance notice requirements for stockholder proposals and
	nominations;
•
limitations on the ability of stockholders to amend, alter or
	repeal the by-laws; and
•
the authority of the board to issue, without stockholder
	approval, preferred stock with such terms as the board may
	determine.
We will also be afforded the protections of Section 203 of
the Delaware General Corporation Law, which could have similar
effects. See "Description of Capital Stock."
There may not be an active market for our common stock, making
 it difficult for you to sell your stock.
Prior to this offering, there has not been a public market for
our common stock. We cannot predict the extent to which a trading
 market will develop after this offering or how liquid that
market might become. An illiquid market for our stock may result
in price volatility and poor execution of buy and sell orders for
 investors. The initial public offering price has been determined
 by negotiations between representatives of the underwriters and
us, and may not be indicative of prices that will prevail in the
trading market. Historically, stock prices and trading volumes
for newly public companies fluctuate widely for a number of
reasons, including some reasons that may be unrelated to their
business or results of operations. The price of our common stock
that will prevail in the market after the offering may be lower
than the price you pay.
Future sales of our common stock could depress its market
price.
The market price for our common stock could fall substantially if
 our stockholders who hold restricted securities sell large
amounts of shares in the public market following this offering.
Our directors, executive officers and existing shareholders and
optionholders own
          shares
 of common stock and options to purchase
          shares
 of common stock that are subject to "lock-up"
agreements. Those agreements prohibit them from selling shares of
 our common stock for 180 days after the date of this
prospectus. When the 180-day "lock-up" period expires,
or if Credit Suisse First Boston Corporation consents, in its
sole discretion, to an earlier sale, our existing stockholders
will be able to sell their shares in the public market, subject
to legal restrictions on transfer.
10
Table of Contents
Some of our existing stockholders are parties to a registration
agreement with us that provides for "demand"
registration rights to cause us to register under the Securities
Act all or part of the shares of our common stock, as well as
"piggyback" registration rights. Registration of the
sale of these shares of our common stock would permit their sale
into the market immediately. If our existing stockholders sell a
large number of shares, the market price of our common stock
could decline, as these sales may be viewed by the public as an
indication of an upcoming or recently occurring shortfall in the
financial performance of our company. Moreover, the perception in
 the public market that these stockholders might sell shares of
our common stock could depress the market price of the common
stock. See "Certain Relationships and Related
Transactions — Registration Agreement" and
"Shares Eligible for Future Sale."
Because you will pay more for your shares than existing
stockholders, the value of your investment in our common stock
will be diluted.
If you purchase our common stock in this offering, you will pay
more for your shares than the amount paid by existing
stockholders or payable by our employees upon exercise of options
 granted before this offering. As a result, the value of your
investment, based on the value of our net tangible assets as
recorded on our books, will be less than the amount you pay for
shares of our common stock in this offering. In addition, the
total amount of our capital will be less than what it would have
been had you and all of the existing stockholders and optionees
paid the same amount per share of our common stock as you will
pay in this offering. You may experience further dilution to the
extent that additional shares of our common stock are issued upon
 the exercise of stock options or warrants. See
"Dilution."
Our quarterly operating results may fluctuate and this could
cause our stock price to fluctuate or decline.
Our quarterly operating results have varied significantly in the
past and may vary significantly in the future. If our quarterly
net revenue and operating results fall below the expectations of
securities analysts and investors, the market price of our common
 stock could fall substantially. Operating results vary depending
 on a number of factors, many of which are outside our control,
including:
•
demand for our tests and ancillary services;
•
loss of a significant customer or group purchasing organization
	contract;
•
new test introductions by competitors;
•
changes in our pricing policies or those of our competitors;
•
the hiring and retention of key personnel;
•
changes in healthcare laws and regulations;
•
changes in fuel prices, which affect our cost of collecting
	specimens;
•
costs related to acquisitions of technologies or businesses; and
•
general economic factors.
Our quarterly operating results may also be affected by seasonal
factors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations —
Seasonality."
Our stock price is likely to be volatile and could drop
unexpectedly.
Following this offering, the price at which our common stock will
 trade is likely to be volatile. The stock market has from time
to time experienced significant price and volume fluctuations
that have affected the market prices of securities, particularly
securities of clinical laboratory, biotechnology and other
healthcare service companies. As a result, you may experience a
material decline in the market price of our common stock,
regardless of our operating performance. In the past, following
periods of volatility in
11
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the market price of a particular company's securities, class
 action litigation has often been brought against that company.
We may become involved in this type of litigation in the future.
Litigation of this type is often expensive and diverts
management's attention and resources.
The reliability of market data included in this prospectus is
uncertain.
In this prospectus, we rely on and refer to information regarding
 the clinical laboratory testing industry and its segments and
competitors derived from our internal estimates, industry
publications, market research reports, analyst reports and other
publicly available information. Although we believe that this
information is reliable, we cannot guarantee the accuracy and
completeness of the information and have not independently
verified it. None of the sources that we rely on for information
about the clinical laboratory testing industry has consented to
the disclosure and use of their information in this prospectus.
12
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus contain
forward-looking information. These statements are found in the
sections entitled, including, without limitation,
"Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of
Operations" and "Business." They include, but are
not limited to, statements concerning:
•
our business;
•
our growth strategy;
•
conditions in the clinical laboratory testing industry;
•
our ability to compete in the intensely competitive clinical
	laboratory testing industry;
•
our dependence on key personnel;
•
our dependence on continuous introduction of new services based
	on the latest testing technology;
•
liquidity and capital expenditures; and
•
our future financial position and sources of revenue.
You can identify these statements by forward-looking words
including "believe," "expect,"
"anticipate," "intend" and other similar
expressions. Potential investors are cautioned not to place undue
 reliance on these forward-looking statements. These
forward-looking statements are based largely on our current
expectations and are subject to a number of risks and
uncertainties, including, without limitation, those identified
under the "Risk Factors" section and elsewhere in this
prospectus and other risks and uncertainties indicated from time
to time in our filings with the SEC. Actual results could differ
materially from these forward-looking statements. In addition,
important factors to consider in evaluating such forward-looking
statements include changes in external market factors, changes in
 our business or growth strategy or an inability to execute our
strategy due to changes in our industry or the economy generally,
 the emergence of new or growing competitors and various other
competitive factors. In light of these risks and uncertainties,
there can be no assurance that the matters referred to in the
forward-looking statements contained in this prospectus will in
fact occur.
Unless required by law, we do not undertake to update our
forward-looking statements or risk factors to reflect future
events or circumstances.
13
Table of Contents
USE OF PROCEEDS
We estimate that the net proceeds from our sale
of     shares of common stock in this
offering will be approximately
$          million,
 assuming an initial public offering price of
$     per share, the midpoint of the
range set forth on the cover page of this prospectus and after
deducting underwriting discounts and commissions and estimated
offering expenses payable by us. If the underwriters'
over-allotment option is exercised in full, we estimate that the
net proceeds from this offering will be approximately
$          million.
We will use the proceeds from this offering to repay a portion of
 the Term A and Term B loans under our senior credit
facility. This indebtedness carries the following terms:
•
the Term A loan matures on October 13, 2004 and
	currently bears interest at a rate of 10.0%; and
•
the Term B loan matures on April 13, 2006 and currently
	 bears interest at a rate of 10.625%.
As of June 30, 2000, there was $112.7 million
outstanding under the Term A and Term B loans. In
connection with this offering, we intend to amend or refinance
our existing senior credit facility on what we believe will be
improved terms.
DIVIDEND POLICY
We have not in the past paid, and do not expect for the
foreseeable future to pay, dividends on our common stock.
Instead, we anticipate that all of our earnings, if any, in the
foreseeable future will be used for working capital and other
general corporate purposes. The payment of dividends by us to
holders of our common stock is prohibited by our current senior
credit facility, and we expect any future credit facility would
also contain a prohibition on our ability to pay dividends. Any
future determination to pay dividends will be at the discretion
of our board of directors and will depend upon, among other
factors, our results of operations, financial condition, capital
requirements and contractual restrictions.
14
Table of Contents
CAPITALIZATION
The following table sets forth our total capitalization as of
June 30, 2000 on an actual basis and on an as adjusted basis
 to reflect:
•
the sale by us of     shares of common
	stock in this offering, assuming an offering price of
	$           per
	 share, the midpoint of the range set forth on the cover page of
	this prospectus, and the application of the net proceeds as
	described under "Use of Proceeds";
•
the redemption of shares of our redeemable cumulative preferred
	stock with an aggregate liquidation value of
	$       as described under
	"Certain Relationships and Related Transactions"; and
•
the conversion of
	$       aggregate principal
	amount of convertible subordinated notes into shares of our
	common stock at $        
	 per share, and the payment of all accrued interest on the
	convertible subordinated notes and the repayment of the remaining
	 principal of $       of
	convertible subordinated notes.
This table should be read in conjunction with "Selected
Consolidated Financial Data," "Unaudited Pro Forma
Condensed Consolidated Statement of Operations," our
consolidated financial statements, the notes to those
consolidated financial statements and the other financial
information appearing elsewhere in this prospectus.
As of June 30, 2000
Actual
As Adjusted
(unaudited)
(dollars in thousands)
Long-term debt, including current maturities
$
145,819
$
Redeemable cumulative 10% preferred stock, $0.01 par value,
	60,000 shares authorized and 1,491 shares issued and outstanding
	at liquidation value on an actual basis; no shares authorized,
	issued or outstanding on an as adjusted basis
2,004
—
Stockholders' equity:
Preferred stock, $0.01 par value, no shares authorized, issued or
	 outstanding on an actual basis; 5,000,000 shares authorized and
	no shares issued and outstanding on an as adjusted basis
—
—
Common stock, $0.01 par value, 25,000,000 shares authorized and
	20,863,811 shares issued and outstanding on an actual basis;
	    shares authorized and   
	 shares issued and outstanding on an as adjusted basis
209
Additional paid-in capital
7,588
Stock-based deferred compensation
(1,613
)
Retained earnings
5,026
Total stockholders' equity
11,210
Total capitalization
$
159,033
$
The common stock to be outstanding after this offering does not
include:
•
shares issuable upon
	the exercise of outstanding options, with a weighted average
	exercise price of $     per share; and
•
additional
	 shares of common stock expected to be reserved for future
	grants, awards or sale under our 2000 Equity Incentive Plan or
	sale under our 2000 Employee Stock Purchase Plan.
15
Table of Contents
DILUTION
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share of our common stock and the as adjusted
net tangible book value per share of common stock after this
offering. Our net tangible book value as of June 30, 2000,
as adjusted to reflect the conversion of convertible subordinated
 notes described under "Capitalization," was
$   million or $   per share. Net
tangible book value per share represents the amount of our total
tangible assets less total liabilities, divided by the number of
shares of common stock outstanding. Dilution in net tangible book
 value per share represents the difference between the amount per
 share paid by purchasers of common stock in this offering and
the net tangible book value per share of common stock immediately
 after the completion of this offering. After giving effect to
the sale of the       shares of
common stock in this offering at an assumed initial public
offering price of $   per share less estimated
underwriting discounts and commissions and estimated offering
expenses, our as adjusted net tangible book value as of
June 30, 2000 would have been $   million or
approximately $   per share. This represents an
immediate increase in net tangible book value of
$   per share to existing stockholders and an
immediate dilution in net tangible book value of
$   per share to new investors, or approximately
  % of the assumed initial public offering price of
$   per share. The following table illustrates
this per share dilution:
Assumed initial public offering price per share
$
Tangible book value per share at June 30, 2000
$
Increase in net tangible book value per share attributable to new
	 investors
Net tangible book value per share after this offering
Dilution per share to new investors
$
The following table summarizes, on an as adjusted basis as of
June 30, 2000, the number of shares purchased, the total
consideration paid, or to be paid, and the average price per
share paid, or to be paid, by the existing stockholders and the
purchasers of common stock in the offering. The table assumes an
offering price of $   per share before deducting
the estimated offering expenses and underwriting discounts and
commissions:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
%
$
%
$
New investors
$
Total
100.0
%
$
100.0
%
The foregoing discussion and tables assume no exercise of any
outstanding stock options. The exercise of all options
outstanding as of June 30, 2000 having an exercise price
less than the assumed initial public offering price would
increase the dilutive effect to new investors to
$   per share.
If the underwriters exercise their over-allotment in full, the
following will occur:
•
the number of shares of common stock held by existing
	stockholders will decrease to approximately   % of the
	total number of shares of our common stock outstanding; and
•
the number of shares held by new investors will increase to
	      shares, or approximately
	  % of the total number of shares of our common stock
	outstanding after this offering.
16
Table of Contents
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial
data of:
•
Our predecessor, as of and for the years ended December 31,
	1995 and 1996, and for the period from January 1, 1997 to
	May 1, 1997; and
•
Our company, as of December 31, 1997 and for the period from
	 May 2, 1997 to December 31, 1997, as of and for the
	years ended December 31, 1998 and 1999, and as of and for
	the six months ended June 30, 1999 and 2000.
Data as of and for the six months ended June 30, 1999 and
2000 were derived from our unaudited consolidated financial
statements which, in the opinion of management, reflect all
adjustments, consisting of normal recurring adjustments,
necessary for the fair presentation of the financial condition
and results of operations for such periods.
The consolidated statement of operations data for the periods
from January 1, 1997 to May 1, 1997 and from
May 2, 1997 to December 31, 1997, and for the years
ended December 31, 1998 and 1999, and the consolidated
balance sheet data as of December 31, 1998 and 1999, are
derived from consolidated financial statements, which have been
audited by KPMG LLP, independent auditors, and which are included
 in this prospectus. The consolidated income statement data for
the years ended December 31, 1995 and 1996, and the
consolidated balance sheet data as of December 31, 1995 and
1996 of our predecessor, are derived from audited financial
statements which were audited by a predecessor auditor that do
not appear in this prospectus.
The selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our
audited consolidated financial statements and related notes
appearing elsewhere in this prospectus.
17
Table of Contents
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
Predecessor(1)(2)
American Medical Laboratories, Incorporated(1)(2)
Period
Period
Year Ended
January 1,
May 2,
Year Ended
Six Months
December 31,
1997
1997 to
December 31,
Ended June 30,
to May 1,
December 31,
1995
1996
1997
1997
1998
1999
1999
2000
(unaudited)
Consolidated Statement of Operations Data:
Net revenue
$
67,336
$
77,975
$
28,340
$
59,234
$
102,729
$
143,436
$
58,609
$
129,895
Cost of services
28,658
32,468
20,055
41,748
69,888
96,067
38,530
83,816
Selling, general and administrative
34,195
37,756
6,151
13,071
23,131
33,575
14,077
27,070
Depreciation and amortization
3,255
2,974
524
1,073
2,170
4,803
1,356
6,425
Loss on impairment of assets
—
5,674
—
—
—
—
—
—
Operating expenses
66,108
78,872
26,730
55,892
95,189
134,445
53,963
117,311
Operating income (loss)
1,228
(897
)
1,610
3,342
7,540
8,991
4,646
12,584
Interest expense
2,839
2,811
130
619
927
4,578
835
7,602
Other (income) expense
184
—
(49
)
331
14
100
(13
)
—
Share in loss of affiliate
—
—
165
694
443
815
407
284
Extraordinary item
—
—
—
—
—
442
67
—
Provision (benefit) for taxes
(557
)
(1,357
)
612
683
2,197
1,820
1,338
2,152
Net income (loss)
(1,238
)
(2,351
)
752
1,015
3,959
1,236
2,012
2,546
Dividends on preferred stock
—
—
—
566
923
462
375
95
Net income (loss) to common shareholders
$
(1,238
)
$
(2,351
)
$
752
$
449
$
3,036
$
774
$
1,637
$
2,451
Net income (loss) per common share
Basic
Diluted
Weighted-average common shares outstanding
Basic
Diluted
Other Financial Data:
Adjusted EBITDA(3)
$
4,299
$
2,077
$
2,183
$
4,084
$
9,696
$
13,694
$
6,015
$
19,181
Adjusted EBITDA as of % of net revenue
6.4
%
2.7
%
7.7
%
6.9
%
9.4
%
9.5
%
10.3
%
14.8
%
Cash flows provided by (used in) operating activities
$
2,238
$
5,845
$
(2,393
)
$
4,974
$
1,464
$
1,710
$
2,058
$
6,834
Cash flows provided by (used in) investing activities
(1,201
)
(2,363
)
31,154
(21,545
)
(7,388
)
(88,431
)
(1,511
)
(13,548
)
Cash flows provided by (used in) financing activities
(1,114
)
(1,954
)
(27,216
)
13,445
5,924
87,590
678
6,853
Consolidated Balance Sheet Data (at period end):
Cash and cash equivalents
$
54
$
1,581
$
1,125
$
0
$
869
$
1,225
$
1,008
Working capital (deficit)
4,128
(22,128
)
6,366
9,258
14,391
10,255
24,367
Total assets
60,524
57,597
30,303
45,263
202,093
53,634
202,352
Total debt
30,895
28,871
6,170
12,473
138,969
26,676
145,819
Redeemable preferred stock
—
—
9,238
10,161
1,909
1,822
2,004
Total stockholders' equity
—
—
827
3,863
8,584
4,060
11,210
(1)
On May 2, 1997, we acquired all of the
	outstanding stock of Medical Laboratories Corporation, our
	predecessor, in a business combination accounted for as a
	purchase. Therefore the assets and liabilities were recorded at
	fair value as required by the purchase method of accounting and
	the operations were reflected in our results of operations from
	the date of acquisition.
(2)
The financial data for the periods presented are
	not strictly comparable due to the significant effect that the
	acquisitions of Medical Laboratories Corporation and APL have had
	 on such data. See "Management's Discussion and
	Analysis of Financial Condition and Results of
	Operations—General" and Notes 1 and 6 of the notes to
	our consolidated financial statements, appearing elsewhere in
	this prospectus.
(3)
Adjusted EBITDA is defined as EBITDA adjusted to
	exclude stock-based compensation expense. Stock-based
	compensation expense for the six-month period ended June 30,
	 2000 was $172 and zero for all other periods presented. EBITDA
	consists of net income before interest expense, income taxes,
	equity in income (loss) of affiliates, depreciation and
	amortization and extraordinary items. EBITDA and Adjusted EBITDA
	should not be considered as measures of financial performance
	under GAAP. Items excluded from EBITDA and Adjusted EBITDA are
	significant components in understanding and assessing financial
	performance. We present Adjusted EBITDA, which is a non-GAAP
	measure, to enhance the understanding of our operating results.
	Adjusted EBITDA should not be considered in isolation or as an
	alternative to net income, cash flows generated from operations,
	investing or financing activities, or other financial statement
	data presented in the consolidated financial statements as an
	indicator of financial performance or liquidity. Because Adjusted
	 EBITDA is not a measurement determined in accordance with GAAP
	and is thus susceptible to varying calculations, Adjusted EBITDA
	as presented may not be comparable to other similarly titled
	measures of other companies.
18
Table of Contents
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
We prepared the following Unaudited Pro Forma Condensed
Consolidated Statements of Operations for the year ended
December 31, 1999 and for the six months ended June 30,
 1999 to illustrate the effects of our acquisition of APL on
October 13, 1999 and related transactions. The Unaudited Pro
 Forma Condensed Consolidated Statements of Operations are
presented as if these transactions had occurred as of
January 1, 1999. We have not presented a pro forma statement
 of operations for the six months ended June 30, 2000
because these transactions were reflected in our actual results
for the entire period, and therefore no pro forma adjustments are
 required for an understanding of our results of operations for
that period. We have not presented a pro forma balance sheet
because these transactions were reflected in our balance sheet as
 of June 30, 2000, and therefore no pro forma adjustments
are required for an understanding of our financial position on
that date.
We believe that the assumptions used in preparing the Unaudited
Pro Forma Condensed Consolidated Statements of Operations provide
 a reasonable basis for presenting the significant effects
directly attributable to the APL acquisition and related
transactions. The Unaudited Pro Forma Condensed Consolidated
Statements of Operations do not purport to represent what our
results of operations would actually have been if these
transactions had in fact occurred on January 1, 1999 or to
project our results of operations for any future period. These
statements should be read in connection with, and are qualified
by reference to, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the
financial statements and related notes included elsewhere in this
 prospectus.
For the Year Ended December 31, 1999
(in thousands, except per share data)
Historical
American Medical
Laboratories,
Incorporated,
including APL
from October 13,
Historical APL
1999 to
January 1, 1999 to
Pro Forma
Pro Forma
December 31, 1999
October 12, 1999
Adjustments
Consolidated
Net revenue
$
143,436
$
82,430
$
(230
)
(A)
$
225,636
Cost of services
96,067
57,524
(8,386
)
(B)
145,205
Selling, general and administrative
33,575
19,612
—
53,187
Depreciation and amortization
4,803
1,621
5,193
(C)
11,617
Total operating expenses
134,445
78,757
(3,193
)
210,009
Operating income
8,991
3,673
2,963
15,627
Interest expense
(4,578
)
(1,366
)
(6,003
)
(D)
(11,947
)
Share in loss of affiliate
(815
)
—
—
(815
)
Other (income) expense
(100
)
149
—
49
Income before income taxes and extraordinary items
3,498
2,456
(3,040
)
2,914
Provision for income taxes
1,820
—
1,186
(E)
3,006
Income (loss) before extraordinary item
$
1,678
$
2,456
$
(4,226
)
$
(92
)
Dividends on preferred stock
(462
)
—
—
(462
)
Pro forma net income (loss) applicable to common shareholders
	before extraordinary item
1,216
2,456
(4,226
)
(554
)
Pro forma net loss per common share before extraordinary
	item — basic and diluted
(F)
$
Pro forma weighted-average common shares used in per share
	computation:
Basic
(F)
Diluted
(F)
Other Financial Data
Adjusted EBITDA
$
27,293
(footnotes on page 21)
19
Table of Contents
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(dollars in thousands, except per share data)
Historical American
Medical
Historical APL
Laboratories,
January 1, 1999
Pro Forma
Pro Forma
Incorporated
to June 30, 1999
Adjustments
Consolidated
Net revenue
$
58,609
$
51,600
$
(115
)
(A)
$
110,094
Cost of services
38,530
32,180
(316
)
(B)
70,394
Selling, general and administrative
14,077
10,544
—
24,621
Depreciation and amortization
1,356
1,333
3,324
(C)
6,013
Total operating expenses
53,963
44,057
3,008
101,028
Operating income
4,646
7,543
(3,123
)
9,066
Interest expense
(835
)
(817
)
(4,354
)
(D)
(6,006
)
Share in loss of affiliate
(407
)
—
—
(407
)
Other (income) expense
13
(13
)
—
—
Income before income taxes and extraordinary items
3,417
6,713
(7,477
)
2,653
Provision for income taxes
1,338
—
741
(E)
2,079
Income before extraordinary items
2,079
6,713
(8,218
)
574
Dividends on preferred stock
375
—
—
375
Pro forma net income applicable to common shareholders before
	extraordinary item
$
1,704
$
6,713
$
(8,218
)
$
199
Pro forma net income per common share before extraordinary
	item — basic and diluted
(F)
$
Pro forma weighted-average common shares used in per share
	computation:
Basic
(F)
Diluted
(F)
Other Financial Data
Adjusted EBITDA
$
15,079
(footnotes on following page)
20
Table of Contents
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999 and the Six Months
Ended June 30, 1999
A
Reflects the elimination of approximately $230,000 and $115,000
	of inter-company sales from January 1, 1999 to
	October 12, 1999 and January 1, 1999 to June 30,
	1999, respectively.
B
Reflects the elimination of expense associated with the
	following: (1) approximately $7.9 million and $200,000
	in salaries and bonuses of the former owners and key members of
	management of APL during the periods January 1, 1999 to
	October 12, 1999 and January 1, 1999 to June 30,
	1999, respectively, based on contractual agreements which
	established the compensation of these individuals subsequent to
	the closing of the transaction; and (2) approximately
	$224,000 and $0 in merger related expenses incurred by APL from
	January 1, 1999 to October 12, 1999 and January 1,
	 1999 to June 30, 1999, respectively.
C
Reflects the amortization of intangible assets, including
	goodwill over three to twenty year periods. The estimated period
	of amortization of identifiable intangible assets and goodwill is
	 based on preliminary allocations of values to identifiable
	assets of APL. We do not believe that the final allocation of
	values to intangible assets and goodwill of APL will result in
	amortization expense materially different from the adjustment
	above.
D
Reflects the elimination of the historical interest expense
	related to debt not assumed in the acquisition, and inclusion of
	the debt incurred to finance the acquisition.
E
Reflects the income tax effect of combining our company's
	and APL's results of operations and pro forma adjustments,
	excluding the impact of nondeductible amounts. In conjunction
	with the APL acquisition, APL changed from an S Corporation to a
	C Corporation for federal and state income tax reporting
	purposes, which requires APL to recognize the tax consequences of
	 operations in its statements of operations. The pro forma
	adjustments reflect the estimated impact of recognizing income
	tax expense as if APL had been a C Corporation and part of our
	consolidated group for tax reporting purposes for the entire year
	 ended December 31, 1999.
F
The pro forma net income (loss) per common share before
	extraordinary item information gives effect to the issuance of
	common stock to the former owners of APL in conjunction with the
	transaction.
21
Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
our consolidated financial statements, the notes to those
statements and the other financial information appearing
elsewhere in this prospectus. This prospectus contains
forward-looking statements that involve risks and uncertainties.
Our actual results may differ materially from those indicated in
forward-looking statements. See "Cautionary Note Regarding
Forward-Looking Statements."
Background
Our company was founded in 1959 by pathologists in Fairfax,
Virginia. Over time, we expanded our clinical laboratory
operations and became the leading provider of laboratory tests to
 physicians' offices in the metropolitan
Washington, D.C. area. We also developed a significant
business in esoteric testing for hospital customers in the
central Atlantic states. In 1992, we moved our headquarters into
a custom-designed laboratory facility in Chantilly, Virginia,
located near Dulles International Airport.
On May 2, 1997, GTCR and current management purchased our company
 from the prior owners for $23.0 million in cash. The
transaction was accounted for using the purchase method of
accounting, under which a new basis was established for the
company's assets. Accordingly, the results of operations in
the selected consolidated financial data table for the
predecessor company for periods prior to May 2, 1997 are not
 comparable to the results of subsequent periods.
We have grown significantly since May 1997. Shortly after the
purchase of the company by GTCR and current management, we
implemented an aggressive sales program, which, combined with our
 focus on customer service, has resulted in growth in our
esoteric business nationwide as well as our esoteric and routine
business in the metropolitan Washington, D.C. area. In June 1998,
 we acquired Providence Laboratory Associates, or PLA, a small
laboratory located in Maryland, which also contributed to our
growth.
We grew dramatically in 1999 with the APL acquisition. APL was
founded in 1966 and is the leading laboratory services provider
in the state of Nevada. We acquired all of the outstanding
capital stock of APL in October 1999 for a total purchase
price of $107.2 million, consisting of $64.3 million of
 cash, the issuance of convertible subordinated notes in an
aggregate principal amount of $17.5 million, the issuance of
 shares of our common stock with a value at that time of
$5.6 million, the assumption of debt of approximately
$17.8 million and acquisition costs of approximately
$2.0 million. Holders of
$     aggregate principal amount of
these convertible subordinated notes have elected to convert
their notes into shares of our common stock in connection with
this offering. The APL acquisition was accounted for using the
purchase method of accounting. Due to the significant effect of
the APL acquisition, financial data in the tables and schedules
which follow in this prospectus may not be strictly comparable
between periods.
22
Table of Contents
Results of Operations
The following table describes our results of operations as a
percentage of net revenue for the periods presented:
Six Months
Ended June 30,
Period
May 2, 1997
Year Ended
to
December 31,
(unaudited)
December 31,
Actual
Pro Forma
Actual
1997
1998
1999
1999
1999
2000
Statement of Operations Data:
Net revenue
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Cost of services
70.5
68.0
67.0
65.7
63.9
64.5
Selling, general and administrative
22.1
22.5
23.4
24.0
22.4
20.8
Depreciation and amortization
1.8
2.1
3.3
2.3
5.5
4.9
Operating income
5.6
%
7.3
%
6.3
%
7.9
%
8.2
%
9.7
%
Adjusted EBITDA
6.9
%
9.4
%
9.5
%
10.3
%
13.7
%
14.8
%
Six months ended
June 30, 2000 compared to six months ended June 30,
1999
Net Revenue.
Net revenue increased to $129.9 million
for the six months ended June 30, 2000 from
$58.6 million for the same period of 1999, representing an
increase of $71.3 million or 121.7%. Approximately
$58.7 million of the increase was attributable to revenue
generated from the acquisition of APL, which was acquired
subsequent to the first six months of 1999. Excluding the effect
of the acquired business, net revenue increased
$12.6 million or 21.5%, primarily as a result of an
increased volume of laboratory tests performed. Laboratory tests
for our customers are ordered and billed on a per accession
basis. An accession represents a single patient intervention on
which one or more tests may be performed. Also excluding the
effect of the acquired business, the number of billed accessions
increased approximately 18.5% in the first six months of 2000
compared to the same period in 1999, while the average price
billed per accession increased approximately 3.2%. This volume
growth has primarily been driven by a net increase in the number
of total customers we serve. During 2000, we have been successful
 in attracting new customers, primarily in the hospital,
physician and independent clinical laboratory markets, while also
 maintaining a very high retention rate for our existing
customers. The increase in the average price billed per accession
 is due to a greater proportion of higher-priced esoteric tests
performed in the first six months of 2000 compared to the same
period in 1999, as well as to price increases during 2000 for
certain client and patient fee schedules.
Cost of Services.
Cost of services increased to
$83.8 million for the six months ended June 30, 2000
from $38.5 million for the same period in 1999, representing
 an increase of $45.3 million or approximately 117.7%.
Approximately $35.1 million of the increase is attributable to
the cost of services performed by APL. Excluding the effect of
the acquired business, cost of services increased
$10.2 million or approximately 26.5%. Approximately
$6.4 million of the $10.2 million increase is due to
the greater volume of laboratory tests performed in the first six
 months of 2000 compared to the same period in 1999. In addition,
 we experienced cost increases on a per-test basis for laboratory
 supplies, operations labor and transportation costs. Supplies
cost per test increased due to the greater proportion of esoteric
 tests performed in the first six months of 2000 compared to the
same period of 1999, while the increases in labor and
transportation primarily reflect wage increases and higher
transportation volumes and fuel costs.
Selling, General and Administrative.
Selling, general and
administrative expense increased to $27.1 million for the
six months ended June 30, 2000 from $14.1 million for
the same period of 1999, representing an increase of
$13.0 million or 92.2%. Approximately $10.9 million of
the increase was attributable to the acquisition of APL.
Excluding the effect of the acquired business, selling, general
and
23
Table of Contents
administrative expense increased $2.1 million or
approximately 14.9%. The increase in selling expense is due to
increased costs to expand our national sales coverage, including
additional travel and sales office costs. The increase in general
 and administrative expense primarily relates to expansion of our
 management team and our information technology capabilities in
order to support our growth. We incurred increased costs in
personnel salaries and benefits, travel and information
technology. General and administrative expense for the six months
 ended June 30, 2000 also includes $0.2 million of
stock-based compensation expense; there was no similar charge in
the prior year period. Stock-based compensation expense
represents the difference between the exercise price of options
granted during the first six months of 2000 and the deemed fair
value of our common stock on the date of grant. The difference is
 being amortized over the five-year vesting period.
Depreciation and Amortization.
Depreciation and
amortization expense increased to $6.4 million for the six
months ended June 30, 2000 from $1.4 million for the same
period in 1999, representing an increase of $5.0 million.
The increase is primarily due to approximately $2.7 million
in goodwill amortization and $2.1 million of additional
depreciation expense as a result of the acquisition of APL in the
 fourth quarter of 1999.
Interest Expense.
Interest expense increased to
$7.6 million for the six months ended June 30, 2000
from $0.8 million for the same period of 1999, representing
an increase of $6.8 million. The increase reflects the
increase in long-term debt arranged in conjunction with
acquisition of APL in the fourth quarter of 1999.
Provision for Income Taxes.
The provision for income taxes
 increased to $2.2 million for the six months ended
June 30, 2000 from $1.3 million for the same period of
1999, representing an increase of $0.9 million. The increase
 is due both to the increase in income before income taxes as
well as to an increase in the effective tax rate. The effective
tax rate has increased due to the amortization of intangibles
acquired in connection with the APL acquisition, which are not
deductible for tax purposes.
Adjusted EBITDA.
Adjusted EBITDA increased to
$19.2 million for the six months ended June 30, 2000
from $6.0 million for the same period of 1999, representing
an increase of $13.2 million. Approximately
$12.0 million of the increase is due to the acquisition of
APL. Excluding the acquired business, Adjusted EBITDA increased
approximately $1.2 million or 20.0% in the first six months
of 2000 compared to the same period of 1999.
Actual six months ended
June 30, 2000 compared to pro forma six months ended
June 30, 1999
Net Revenue.
Net revenue increased to $129.9 million
for the six months ended June 30, 2000 from
$110.1 million for the pro forma 1999 period, representing
an increase of $19.8  million or 18.0%. We achieved
substantial volume growth in billed accessions at both of our
major laboratories, with total volume growth approximating 15.8%.
 This volume increase has primarily been driven by a net increase
 in the number of total customers we serve, particularly in the
hospital, physician and independent clinical laboratory markets.
The average price per billed accession increased approximately
2.7% in the first six months of 2000 compared to the pro forma
1999 period. The increase in the average price billed per
accession is due to a greater proportion of higher-priced
esoteric tests performed as well as to price increases in 2000
for certain client and patient fee schedules.
Cost of Services.
Cost of services increased to
$83.8 million for the six months ended June 30, 2000
from $70.4 million for the pro forma 1999 period,
representing an increase of $13.4 million or 19.0%. The
increase in cost of services was primarily due to the increase in
 the testing volume at our laboratories. In addition, we
experienced cost increases on a per test basis for
laboratory supplies, operations labor and transportation costs.
Supplies cost per test increased due to the greater proportion of
 esoteric tests performed in the first six months of 2000, while
the increases in labor and transportation primarily reflect wage
increases and higher transportation volumes and fuel costs.
24
Table of Contents
Selling, General and Administrative.
Selling, general and
administrative expense increased to $27.1 million for the
six months ended June 30, 2000 from $24.6 million for
the pro forma 1999 period, representing an increase of
$2.5 million or 10.2%. The increase in selling costs is due
to increased costs to expand our national sales coverage. The
increase in general and administrative costs primarily relates to
 expansion of our management team and our information technology
capabilities in order to support our growth.
Depreciation and Amortization.
Depreciation and
amortization expense increased to $6.4 million for the six
months ended June 30, 2000 from $6.0 million for the
pro forma 1999 period, representing an increase of
$0.4 million. The increase is primarily due to additional
depreciation expense as a result of capital expenditures.
Interest Expense.
Interest expense increased to
$7.6 million for the six months ended June 30, 2000
from $6.0 million for the pro forma 1999 period. The
increase reflects greater borrowings under our senior credit
facility incurred to finance the expansion of our business.
Provision for Income Taxes.
The provision for income taxes
 increased to $2.2 million for the six months ended
June 30, 2000 from $2.1 million for the pro forma 1999
period. The increase is due both to the increase in income before
 income taxes as well as to a decrease in the effective tax rate.
 The effective tax rate has decreased due to the effect of the
amortization of intangibles acquired in connection with the APL
acquisition, which are not deductible for tax purposes. Because
the non-deductible amount is fixed, to the extent our income
before income taxes increases, our effective tax rate declines.
Adjusted EBITDA.
Adjusted EBITDA increased to
$19.2 million for the six months ended June 30, 2000
from $15.1 million for the pro forma 1999 period. As a
result, Adjusted EBITDA as a percentage of net revenue increased
to 14.8% for the six months ended June 30, 2000 from 13.7%
for the pro forma 1999 period.
Year ended December 31,
1999 compared to year ended December 31, 1998
Net Revenue.
Net revenue increased to $143.4 million
for the year ended December 31, 1999 from
$102.7 million in the prior year, representing an increase
of $40.7 million or 39.6%. Approximately $22.9 million
of the increase was attributable to revenue generated from the
acquisition of APL. Excluding the effect of the acquired
business, net revenue increased $17.8 million or 17.3%,
primarily as a result of an increased volume of laboratory tests
performed. Also excluding the effect of the acquired business,
the number of billed accessions increased approximately 11.3% in
the year ended December 31, 1999 compared to the year ended
December 31, 1998, while the average price billed per
accession increased approximately 5.2%. Our volume growth has
primarily been driven by a net increase in the number of total
customers we serve. During 2000, we have been successful in
attracting new customers, primarily in the hospital, physician
and independent clinical laboratory markets while also
maintaining a very high retention rate for our existing
customers. The increase in the average price billed per accession
 is due to a greater proportion of higher-priced esoteric tests
performed in 1999 compared to 1998, as well as to price increases
 during 1999 for certain client and patient fee schedules.
Cost of Services.
Cost of services increased to
$96.1 million for the year ended December 31, 1999 from
 $69.9 million in the prior year, representing an increase
of $26.2 million or 37.5%. Approximately $14.3 million
of the increase is attributable to the cost of services performed
 by APL, which was acquired during the fourth quarter of 1999.
Excluding the effect of the acquired business, cost of services
increased $11.9 million or approximately 17.0%.
Approximately $6.9 million of the $11.9 million
increase is due to the greater volume of laboratory tests
performed in 1999 compared to the prior year. The remaining
$5.0 million is due to cost increases on a per-test basis
for laboratory supplies, operations labor and transportation
costs. Supplies cost per test increased due to the greater
proportion of esoteric tests performed in 1999 compared to the
prior year, while the increases in labor and transportation costs
 primarily reflect wage increases and higher transportation
volumes and fuel costs.
25
Table of Contents
Selling, General and Administrative.
Selling, general and
administrative expense increased to $33.6 million for the
year ended December 31, 1999 from $23.1 million for the
 year ended December 31, 1998, representing an increase of
$10.5 million or 45.5%. Approximately $5.0 million of
the increase was attributable to the acquisition of APL.
Excluding the effect of the acquired business, selling, general
and administrative costs increased $5.5 million or 23.8%.
The increase in selling expense is due to increased costs to
expand our national sales coverage, including additional travel
and sales office costs. The increase in general and
administrative expense primarily relates to expansion of our
management team and our information technology capabilities in
order to support our growth. We incurred increased costs in
personnel salaries and benefits, travel and information
technology.
Depreciation and Amortization.
Depreciation and
amortization expense increased to $4.8 million for the year
ended December 31, 1999 from $2.2 million for the year ended
 December 31, 1998, representing an increase of
$2.6 million. The increase is primarily due to amortization
of goodwill and additional depreciation attributable to the
acquisition of APL in the fourth quarter of 1999.
Interest Expense.
Interest expense increased to
$4.6 million for the year ended December 31, 1999 from
$0.9 million for the year ended December 31, 1998,
representing an increase of $3.7 million. The increase
reflects the effect of an increase in long-term debt arranged in
conjunction with acquisition of APL in the fourth quarter of
1999.
Provision for Income Taxes.
The provision for income taxes
 decreased to $1.8 million for the year ended
December 31, 1999 from $2.2 million for the year ended
December 31, 1998, representing a decrease of
$0.4 million. The decrease is due to the decrease in income
before income taxes, primarily due to higher interest expense in
1999, which was partially offset by an increase in the effective
tax rate. The effective tax rate has increased due to the
amortization of intangibles acquired in connection with the APL
acquisition, which are not deductible for tax purposes.
Adjusted EBITDA.
Adjusted EBITDA increased to
$13.7 million for the year ended December 31, 1999 from
 $9.7 million for the year ended December 31, 1998,
representing an increase of $4.0 million. Approximately
$3.5 million of the increase is due to the acquisition of
APL, which was acquired during the fourth quarter of 1999.
Excluding the effect of the acquired business, Adjusted EBITDA
increased approximately $0.5 million or 5.2% in 1999
compared to 1998.
Year ended December 31, 1998 compared to the period
May 2, 1997 to December 31, 1997
Net Revenue.
Net revenue increased to
$102.7 million in the year ended December 31, 1998,
from $59.2 million in the May 2, 1997 to
December 31, 1997 period, representing an increase of
$43.5 million or 73.5%. The increase in net revenue in the
twelve-month 1998 period compared to the eight-month 1997 period
is due both to the longer time period and to a full year-to-year
growth in the volume of billed accessions. The growth in testing
volume was the result of the success of the aggressive sales and
marketing program instituted during 1997 and 1998. The average
price per accession did not vary significantly between periods.
Cost of Services.
Cost of services increased to
 $69.9 million in the year ended December 31, 1998 from
 $41.7 million in the May 2, 1997 to December 31,
1997 period, representing an increase of $28.2 million or
approximately 67.6%. The increase in the cost of services of the
twelve-month 1998 period compared to the eight-month 1997 period
of 67.6% is due both to the longer time period and to a full year
 increase in the volume of laboratory tests performed. The
average cost per test did not vary significantly between periods.
Selling, General and Administrative.
Selling,
general and administrative expense increased to
$23.1 million in the year ended December 31, 1998 from
$13.1 million in the May 2, 1997 to December 31,
1997 period, representing an increase of $10.0 million or
76.3%. This increase is due both to the longer time period as
well as increased expenditures. Selling expense increased due to
the costs
26
Table of Contents
associated with the expanded sales coverage and marketing program
 initiated by the new management team.
Depreciation and Amortization.
Depreciation and
 amortization increased to $2.2 million in the year ended
December 31, 1998 from $1.1 million in the May 2,
1997 to December 31, 1997 period. The increase in 1998 over
the 1997 amount is due to the longer time period, the effect of
depreciation on capital additions and amortization of the
goodwill from the 1998 Providence Laboratory Associates
acquisition.
Adjusted EBITDA.
Adjusted EBITDA increased to
$9.7 million for the year ended December 31, 1998 from
$4.1 million in the May 2, 1997 to December 31,
1997 period, representing an increase of 136.6%. This increase is
 due both to the longer time period in 1998 as well as to the
factors discussed above.
Suppliers
On a pro forma basis, no single supplier comprised greater than
6.2% of our laboratory supply purchases for the year ended
December 31, 1999. We believe that suppliers are numerous
and compete aggressively for our business. We believe that our
relative size and position in the market offer us procurement
advantages not available to other smaller laboratories in the
industry.
Seasonality
We experience seasonal trends that we believe affect all clinical
 laboratory companies. Testing volume generally tends to be lower
 during the holiday seasons and, to a lesser extent, inclement
weather. As a result, because a substantial portion of our
expenses are relatively fixed over the short term, our operating
income as a percentage of revenue tends to decrease during the
third and fourth quarter of each year. Our historical results do
not necessarily demonstrate the impact of seasonality given our
high growth during the periods presented.
Liquidity and Capital Resources
Our principal sources of liquidity are cash flow generated from
operations and borrowings under our senior credit facility. Total
 debt obligations increased to $145.8 million as of
June 30, 2000 from $139.0 million as of
December 31, 1999 and $12.5 million as of
December 31, 1998. Total debt obligations as of
June 30, 2000 are composed of $123.5 million in
borrowings under our senior credit facility, $17.5 million
related to the convertible subordinated notes, and
$4.8 million in other borrowings. The increase resulted
primarily from borrowings to finance the acquisition of APL in
1999. As of June 30, 2000, we had $1.0 million in cash
and cash equivalents and $23.4 million in non-cash working
capital.
Net cash flow from operations was $1.5 million in the year
ended December 31, 1998, $1.7 million in the year ended
 December 31, 1999, and $6.8 million in the six months
ended June 30, 2000. The trend of improved operating cash
flow is due to an improvement in our net income since our
acquisition of APL in October 1999. Operating cash flow has
been negatively impacted by increases in working capital,
primarily accounts receivable and inventories, that have
accompanied the growth in business volumes.
Net cash used for investing activities was $7.4 million in
the year ended December 31, 1998, $88.4 million in the
year ended December 31, 1999, and $13.5 million in the six
months ended June 30, 2000. Investing activities consist of
acquisitions and capital expenditures for property, equipment and
 intangibles. Cash used in investing activities for the year
ended December 31, 1998 was primarily for the acquisition of
 Providence Laboratory Associates. Cash used in investing
activities for the year ended December 31, 1999 was
primarily for the acquisition of APL. Capital expenditures
primarily represent laboratory operating equipment, leasehold
improvements to the lab facilities and office equipment,
primarily computers. Capital expenditures during fiscal 1998 were
 approximately $2.9 million, $5.5 million in 1999 and
$3.2 million in the six months ended June 30, 2000.
27
Table of Contents
Net cash provided by (used in) financing activities was
$5.9 million in the year ended December 31, 1998,
$87.6 million in the year ended December 31, 1999, and
$6.9 million in the six months ended June 30, 2000.
Financing activities in 1998 consisted primarily of borrowings
and repayments under a $20.0 million credit facility with Heller
Financial Inc., which consisted of a term loan and accounts
receivable based line of credit. Financing activities in 1999
included the refinancing of our credit agreement with Heller
Financial Inc. with a new term loan of $20.0 million and a
revolving facility of $15.0 million. On October 13, 1999,
all of the outstanding debt related to the Heller Financial
credit agreement was repaid.
On October 13, 1999, in connection with the APL acquisition,
 we entered into an amended and restated senior credit facility
with Bankers Trust Company, as agent, and various other lenders
that provides for:
•
a revolving credit facility providing for up to
	$25.0 million in revolving credit loans and letters of
	credit;
•
a Term A Loan facility providing for $50.0 million in term
	loans; and
•
a Term B Loan facility providing for $65.0 million in term
	loans.
We may borrow amounts under the senior credit facility for
permitted acquisitions, including related fees and expenses and
to fund working capital and general corporate needs. All
revolving loans incurred under the senior credit facility will
mature on October 13, 2004. At June 30, 2000, there was
 $48.0 million outstanding under the Term A facility
and $64.7 million outstanding under the Term B
facility, $10.8 million of revolving credit borrowings and
$14.2 million of unused borrowing capacity. The senior
credit facility provides that all of our indebtedness be secured
by a first priority security interest in some of our assets and
the capital stock of our subsidiaries.
Our borrowings under the senior credit facility bear interest at
a floating rate and may be maintained by us as base rate loans
or, at our option, as Euro-rate loans, in each case, plus an
applicable margin. For the six-month period ended June 30,
2000, our weighted average interest rate under our senior credit
facility was 9.94%.
The term loans mature, and as a result must be repaid, in
quarterly installments on March 31, June 30,
September 30 and December 31 of each year, beginning on
 June 30, 2000. The scheduled repayments for the term loans
for the remainder of this year and 2001 are $4.7 million and
 $9.2 million, respectively. The final maturity date of the
Term A loan is October 13, 2004 and the final maturity date
of the Term B loan is April 13, 2006.
The senior credit facility requires us to meet certain financial
tests, including, without limitation, minimum interest coverage
ratios, a maximum senior debt leverage ratio, a maximum level of
capital expenditures and a minimum adjusted net worth. For the
three-month period ended June 30, 2000, we were not in
compliance with a financial ratio covenant in our senior credit
facility. We have received a waiver from the lenders under our
senior credit facility for that noncompliance.
The senior credit facility contains customary events of default,
including without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, cross-defaults
 to certain other indebtedness, specified events of bankruptcy
and insolvency, judgment defaults, failure of any guaranty or
security document supporting the senior credit facility to be in
full force and effect and a change of control.
We will use the net proceeds of the offering to repay
indebtedness under the Term A loan and the Term B loan.
 In connection with, and subject to, the offering, we expect to
amend or refinance our senior credit facility on terms and
conditions that are more favorable to us.
We believe that our cash and cash equivalents together with cash
flows expected to be generated from operations and borrowing
capabilities under the current or an amended senior credit
facility will be sufficient to meet anticipated requirements for
working capital, interest payments, capital expenditures and
scheduled principal payments under our debt obligations for the
foreseeable future.
28
Table of Contents
Quantitative and Qualitative Disclosure of Market Risks
Interest on amounts borrowed under our credit facility discussed
above is subject to adjustment determined based on certain levels
 of financial performance. For LIBOR borrowings, the applicable
margin added to LIBOR can range from 2.00% to 3.25% for Term A
and revolving loans and is equal to 3.875% for Term B loans. At
any time, a sharp rise in interest rates could have a material
adverse impact on our cost of working capital and interest
expense. For every one-half percent rise in interest rates, our
variable note obligations held at June 30, 2000 interest
expense would increase by $0.6 million annually.
During 1999, we entered into one interest rate swap agreement,
which is used to reduce the impact of interest rate changes on
net income. This agreement effectively converts, for a three-year
 period, $58.0 million of floating rate borrowings to fixed
rate borrowings. We secured a fixed interest rate on this
agreement of 6.6225%.
We do not conduct business operations in foreign currencies and,
as a result, are not generally subject to the exposures that
arise from foreign exchange rate movements. However, occasionally
 we may purchase laboratory supplies or reagents from vendors who
 are located outside the United States. In such cases, we usually
 arrange to purchase the supplies or reagents through a U.S.
distributor, so we would not be directly exposed to exchange rate
 risk.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments and
 hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. This statement was amended by SFAS 137 which
defers the effective date to all fiscal quarters of fiscal years
beginning after June 15, 2000. SFAS 133 is effective for our
 first quarter in the fiscal year ending December 31, 2001
and is not expected to have a material effect on our financial
position or results of operations. However, the ultimate impact
will depend on the derivative activity that we have at the date
of adoption and thereafter.
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BUSINESS
Overview
We are a leading national provider of esoteric laboratory testing
 services. Esoteric tests are clinical laboratory tests that are
more complex and typically priced higher than routine tests. We
market our esoteric testing services to hospitals and independent
 clinical laboratories nationwide. As of September 15, 2000,
 we provided our services to over 380 hospitals and 160
independent clinical laboratories in 31 states. Our two main
laboratories are located in metropolitan Washington, D.C., and
Las Vegas, Nevada. We are the leading provider of comprehensive
laboratory services in each of those markets. We strengthen our
offering by providing our clients advanced information technology
 solutions, as well as other value-added laboratory services.
We believe that we are well positioned to serve our target
clients. Many hospitals and independent clinical laboratories do
not perform esoteric tests because of the complexity and high
cost of performing these tests internally. These organizations
choose us as their esoteric laboratory because we offer them
superior service, excellent quality and rapid turnaround time. In
 addition, unlike the laboratories that provide comprehensive
services on a national basis, we generally do not compete with
our clients for routine testing business in their local markets.
We believe that we offer our clients one of the most complete
esoteric testing service offerings available, as well as access
to the latest in innovative testing technology. We obtain this
access through acquisition and licensure of new testing
technologies, which leverages external research in esoteric
testing and reduces our development time and costs.
In October 1999, we acquired APL, the leading laboratory services
 provider in Nevada. With this purchase, we acquired a full
service laboratory facility in Las Vegas, Nevada that complements
 the geographic reach of our Chantilly, Virginia facility and
enhances our position as a nationwide provider of esoteric
testing services. We have been successful in attracting a wide
range of clients for our esoteric testing services, including
Kaiser Permanente, Consorta Catholic Health Resource Partners,
Health Trust Purchasing Group and Massachusetts General Hospital.
 We are currently performing more than 330,000 total tests per
week. For the six months ended June 30, 2000 and for the
year ended December 31, 1999 on a pro forma basis, we had
net revenue of $129.9 million and $225.6 million,
respectively, and Adjusted EBITDA of $19.2 million and $27.3
 million, respectively.
Industry
Reliance on laboratory testing for detection, diagnosis,
evaluation, monitoring and treatment of diseases and other
medical conditions creates significant market demand for clinical
 laboratory testing services. In 1998, over 5.6 billion
tests were performed in the United States. According to industry
sources, more than 70% of all health care decisions and spending
are impacted by clinical laboratory test results.
According to Washington G-2 Reports, the U.S. clinical
laboratory industry generated $31.8 billion in revenues in
1999, which represented approximately 3% of total healthcare
expenditures. We expect growth in clinical laboratory spending
due to the following:
•
general aging of the U.S. population;
•
growth in new highly-specialized tests, including genetic
	testing;
•
increasing testing for diagnosis and monitoring of infectious
	diseases, such as HIV and hepatitis C;
•
increasing testing by employers for substance abuse;
•
increasing outsourcing in the health care industry; and
•
increasing awareness of patients as to the value of laboratory
	testing and an increasing willingness of patients to pay for
	screening and other tests that may not be covered by third-party
	payors.
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Laboratory tests are provided by hospital-affiliated
laboratories, physician-owned laboratories and independent
clinical laboratories. The clinical laboratory testing market is
highly fragmented with over 165,000 federally-regulated clinical
laboratories, 8,900 of which are hospital-based clinical
laboratories and 4,900 of which are independent clinical
laboratories. Washington G-2 Reports estimates that in 1998, 63%
of all laboratory testing revenue was derived from hospital-based
 laboratories, 26% was derived from independent clinical
laboratories and the remaining 11% was derived from
physician-based laboratories. We believe hospitals and
independent clinical laboratories will continue to outsource
esoteric laboratory testing services because of the complexity
and high cost of performing these tests internally. We also
believe that hospitals will compete on an "outreach"
basis with independent clinical laboratories for routine,
physician-generated testing business in local markets. Providing
these services allows hospitals to spread the fixed costs of
their internal laboratory facilities across a broader revenue
base.
We perform laboratory tests on body fluids such as blood and
urine as well as on tissue and other samples, such as human
cells. The tests that we perform can be categorized as follows:
Esoteric Tests:
Esoteric tests are specialized tests which
 are used by physicians to obtain information not provided by
routine tests. These tests are performed less frequently than
routine tests and require specialized equipment, highly-trained
personnel and may have significant non-automated processes. In
1998, the esoteric testing market represented approximately
$2.0 billion. We believe the esoteric testing market is
growing rapidly, driven by general advances in medical technology
 and the accelerating pace of new genetic-based testing. Esoteric
 tests generally command a higher price, are more profitable and
have a more attractive payor mix than routine tests. We believe
that, due to the high degree of complexity and costs involved
with esoteric testing, the majority of these tests are performed
by independent clinical laboratories, such as AML.
Toxicology Tests:
Toxicology tests are targeted at the
discovery and identification of chemical and drug substances
present in the body's metabolism. Employers are increasingly
 utilizing toxicology tests in attempting to lower their overall
health care costs and improve their workplace environment by
maintaining a healthy, drug free work force. According to
Washington G-2 Reports, among firms in the United States,
approximately 70% test employees or job applicants for illegal
drug use. The toxicology testing market in the United States has
been estimated at $750 million per year. Toxicology tests
are often classified as a subcategory of esoteric tests.
Routine Tests:
Routine tests are used by physicians in
general patient care to establish or support a diagnosis and to
monitor disease. These tests typically measure the functionality
of organs such as the kidney, heart, liver and thyroid. Routine
tests are conducted 24 hours-a-day, 365 days-a-year, with results
 often provided electronically within 24 hours of testing. Among
independent laboratory companies, routine tests are offered or
conducted through their respective patient service centers,
primary laboratories and short turnaround time, or STAT,
laboratories. Patient service centers are facilities at which
specimens are collected and are typically in close proximity to
medical professional buildings or complexes.
Our Business Strategy
The principal elements of our business strategy include:
•
Expanding Our Position as a Leading National Provider of
	Esoteric Testing Services.
We will continue to expand
	nationally by providing esoteric testing services to our clients
	as a service offering that complements their routine testing
	operations. We believe that as tests become more complex and
	costly, hospitals and independent clinical laboratories will
	refer more of these tests to esoteric testing laboratories, such
	as ours. Hospitals and independent clinical laboratories find our
	 esoteric testing services attractive in part because we do not
	compete with them for routine testing
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services outside of our core markets of Nevada and metropolitan
	Washington, D.C. With significant operations in both the eastern
	and western United States, we offer hospitals and independent
	clinical laboratories throughout the nation access to esoteric
	testing technology and expertise that supports and enhances their
	 clinical laboratory offerings and objectives.
•
Maintaining Our Comprehensive Offering of Esoteric Tests.
We will continue to acquire and license new esoteric tests to
	satisfy our clients' needs. We believe this approach allows
	us to leverage external research and reduce our development time
	and costs while providing the latest in technological innovation.
	 We will continue to maintain strong relationships with
	developers of new medical testing technologies to remain a
	leading provider of esoteric testing services. Our operating
	history, market knowledge and strong professional relationships
	have consistently enabled us to access and provide newly-created
	esoteric tests expeditiously.
•
Growing Our Leadership Position in Our Core Geographic
	Markets.
We believe the attractive demographic
	characteristics and growth prospects of our core geographic
	markets, Nevada and metropolitan Washington, D.C., provide an
	excellent opportunity for us to continue to expand and grow our
	esoteric and routine operations. We also believe that our strong
	regional presence and reputation for superior quality and client
	service position us as the preferred provider of laboratory
	testing services for hospitals, independent clinical laboratories
	 and physician laboratories in these markets. In response to our
	clients' needs, we have developed an extensive
	infrastructure and provide a full spectrum of testing services
	supported by a network of rapid collection, processing and
	distribution services. Our extensive infrastructure and strong
	financial performance in our core geographic markets provide us
	with a platform for offering esoteric testing services on a
	national basis. We may opportunistically expand our full-service
	testing offering in strategic locations throughout the United
	States.
•
Enhancing Our Competitive Position by Providing the Highest
	Levels of Client Service.
We seek to achieve the highest
	levels of client satisfaction and foster long-term relationships
	through superior customer service. Members of our executive
	management team begin each day with a meeting to address specific
	 client service issues. We have a comprehensive quality assurance
	 program which ensures that laboratory specimens are properly
	collected and tested and that client and patient information is
	timely and properly recorded, billed and filed. Our sales and
	operations teams are trained to identify, respond to and resolve
	all client service issues in a time efficient and satisfactory
	manner. We constantly monitor, assess and strive to improve
	turnaround time, process workflow and overall client
	satisfaction. We utilize external providers to perform
	proficiency testing on, and confirm accuracy of, laboratory
	results. We believe we have a reputation as one of the highest
	quality providers of clinical laboratory services in the markets
	in which we operate. We believe our strong client service has
	contributed to our 99% client retention rate over the period from
	 January 1999 to June 2000.
•
Strengthening Customer Relationships with Value-Added
	Services.
We will continue to leverage our long history of
	clinical laboratory experience and expertise to develop and
	strengthen the community outreach efforts of our clients. We have
	 developed innovative services that address the evolving needs of
	 our hospital, physician and independent clinical laboratory
	clients. Our value-added services enable our clients to more
	effectively manage certain laboratory services while outsourcing
	other services to us. We believe that offering these value-added
	services to our clients creates a long-term relationship,
	providing us with a sustainable competitive advantage.
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Our Services
The following table depicts the various services we offer:
Testing
Category
Scientific Focus
Selected Examples
Selected Client Relationships
Esoteric
Endocrinology
Genetics
Immunology
Immunoperoxidase
Microbiology
Molecular Biology
Oncology
Serology
Special Chemistry
Clinical Toxicology
HIV Genotyping
Polymerase Chain Reaction
Tuberculosis
Blood Cultures
Bone Marrow
Karotyping
Phenotyping
Prognostic HIV
DNA Sequencing
Blood Leads
Kaiser Permanente
Whitman Walker Clinic
Georgetown University Hospital
Massachusetts General Hospital
Universal Health Services
Toxicology
Forensic
Drug Testing (Hair and Urine)
Blood Alcohol
US Postal Service
US Airways
Starwood Resorts
Frito Lay
Publix Supermarkets
Routine
Hematology
Cytology
Histology
Automated Chemistry
Bacteriology
Complete Blood Count
Routine Health Screens
Cholesterol Tests
Electrolytes
Pregnancy and Prenatal
Pap Smears
Glucose Monitoring
Sierra Health
Aetna US Healthcare
Individual physician practices
Esoteric Testing.
We perform an average of 123,000
esoteric tests per week. The nature of these tests requires a
high level of accuracy, quick turnaround time and substantial
human involvement. Because it is not cost effective for most
laboratories to perform esoteric tests in-house, they generally
refer many esoteric tests to outside testing laboratories.
We offer our clients a broad array of esoteric tests, which we
believe represent substantially all of the esoteric tests
typically requested. We have relationships with niche
laboratories that perform the small number of tests that we do
not perform internally. We acquire and license new esoteric tests
 created by others to leverage external research and reduce our
development time and costs while providing the latest testing
technology to our clients.
We currently offer a wide range of genetic tests, which are tests
 that are based on DNA and RNA. We believe genetic testing is a
substantial area of growth for us because recent scientific
advances have made it possible to use esoteric testing to
identify genetic characteristics of many diseases. As science
expands our understanding of the human genome, we believe that
genetic testing will increase in importance.
We use complex testing technologies, such as Branch DNA and
polymerase chain reaction, or PCR, testing to directly evaluate
genetic material. These testing technologies provide earlier and
more precise detection of disease and predisposition to disease
than historically has been available. In August of this year, we
became the first national laboratory to offer Roche's new
PCR test for the sexually transmitted
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diseases chlamydia and gonorrhea. This highly specialized
esoteric test has been scientifically proven to be a more
sensitive test than traditional methodologies.
For the year ended December 31, 1999 and the six months
ended June 30, 2000, esoteric testing represented 47.0% and
52.9% of our net revenue, respectively.
Toxicology Testing.
We perform an average of 43,500
forensic toxicology tests per week. Forensic toxicology requires
complex procedures and government licensure, which we have both
at our Las Vegas, Nevada and Chantilly, Virginia laboratories.
Our toxicology customers are large employers and government
organizations who test their employees for drugs of abuse, as
well as hospitals and independent laboratories who choose not to
do these tests.
Our forensic toxicology department screens urine and hair
specimens for the presence of drugs. Specimens are submitted to
us by customers needing to comply with company, state or federal
government workplace drug testing programs. Toxicology testing
can occur on a pre-employment, random, for cause, return-to-duty
or post-accident basis. Hair testing can often detect drugs used
by an individual in the last 60 to 90 days, whereas
conventional urine drug testing typically only detects drug use
in the last few days.
We have made significant proprietary advances in the use of hair
testing for drug use, which have enabled enhanced detection of
drug users. We recently received a patent related to our hair
testing product and, in accordance with a final rule published by
 the FDA in April 2000, we will be seeking to obtain FDA
approval of that product. Our hair testing product shortens the
time needed to perform a hair test to a single day.
For the year ended December 31, 1999 and six months ended
June 30, 2000, toxicology testing represented 10.1% and
10.3% of our net revenue, respectively.
Routine Testing.
We perform an average of 164,000 routine
tests per week. Routine clinical laboratory tests measure various
 important bodily health parameters such as the function of the
kidneys, heart, liver, thyroid and other organs. Commonly ordered
 tests include:
•
blood chemistry tests;
•
complete blood count, or CBC;
•
pap smears;
•
HIV screening tests;
•
urinalyses; and
•
pregnancy tests.
We perform routine testing through our primary and STAT
laboratories. We also perform routine testing in hospitals where
we have on-site laboratories. Many test results are delivered
electronically to our customers, which include managed care
organizations and individual physician practices.
For the year ended December 31, 1999 and the six months
ended June 30, 2000, routine testing represented 42.9% and
36.8% of our net revenue, respectively.
Value-Added Services.
As part of our comprehensive service
 offering, we provide value-added services designed to support
our customers' laboratory businesses and enhance our
relationship with these customers. We draw on our expertise in
the clinical laboratory testing market to provide the following
value-added services to our customers:
•
Information Technology Services.
Our information
	technology capabilities enable online connectivity between us and
	 our clients.
•
Medical Directorships.
We provide medical directors for
	37 of our clients' laboratories.
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•
Test Management.
We examine our client's testing menu
	 and services and recommend strategies to reduce overall
	laboratory costs, while optimizing laboratory quality and
	turnaround time.
•
Sales Support.
Our sales force accompanies clients to
	promote our esoteric laboratory testing services as the
	client's reference laboratory.
•
Ancillary Services.
We assist our clients in ancillary
	services, including courier services, information technology and
	laboratory technical expert consultation.
•
On-Site Laboratories.
Some hospitals wish to reduce their
	involvement in the day-to-day operation of their in-house
	laboratories. We sometimes enter into agreements with our clients
	 under which we establish and license, in our name, an on-site
	laboratory, renting space from the client as necessary.
•
Phlebotomy Services.
In response to a request by a client,
	 we will work with our client to provide phlebotomy services,
	which is the process for collecting a blood specimen, in accord
	with relevant state and federal law.
Customers
We provide testing services to a broad range of health care
providers including hospitals, independent clinical laboratories,
 employers, managed care organizations, physicians and physician
practice groups. No single customer or affiliated group of
customers accounted for more than 7% of our total net revenues
for the six months ended June 30, 2000. Our strong client
service focus has contributed to a 99% client retention rate from
 January 1999 to June 2000.
Our principal customers include:
Hospitals.
We provide esoteric testing and value-added
services to over 380 hospitals throughout the United States. We
believe that we are one of the industry leaders in servicing
hospitals' esoteric laboratory testing needs. Hospitals are
competing for routine testing businesses in order to spread the
fixed costs of their internal laboratory facilities across a
broader revenue base. Our ability to assist hospitals in
expanding their routine testing businesses helps position us as
their preferred provider for esoteric testing services.
Our clients in the hospital market include individual hospitals,
hospital networks and hospitals belonging to GPOs. We recently
were named a preferred provider in contracts with two large GPOs,
 Health Trust Purchasing Group and Consorta Catholic Health
Resource Partners, which together have over 600 hospitals as
participating members. Our individual hospital clients include
Georgetown University Hospital and Massachusetts General
Hospital; and our hospital network clients include Central
Pennsylvania Alliance of Laboratories and Inova Health System.
Hospitals generally maintain on-site laboratories to perform
routine testing and outsource less frequently needed and esoteric
 procedures to laboratories like AML. Many hospitals compete with
 independent laboratories by offering testing services to
community physicians via the hospital's own laboratory. As a
 national esoteric laboratory services provider, we provide our
hospital customers with services that complement their routine
testing operations, and unlike other comprehensive national
laboratory service providers, other than in our core geographic
markets, we do not compete with those hospitals for routine
testing business in their local markets.
Independent Clinical Laboratories.
We provide esoteric
testing services to local and regional independent laboratories
that do not have the breadth of our esoteric testing
capabilities. The services we perform for independent laboratory
clients are similar to the esoteric testing services we perform
for hospital clients. We have over 160 independent clinical
reference laboratories as clients, including MDS, PathLab and
Dynacare.
Employers and Other Institutions.
We believe that we are
one of the leaders in the clinical laboratory industry in
providing testing to employers for illegal drug use. We believe
that the employer
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market is a large, growing market for laboratory testing as
companies and governmental agencies increase their pre-employment
 drug screening programs to ensure that their work environments
are safe and drug-free. All of our 4,730 employer and other
institutional customers are charged on a fee-for-service basis.
These customers include US Airways, United States Postal Service
and Publix Supermarkets.
Managed Care Organizations.
In our core geographic
markets, we service the managed care needs of our physician
clients. Managed care organizations in these markets contract
with us because of our share of the physician market and our
extensive service network. We also service the esoteric testing
needs of managed care organizations such as Kaiser Permanente,
which have their own routine testing laboratories but outsource
esoteric testing to us. We have capitated contracts, which
provide for billing on a fixed-fee basis, with 13 managed care
organizations.
Physicians and Physician Groups.
We provide esoteric
testing services to physicians and physician groups on a national
 basis. We also service the routine testing needs of these
customers in our core geographic markets. Many physicians are
required to refer tests to a specific laboratory. In addition to
capturing a share of that business, we believe our reputation as
a premier provider of testing services has enabled us to capture
many physicians' or physician groups' other testing
business. Our physician and physician group clients are billed on
 a fee-for-service basis.
Payors
We bill the majority of our testing services on a fee-for-service
 basis. If the service is a physician-ordered test, the payor may
 be the physician, the patient or a third party who pays the bill
 for the patient, such as an insurance company, Medicare or
Medicaid. Fees are billed to hospitals, independent clinical
laboratories and physicians based on a negotiated fee schedule.
Medicare and Medicaid reimbursements are based on fee schedules
set by governmental authorities.
Over the past few years, billing on a capitated basis has become
a larger segment of the industry's revenue. We have
selectively entered into capitated agreements and we received
only approximately 5% of our net revenue for the six months ended
 June 30, 2000 from capitated arrangements. The following
table shows current estimates of the breakdown of the percentage
of our net revenue for the six months ended June 30, 2000
applicable to each payor group:
Six Months Ended
June 30, 2000
Health care providers and employers
59.9%
Patient
12.4%
Other insurance
21.0%
Medicare and Medicaid
6.7%
Total
100.0%
Sales and Marketing
Our sales and marketing strategy is designed to expand our
esoteric services nationally and increase the penetration of our
comprehensive service offering in Nevada and metropolitan
Washington, D.C. The key elements of our strategy include:
•
continuing our direct sales efforts targeted at hospitals and
	independent clinical laboratories;
•
expanding our direct sales force with an increasing national
	focus; and
•
increasing the technical expertise of our sales organization.
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We believe our sales force is a key competitive advantage. Our
sales force includes recognized laboratory industry veterans and
is currently comprised of 46 sales professionals and a support
staff of 16 individuals. Twenty-four of our salespeople focus on
sales of esoteric testing and value-added services, while seven
focus primarily on toxicology sales. The remaining 15 salespeople
 focus primarily on sales to physicians and physician groups in
Nevada and metropolitan Washington, D.C. Many of our sales
professionals are medical technologists or other health care
professionals. We continue to expand our sales force with
additional personnel and management staff to accommodate new
market opportunities and to concentrate on increasing revenues
and profitability from existing clients.
We continually train and educate our sales force on the testing
services offered by our company. We emphasize client service and
quality, including periodic comprehensive reviews of our
performance and daily meetings among management and the sales
professionals to review any issues or problems with our clients.
We believe the success of our focus and efforts on client service
 and quality is demonstrated by our strong client retention,
growth in new clients and high customer satisfaction.
Information Technology
We provide a comprehensive offering of information technology
solutions to our clients that enables multi-level connectivity
and system interface functionality. Our offering includes a wide
range of flexible services, ranging from electronic data
interchange to internet-based services. Drawing on our extensive
operating history and diverse client base, we have created a
state of the art information technology solution that is user
friendly, cost effective and hardware neutral. Our service
offering includes:
•
automated test ordering;
•
results reporting;
•
legacy system interface and connectivity; and
•
a strategic relationship with LabPortal, Inc., which we believe
	will provide our clients with the latest clinical laboratory
	web-based connectivity software products and services.
These information technology capabilities help us establish a
long term relationship and provide value-added services not
typically offered in the laboratory industry. We have made a
significant investment in building a strong information
technology infrastructure that allows our customers to
efficiently and cost-effectively access and deliver data. We
believe that these investments give us a competitive advantage,
as customers find it easier to do business with us than with our
competitors.
Competition
The esoteric clinical laboratory business is highly competitive
and is served by several national laboratories, as well as many
niche and regional organizations. Our primary competitors include
 large independent laboratories, such as Quest Diagnostics and
Laboratory Corporation of America. We also compete with niche
laboratories such as Specialty Laboratories, Impath and Athena
Diagnostics, as well as laboratories affiliated with educational
institutions such as Mayo Medical Laboratories and Associated
Regional University Pathologists, in the esoteric testing market.
 In the toxicology testing business, we compete with Quest
Diagnostics, Laboratory Corporation of America, Psychemedics and
PharmChem. The routine laboratory testing business is highly
fragmented and also very competitive.
We believe that health care providers consider the following
factors, among others, in selecting a laboratory:
•
accuracy, timeliness and consistency in reporting test results;
•
breadth of tests performed by the laboratory;
•
customer service capability;
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•
reputation in the medical community;
•
logistics capability and geographic location;
•
information technology solutions;
•
approval of managed care organizations; and
•
pricing.
We believe that we compete favorably in each of these areas.
Compliance Program
Compliance with government rules and regulations is a significant
 concern throughout the clinical laboratory industry because of
evolving interpretations of regulations and the national debate
over health care expenditures, fraud and abuse. We have created a
 compliance program that we believe substantially follows the
United States Department of Health and Human Services'
Office of Inspector General's Model Compliance Plan for
Clinical Laboratories. We are in the process of integrating the
compliance programs of AML and APL. We believe that we comply, in
 all material respects, with applicable statutes and regulations.
Quality Assurance
Our goal is to provide the highest levels of client satisfaction
and foster long-term relationships. To achieve that goal, we have
 implemented a comprehensive quality assurance program which
ensures that laboratory specimens are properly collected and
tested and client and patient information is timely and properly
recorded, billed and filed.
Internal Quality Control and Audits.
Quality control
samples are processed in parallel with the analysis of patient
specimens. The results of tests on quality control samples are
then monitored to identify imprecision in the analytical
processes. In addition, we administer an extensive internal
program of "blind" proficiency testing, where quality
control samples are processed through our systems as normal
patient samples. We also perform internal process audits as part
of our comprehensive quality assurance program.
External Proficiency Testing and Accreditation.
Our
laboratories participate in various externally-conducted blind
sample quality surveillance programs. These programs are
performed in connection with all other quality assurance
procedures. They include proficiency testing programs
administered by the College of American Pathologists, as well as
many state agencies. Our laboratories are all accredited by the
College of American Pathologists, an independent nongovernmental
organization of board certified pathologists approved by the
United States Health Care Financing Administration to inspect
laboratories to determine compliance with the standards required
by the Clinical Laboratory Improvement Amendments of 1988. The
College of American Pathologists, or CAP, offers an accreditation
 program, which includes on-site inspections and participation in
 a proficiency testing program, to which laboratories may
voluntarily subscribe.
Regulation of Clinical Laboratory Operations
The clinical laboratory industry is subject to significant
federal and state regulation. Governmental authorities may impose
 fines or criminal penalties or take other enforcement actions,
including revoking a clinical laboratory's right to conduct
business, in order to enforce laws and regulations.
CLIA and State Law.
Our laboratories and patient service
centers are licensed and accredited by applicable federal and
state agencies. The Clinical Laboratory Improvement Amendments of
 1988, or CLIA, regulate virtually all clinical laboratories by
requiring that they be certified by the federal government to
ensure that laboratory testing services are uniformly accurate,
reliable and timely. CLIA permits states to adopt regulations
that are more stringent than federal law. For example, state laws
 may require additional personnel qualifications, including
licensure or certification, specific lab report or billing
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disclosure, quality control, record maintenance or proficiency
testing. State laws may also prohibit mark-ups or multiple fee
schedules by laboratories performing tests on specimens
originating in the state. A number of states with some degree of
jurisdiction over our activities, including New York, have in
fact adopted regulations stricter than those set forth in CLIA.
CAP performs inspections under CLIA for HCFA every two years.
CLIA certification via CAP or other federally designated agencies
 and compliance with applicable state licensure requirements also
 are prerequisites for our continued participation in the
Medicare and Medicaid programs.
Drug Testing.
The Substance Abuse and Mental Health
Services Administration, or SAMHSA, regulates drug testing for
public sector employees. SAMHSA has established detailed
performance and quality standards that laboratories must meet to
perform drug testing on federal employees and contractors and
other regulated entities. Our laboratories that perform such
testing must be certified as meeting SAMHSA standards. Our SAMHSA
 certified laboratories are subject to on-site inspections twice
a year by SAMHSA and CAP.
Controlled Substances.
The federal Drug Enforcement
Administration, or DEA, regulates access to controlled substances
 in drug abuse testing. Our laboratories that handle controlled
substances are licensed by the DEA.
Medical Waste and Radioactive Materials.
Clinical
laboratories are also subject to federal, state and local
regulations relating to the handling and disposal of medical
specimens, hazardous waste and radioactive materials. We use
licensed outside suppliers for such disposal. We believe that we
currently comply with all laws in connection with the disposal of
 medical waste and radioactive materials.
Occupational Safety.
The federal Occupational Safety and
Health Administration, or OSHA, has established extensive
requirements relating specifically to workplace safety for health
 care employers. This includes laboratories whose workers may be
exposed to blood-borne or airborne viruses. We believe that we
are in substantial compliance with OSHA rules and regulations and
 have adopted policies to meet OSHA requirements.
Specimen Transportation.
Regulations of the Department of
Transportation, the Public Health Service and the United States
Postal Service apply to surface and air transportation of
laboratory specimens. We believe that we are in substantial
compliance with such regulations.
Regulation of Reimbursement for Laboratory Services
Overview.
The health care industry has been undergoing
significant changes. Governmental payors, such as Medicare, which
 principally serves patients aged 65 years and older, and
Medicaid, which principally services indigent patients, as well
as private insurers and large employers, have taken steps to
control the cost, utilization and delivery of health care
services. We believe that our non-government reimbursed business
may depend on continued participation in the Medicare and
Medicaid programs, because many clients may want a single
laboratory to perform all of their laboratory testing services,
regardless of whether reimbursements are ultimately made by
themselves, Medicare, Medicaid or other payors.
Billing and reimbursement for laboratory testing is subject to
significant federal and state regulation. Penalties for
violations of laws relating to billing federal health care
programs and for violations of federal fraud and abuse laws
include:
•
exclusion from participation in Medicare/ Medicaid and other
	federal health care programs;
•
asset forfeitures;
•
civil and criminal penalties and fines; and
•
loss of various licenses, certificates and authorizations
	necessary to operate some or all of our business.
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Reduced Reimbursements.
In 1984, Congress established a
Medicare fee schedule for laboratory services performed for
patients covered under Part B of the Medicare program. In
1986, Congress imposed a ceiling (the national limitation amount)
 on the amount that would be paid under the Medicare fee schedule
 reimbursement methodology. Since then, Congress has periodically
 reduced previous ceilings on the national limitation amount. The
 Medicare national limitation amount was reduced in 1996 to 76%
of the national limitation amount and in 1998 to 74% of the
national limitation amount. In addition, Congress also eliminated
 through 2002 the provision for annual fee schedule increases
based on the consumer price index. The Clinton
administration's proposed budget for fiscal Year 2000 sought
 to reduce further the Medicare national limitation amount to
72%, to reduce laboratory payment updates by the Consumer Price
Index, or CPI, minus one percent over the next five years, and to
 reduce laboratory payments by 30 percent for four common
laboratory tests (HgbAlc, TSH, PSA and urine culture) where data
show Medicare overpays compared to the private sector. We cannot
predict whether Congress will implement the proposed reductions
or any other reductions.
Laboratories must bill the Medicare program directly and must
accept the scheduled amount as payment in full for most tests
performed on behalf of Medicare beneficiaries. In addition, state
 Medicaid programs are prohibited from paying more (and in most
instances, pay significantly less) than Medicare. Major
laboratories, including us, typically use two fee schedules:
•
Fees charged to physicians, hospitals and institutions to which a
	 laboratory supplies services on a wholesale basis. These are
	generally subject to negotiation or discount.
•
Fees charged to individual patients and third party payors, like
	Medicare and Medicaid. These generally require separate bills for
	 each requisition.
The fees established by Medicare are typically lower than patient
 fees otherwise charged by us, but are higher than our fees
actually charged to many clients. During 1992, the Office of the
Inspector General, or OIG, of the Department of Health and Human
Services, or HHS, issued final regulations that prohibited
charging Medicare fees substantially in excess of a
provider's usual charges. The OIG, however, declined to
provide any guidance concerning interpretation of these rules,
including whether or not discounts to nongovernmental clients and
 payors or the dual-fee structure might be inconsistent with
these rules.
A proposed rule released in September 1997 would have
authorized the OIG to exclude from participation in the Medicare
program providers, including laboratories, that charge Medicare
and other federal health care programs fees that are
"substantially in excess of . . . usual charges
 . . . to any of [their] customers, clients or
patients." This proposal was withdrawn by the OIG in 1998.
However, the 1997 Balanced Budget Act permits HCFA to adjust
reimbursement for some Part B services, including laboratory
 services, if the fees are "inherently unreasonable."
In January 1998, HCFA issued an interim final rule setting
forth criteria to be used by HCFA in determining whether to
exercise this power. Among the factors listed in the rule are
whether the statutorily prescribed fees are "grossly higher
or lower than the payment made for the . . . services
by other purchasers in the same locality." We cannot provide
 any assurances to you that fees payable by Medicare could not be
 reduced as a result of the application of this rule.
HCFA recently issued a contract to a company to develop
background data to be used in an inherent reasonableness review
of Pap Smears and 50 other high volume tests. The background data
 will be used by HCFA to determine whether the payments made by
Medicare are grossly deficient or grossly excessive for the tests
 to be studied. We cannot determine the results of this review at
 this time. The Clinical Laboratory Management Association, or
CLMA, a trade association representing the clinical laboratory
industry, is also conducting its own industry-wide study of costs
 of 21 laboratory tests, including the four targeted in President
 Clinton's fiscal year 2001 budget proposal for Medicare
payment reductions of 30%. The CLMA hopes to make the study an
annual event so that there will be a database for test costs. We
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cannot determine at this time what the outcome of the study will
be, or how HCFA or Congress will respond to it.
In addition, in the 1997 Balanced Budget Act Congress directed
the Institute of Medicine, or IOM, to undertake a study of
Medicare's current payment system for clinical laboratory
services, to include a review of the adequacy of the current
methodology and recommendations regarding alternative payment
systems. The IOM study is scheduled to be completed and released
in the Fall of 2000. We cannot predict the study's
recommendations regarding payment methodologies, or how Congress
may react to the study's findings, and we cannot assure you
that significant changes to the Medicare reimbursement system for
 clinical laboratory services would not have a material adverse
effect on our business.
Reduced Utilization of Laboratory Testing.
In recent
years, HCFA has taken several steps to reduce utilization of
laboratory testing. Since 1995, Medicare carriers have adopted
policies under which they do not pay for some commonly-ordered
tests unless the ordering physician has provided an appropriate
diagnostic code supporting the medical necessity of the test.
Physicians are required by law to provide diagnostic information
when they order tests for Medicare and Medicaid patients, for
which tests the laboratory is required to provide a diagnosis.
However, there is no penalty prescribed for violations of this
law by physicians.
In March 1996, HCFA eliminated its prior policy under which
Medicare paid for all tests contained in an automated chemistry
panel when at least one of the tests in the panel is medically
necessary. HCFA indicated that under the new policy, Medicare
will only pay for those individual tests in a chemistry panel
that are medically necessary. Later in 1996, the American Medical
 Association, or AMA, in conjunction with HCFA, designed four new
 panels of "clinically relevant" automated chemistry
panels. Each panel consists of between 4 and 12 tests. These four
 new panels replaced the previous automated chemistry test
panels, consisting of 19 to 22 tests. HCFA adopted these panels
in early 1998. Since then, Medicare carriers have focused limited
 coverage application to the panel level and not to the test
component level. However, we cannot assure you that Medicare
carriers will not focus future limited coverage application to
the test component level, thereby further limiting our ability to
 obtain Medicare reimbursement for these profiles.
We are generally permitted to bill patients directly for some
statutorily excluded laboratory services. We are also generally
permitted to bill patients for laboratory tests that Medicare
does not pay for due to "medical necessity"
limitations, but only if the patient signs a properly completed
Advance Beneficiary Notice, or ABN (such tests include limited
coverage tests for which an approved diagnosis code is not
provided by the ordering physician). We often must rely on our
physician customers to obtain ABNs from their Medicare patients.
Negotiated Rulemaking.
On March 10, 2000, the Health
Care Financing Administration issued a proposed rule that would
adopt national coverage and claims processing policies for
clinical laboratory services. These proposals were the result of
negotiated rulemaking mandated by Congress in the Balanced Budget
 Act of 1997 in response to concerns resulting from inconsistent
Medicare carrier policies relating to medical necessity,
documentation and recordkeeping requirements for clinical
laboratory services. We have reviewed the proposed rule and do
not believe it will have a significant impact on our business.
However, we cannot provide any assurances that HCFA will not
implement substantial changes in the final rule that could have a
 material adverse affect on us.
Regional Medicare Carriers.
The 1997 Balanced Budget Act
also directed HCFA to replace the current system of local
Medicare carriers with no more than five regional lab carriers.
To date, HCFA has delayed taking any substantive action on this
mandate and has indicated a desire to have the regional lab
carrier requirement repealed by Congress. We do not believe that
implementation of this regional carrier concept is important to
our success.
Competitive Bidding.
The 1997 Balanced Budget Act requires
 HCFA to conduct and complete by 2002 five Medicare bidding
demonstrations involving various types of medical services. HCFA
is expected
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to include a laboratory demonstration project in a metropolitan
statistical area as part of the legislative mandate. Competitive
bidding for laboratory tests is still under review. If
competitive bidding were implemented on a regional or national
basis for laboratory testing, it could materially adversely
affect the clinical laboratory industry and our business.
Future Legislation.
Future changes in federal, state and
local statutes and regulations (or in the interpretation of
current regulations) affecting governmental reimbursement for
laboratory testing could materially adversely affect us. We
cannot predict, however, whether and what type of legislation or
regulations will be enacted into law.
Fraud and Abuse Regulations.
The federal anti-kickback
statute broadly prohibits laboratories from making payments or
furnishing other benefits to influence the referral of tests
billed to Medicare, Medicaid or other federal health care
programs. Enforcement of this anti-kickback prohibition has
steadily increased in recent years as part of a broader effort by
 various federal enforcement agencies, including the Federal
Bureau of Investigation and the OIG, to interpret liberally and
enforce aggressively statutory fraud and abuse provisions.
According to public statements by the Department of Justice, or
DOJ, health care fraud has been elevated to one of the highest
priorities of the DOJ and substantial prosecutorial and other law
 enforcement resources have been committed to investigating
health care provider fraud. The OIG also is involved in such
investigations and has, according to recent public statements and
 workplans, targeted certain laboratory practices for study,
investigation and prosecution.
As noted above, the penalties for violation of these laws may
include criminal and civil fines and penalties and exclusion from
 participation in federal programs. Many of the anti-fraud
statutes and regulations, including those relating to joint
ventures and alliances, are vague or indefinite and have not been
 interpreted by the courts. In addition, regulators have
generally offered little guidance to the clinical laboratory
industry. Despite several requests from the clinical laboratory
industry for clarification of the anti-fraud and abuse rules
since 1992, the OIG has issued only a few fraud alerts and
advisory opinions regarding laboratory practices. Although we
believe we are in compliance with these laws, we cannot predict
if some of the fraud and abuse rules will be interpreted contrary
 to our practices.
Moreover, many states have anti-kickback, anti-rebate,
anti-fee-splitting and other laws that also affect our
relationships with clients who refer non-government-reimbursed
laboratory testing business to us.
In addition, since 1992, a federal anti-"self-referral"
 law, commonly known as the "Stark" law, prohibits,
with certain exceptions, Medicare payments for laboratory tests
referred by physicians who have, personally or through a business
 or immediate family member, an investment interest in, or a
compensation arrangement with, the testing laboratory. Since
January 1995, these restrictions have also applied to
Medicaid-covered services. Penalties apply to violations of this
statute. Many states have similar anti-"self-referral"
laws that also affect investment and compensation arrangements
with physicians and other clients who refer laboratory testing
business to us. Penalties also apply to violations of these laws.
Insurance
We maintain liability insurance, subject to limits and
deductibles, for claims that could result from providing or
failing to provide laboratory testing, including inaccurate
testing results. These claims could be substantial. Management
believes that present insurance coverage and reserves are
adequate to cover currently estimated exposures. Although we
believe that we will be able to obtain adequate insurance
coverage in the future at acceptable costs, we cannot assure you
that we will be able to do so, or obtain coverage at an
acceptable cost, or that we will not incur significant
liabilities in excess of policy limits.
Properties
We conduct most of our testing from our 250,000 square foot
laboratory facility in Chantilly, Virginia, just outside of
Washington, D.C., under a lease which expires in 2017, and our
124,000 square foot
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facilities in Las Vegas, Nevada, of which 85,000 square feet
 are owned and 39,000 square feet are leased. In addition to
 our facilities in Virginia and Nevada, we operate 22 remote
 service centers that are used to consolidate shipments to our
Virginia and Nevada facilities, 53 patient centers that are
located in the Washington, D.C. and Nevada areas to draw samples
from patients and eight STAT laboratories established for
quick-turnaround, customer-specific testing. We lease space for
all of our remote service centers, patient centers and STAT
laboratories. Our remote service centers are generally
1,500 square feet, our patient centers are generally
1,200 square feet and our STAT laboratories are generally
500 to 5,000 square feet in size.
Employees
At June 30, 2000, we employed approximately 2,700 people, of
 which 2,400 were full-time employees. We believe that we have
good relations with our workers, none of whom is represented by a
 union.
Legal Proceedings
There are claims, suits and complaints which arise in the
ordinary course of business that have been filed or are pending
against us. We believe that all such matters either are
adequately reserved for, are covered by insurance, or would not
have a material adverse effect on us, if adversely determined
against us.
In September 2000, our APL subsidiary reached an agreement
with the United States Department of Justice, the Office of
Inspector General of the Department of Health and Human Services
and the Tricare Management Activity of the Department of Defense
to settle allegations raised in a 1996 "whistleblower"
lawsuit filed under the federal False Claims Act. The settlement
agreement requires APL to pay approximately $1.5 million to
fully resolve the allegations that from 1989 until 1993 APL
billed Medicare and other federal health care programs for
medically unnecessary tests. The settlement amount and all legal
fees and other expenses associated with this matter are covered
by an indemnity and an escrow account provided by the sellers in
the APL acquisition. Moreover, in recognition of APL's
voluntary compliance efforts since 1993, the government has not
required APL to enter into a corporate integrity agreement as
part of the settlement; rather, APL must maintain its existing
compliance program for a period of three years. Thus, the
settlement does not involve any material continuing obligations
on the part of APL and will have no impact on our ability to
conduct our business.
We are currently undergoing an IRS audit relating to our 1997 tax
 year. We have not yet made any determination as to the
additional tax liability, if any, that could result from that
audit. We do not believe that any such liability would be
material.
We are not aware of any other material allegations or
investigations concerning our business by any governmental
entity.
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MANAGEMENT
Directors, Executive Officers and Key Employees
The following table provides information about our directors,
executive officers and key employees.
Name
Age
Position
Timothy J. Brodnik
52
Chairman of the Board, President and Chief Executive Officer
John E. Bergstrom
54
Executive Vice President — Business Development
Victoria L. DiFrancesco
44
Executive Vice President — Sales
Alvin Ezrin
60
Executive Vice President — Law and Corporate Compliance
         Officer
H. Bryan Firestone
42
Senior Vice President — Chief Information Officer
Charles J. Krambuhl
50
Executive Vice President — Employee and Client
        Relations
Robert C. Low
46
Senior Vice President — Controller
Steve R. Pierce
53
Executive Vice President and Chief Financial Officer
John P. Schwartz
50
President of Western Operations
Craig D. Shanklin
44
Executive Vice President — Marketing
Nathan Sherman
49
Senior Vice President and Medical Director
Jay D. Tyler
43
Executive Vice President — Operations
Vance R. White
53
Executive Vice President — Technical Operations and
        Research and Development
Jerrold L. Glick
58
Director and Secretary
Bruce V. Rauner
44
Director
Donald J. Edwards
34
Director
Timothy J. Brodnik, Chairman of the Board, President and Chief
 Executive Officer,
has served as Chairman of the Board since
 December 1999 and has served as Director, President and
Chief Executive Officer of AML since May 1997. From 1991 to
1997, Mr. Brodnik was Executive Vice President and a member
of the Executive Management Committee of Laboratory Corporation
of America and its predecessor, National Health Laboratories.
John E. Bergstrom, Executive Vice President —
Business Development,
has served in that capacity since
May 1997. From 1995 to 1996, Mr. Bergstrom served as
Senior Vice President of Laboratory Corporation of America. From
1993 to 1995, he served as Executive Director – Managed Care
 of National Health Laboratories.
Victoria L. DiFrancesco, Executive Vice President —
Sales,
has served in that capacity since November 1997.
From 1990 until November 1997, Ms. DiFrancesco was the
Associate Vice President of Division Business Development and
Customer Service for Laboratory Corporation of America in San
Diego.
Alvin Ezrin, Executive Vice President — Law and
Corporate Compliance Officer,
has served in that capacity
since May 1997. From 1995 to 1996, Mr. Ezrin served as Vice
President of Law at Laboratory Corporation of America.
H.  Bryan Firestone, Senior Vice President —
Chief Information Officer,
has served in that capacity since
April 2000. From 1987 to 2000, Mr. Firestone was the
Associate Vice President of Information Systems at Laboratory
Corporation of America and its predecessor, National Health
Laboratories.
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Charles J. Krambuhl, Executive Vice President —
Employee and Client Relations,
has served in that capacity
since October 1998. From 1991 to 1998, Mr. Krambuhl was
 the Director, Manufacturing, Distribution and Marketing for the
American Petroleum Institute.
Robert C. Low, Senior Vice President — Controller,
has served in that capacity since May 2000. Prior to
that time, he was Vice President and Controller of the Process
Division of Stone & Webster. Prior to that time, he was the
Director of Financial Analysis at Dresser Industries, Inc. at its
 corporate headquarters. He also served as Controller for
subsidiaries of Dresser in both the United States and abroad.
Mr. Low joined Dresser in 1984 after nine years with Arthur
Andersen.
Steve R. Pierce, Executive Vice President and Chief Financial
Officer,
has served in that capacity since January 2000.
 From 1998 until January 2000, Mr. Pierce was the Vice
President of Finance and Administration and Controller of Kellogg
 Brown and Root, a division of Halliburton Company. From 1995
until 1998, he served as Vice President and Chief Financial
Officer for subsidiaries of Dresser Industries, Inc. in both the
United States and abroad, prior to Dresser's merger with
Halliburton Company.
John P. Schwartz, President of Western Operations,
has
served in that capacity since October of 1999, and as the
President and Chief Executive Officer of APL since 1981.
Craig D. Shanklin, Executive Vice President —
Marketing,
has served in that capacity since
October 1999 and as Vice President of Marketing of APL since
 May 1995.
Nathan Sherman, Senior Vice President & Medical Director,
has served in that capacity since October 1999. From
1987 to 1999, he served as Medical Director of Laboratory
Corporation of America's Northern Virginia regional
laboratory and its predecessor, National Health Laboratories.
Jay D. Tyler, Executive Vice President — Operations,
has served in that capacity since November 1997 and was
 Vice President from May 1997 to November 1997. From January
 to May 1997, Mr. Tyler served as Corporate Billing
Leader for Quest Diagnostics, Inc. From 1988 to 1996, he served
in various financial positions including Vice President of
Corporate Finance of Laboratory Corporation of America.
Vance R. White, Executive Vice President — Technical
 Operations and Research and Development,
has served in that
capacity since 1999. For seven years prior to that time, he was a
 clinical laboratory consultant, the last two years for the
company. From 1973 to 1991, he held various positions including
Executive Vice President of National Health Laboratories.
Jerrold L. Glick, Director and Secretary,
has served as a
Director of AML since May 1997, as Chairman of the Board
from May 1997 to December 1999, and as our Secretary
since May 1997. Mr. Glick has been a general partner of
 Columbia Group Limited, LLLP, a real estate development company,
 since 1972. Mr. Glick has been involved in the clinical
laboratory industry since 1967, having founded a chain of
clinical laboratories that was later sold to National Health
Laboratories. Mr. Glick is also a director of Telik, Inc.
and a number of private companies.
Bruce V. Rauner, Director,
has served as a Director of AML
 since May 1997. Mr. Rauner is managing principal of GTCR
Golder Rauner, LLC, formed in May 1998 as a successor to Golder,
Thoma, Cressey, Rauner, Inc., of which he has been a principal
since 1981. Mr. Rauner is also a director of AnswerThink
Consulting Group, Inc., divine interVentures, inc., Polymer
Group, Inc., U.S. Aggregates, Inc. and a number of private
companies in GTCR's portfolio.
Donald J. Edwards, Director,
has served as a Director of
AML since May 1997. Mr. Edwards is a principal of GTCR
Golder Rauner, LLC, formed in May 1998 as a successor to Golder,
Thoma, Cressey, Rauner, Inc., of which he has been a principal
since 1996 and was an associate from 1994 to 1996.
Mr. Edwards is also a director of a number of private
companies in GTCR's portfolio.
There are no family relationships between any of our directors or
 executive officers.
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Our board of directors currently consists of four directors.
Within 90 days after the consummation of the offering, we expect
to appoint three additional directors who are not employees of
our company or otherwise affiliated with our company or our
principal stockholders. The board of directors has the power to
appoint the officers of the company. Each officer will hold
office for such term as may be prescribed by the board and until
such person's successor is chosen and qualified or until
such person's death, resignation or removal.
Prior to the completion of this offering, we will divide our
board of directors into three classes, as nearly equal in number
as possible, with each director serving a three-year term and one
 class being elected at each year's annual meeting of
stockholders. Mr. Edwards will be in the class of directors whose
 term expires at the 2001 annual meeting of our stockholders. Mr.
 Glick will be in the class of directors whose term expires at
the 2002 annual meeting of our stockholders. Messrs. Brodnik and
Rauner will be in the class of directors whose term expires at
the 2003 annual meeting of our stockholders. One of the three
additional directors that we expect to appoint to the board will
serve in each class. At each annual meeting of our stockholders,
successors to the class of directors whose term expires at such
meeting will be elected to serve for three-year terms and until
their respective successors are elected and qualified.
Compensation of Directors
Directors are currently not entitled to receive any compensation
for serving on the board of directors. Directors are reimbursed
for their out-of-pocket expenses incurred in connection with such
 services. Following this offering, directors who are not our
employees will receive cash and/or stock options as compensation
for their services.
Committees of the Board of Directors
Upon the closing of this offering, the board of directors will
have an audit committee and a compensation committee. The audit
committee will report to the board regarding the appointment of
our independent public accountants, the scope and results of our
annual audits, compliance with our accounting and financial
policies and management's procedures and policies relative
to the adequacy of our internal accounting controls. Upon the
completion of the initial public offering, the audit committee
will consist exclusively of independent directors. The
compensation committee of the board of directors will review and
make recommendations to the board regarding our compensation
policies and all forms of compensation to be provided to our
executive officers. In addition, the compensation committee will
review bonus and stock compensation arrangements for all of our
other employees.
Compensation Committee Interlocks and Insider Participation
We currently do not have a compensation committee. The
compensation arrangements for each of our executive officers was
established pursuant to the terms of the respective employment
agreements between us and each executive officer. The terms of
the employment agreements were established pursuant to
arms-length negotiations between representatives of GTCR and each
 executive officer, except the agreement relating to Mr.
Krambuhl, which was negotiated with us and approved by the board
of directors. On a going forward basis, any changes in the
compensation arrangements of our executive officers will be
determined by the compensation committee.
Professional Services Agreement
For a description of our professional services agreement with
GTCR see "Certain Relationships and Related
Transactions — Professional Services Agreement."
Executive Compensation
The following table provides, for the year ended
December 31, 1999, the compensation paid to our Chief
Executive Officer and our other executive officers whose total
annual salary and bonus was in excess
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of $100,000 for fiscal year 1999. For ease of reference, we refer
 to each of these executive officers throughout this section as a
 Named Executive Officer and collectively as the Named Executive
Officers.
Summary Compensation Table
All Other
Annual Compensation
Compensation($)(1)
Name and
Principal Position
Year
Salary($)
Bonus($)
Timothy J. Brodnik
1999
$
394,859
$
350,000
$
1,776
Chairman, President and Chief Executive Officer
John E. Bergstrom
1999
220,815
122,500
264
Executive Vice President — Business
Development
Charles Krambuhl
1999
161,511
60,000
264
Executive Vice President — Employee and Client
	Relations
Alvin Ezrin
1999
158,831
30,000
264
Executive Vice President — Law and Corporate
	Compliance Officer
(1)  Represents amounts paid by us in respect of term life
insurance premiums.
We did not grant any stock options to any of our Named Executive
Officers during the year ended December 31, 1999.
Fiscal Year End Option Values
The following table contains information regarding unexercised
options held by the Named Executive Officers as of
December 31, 1999. There was no public trading market for
our common stock as of December 31, 1999. Accordingly, the
value of unexercised options has been calculated by subtracting
the exercise price from the fair market value of $7.68 per share
on December 31, 1999, estimated by management for financial
reporting purposes, multiplied by the number of shares underlying
 the option. No options were exercised by the Named Executive
Officers during the year ended December 31, 1999.
Number of
Securities
Underlying
Value of Unexercised
Unexercised
In-the-Money
Options/SARs at
Options/SARs at
Fiscal Year-End
Fiscal Year-End
Shares Acquired on
Exercisable/
Exercisable/
Name
Exercise (#)
Value Realized ($)
Unexercisable
Unexercisable
Timothy J. Brodnik
—
—
—/—
—/—
John E. Bergstrom
—
—
—/—
—/—
Charles Krambuhl
—
—
17,500/57,500
$
134,050/$440,450
Alvin Ezrin
—
—
11,250/28,750
$
86,175/$220,225
Management Employment Agreements
Timothy Brodnik.
We are party to a senior management
agreement with Mr. Brodnik. Under the agreement, Mr. Brodnik
 is entitled to receive an annual base salary of not less than
$650,000. Mr. Brodnik is also eligible for a bonus based on
our achievement of budgetary and other objectives set by our
board of directors, provided that we are obligated to pay
Mr. Brodnik a minimum bonus of $50,000 per year.
Mr. Brodnik is also entitled to all other benefits as are
approved by the board and made generally available to other
members of our senior management.
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Under the agreement, on May 2, 1997, Mr. Brodnik
purchased 1,476,470 shares of common stock at a price of $0.02
per share and 80.99 shares of preferred stock at $1,000 per
share. Mr. Brodnik paid for this stock by delivering $75,000
 in cash, a $9,023 bridge note and a $26,501 promissory note. The
 bridge note was repaid on August 15, 1997. The promissory
note bears interest at the applicable federal rate and is due on
December 31, 2005.
Of the 1,476,470 shares of common stock purchased by
Mr. Brodnik, 151,435 shares were vested on the date of
purchase and the remaining 1,325,035 shares are scheduled to vest
 in 20% increments on each of the first five anniversaries of
May 2, 1997. The agreement also provides that upon
completion of an initial public offering, such as this offering,
the shares which were scheduled to vest during the twelve months
immediately following the date of the offering will vest at the
time of the offering.
Mr. Brodnik's employment with the company will continue
 until terminated by the resignation, death or disability of
Mr. Brodnik or by the board with or without cause. In the
event Mr. Brodnik's employment is terminated by the
board without cause or Mr. Brodnik resigns for good reason,
Mr. Brodnik would be entitled to receive a severance payment
 equal to $2.0 million and would also be entitled to
18 months of continued group medical and life insurance
coverage. Mr. Brodnik has agreed not to compete with the
company or solicit any customers or employees of the company
during the term of his employment and for two years thereafter.
John E. Bergstrom.
We are party to a senior management
agreement with Mr. Bergstrom. Under the agreement,
Mr. Bergstrom is entitled to receive an annual base salary
of not less than $175,000. Mr. Bergstrom is also eligible
for a bonus based on our achievement of budgetary and other
objectives set by our board of directors, provided that we are
obligated to pay Mr. Bergstrom a minimum bonus of $50,000
per year. Mr. Bergstrom is also entitled to all other
benefits as are approved by the board and made generally
available to other members of our senior management.
Under the agreement, on May 2, 1997 Mr. Bergstrom
purchased 618,350 shares of common stock at a price of $0.02 per
share and 27 shares of preferred stock at $1,000 per share.
Mr. Bergstrom paid for this stock by delivering $25,000 in
cash, a $3,008 bridge note and a $11,347 promissory note. The
bridge note was repaid on April 7, 1999. The promissory note
 bears interest at the applicable federal rate and is due on
December 31, 2005.
Of the 618,350 shares of common stock purchased by
Mr. Bergstrom, 50,480 shares were vested on the date of
purchase and the remaining 567,870 shares are scheduled to vest
in 20% increments on each of the first five anniversaries of
May 2, 1997. The agreement also provides that upon
completion of an initial public offering, such as this offering,
the shares which were scheduled to vest during the twelve months
immediately following the date of the offering will vest at the
time of the offering.
Mr. Bergstrom's employment with the company will
continue until terminated by the resignation, death or disability
 of Mr. Bergstrom or by the board with or without cause. In
the event Mr. Bergstrom's employment is terminated by
the board without cause or by Mr. Bergstrom for good reason,
 Mr. Bergstrom is entitled to severance at a rate equal to
his then-current base salary for a period of twelve months and
continued group medical and life insurance coverage during such
period. Mr. Bergstrom has agreed not to compete with the
company or solicit any customers or employees of the company
during the term of his employment and for two years thereafter.
Alvin Ezrin.
We are party to a severance and
non-solicitation agreement with Mr. Ezrin. Under the
agreement, Mr. Ezrin will be entitled to receive severance
payments equal to twelve months of his base salary if we
terminate his employment without cause. Mr. Ezrin has agreed
 not to solicit any customers or employees of ours during the
period in which he is receiving severance payments.
Charles J. Krambuhl.
We are party to an employment
agreement with Mr. Krambuhl. Under the agreement,
Mr. Krambuhl is entitled to receive an annual base salary of
 $155,000. Mr. Krambuhl also
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received a signing bonus of $20,000 and management incentive
bonus of $30,000 in January 2000. We agreed to grant
Mr. Krambuhl an option to purchase 15,000 shares of our
common stock at an exercise price of $0.02 per share.
Mr. Krambuhl is also entitled to other benefits as are
approved by the board and made generally available to other
members of our senior management.
Under the agreement, Mr. Krambuhl will be entitled to
receive severance payments equal to twelve months of his base
salary if we terminate his employment without cause. If
Mr. Krambuhl's employment terminates after a change in
control of our company, he will be entitled to receive two years
of severance payments.
1997 Stock Option Plan
In May 1997, our board of directors approved the 1997 Stock
Option Plan, which as amended we refer to as the 1997 stock
option plan, and which authorizes the granting of non-qualified
stock options to employees of AML or its subsidiaries. The 1997
stock option plan authorizes the granting of stock options up to
an aggregate of
        shares of common
stock, subject to adjustment based on the occurrence of specified
 events and to prevent any dilution or expansion of the rights of
 participants that might otherwise result from the occurrence of
such events.
Options to purchase an aggregate of
        shares of our
common stock were outstanding as of September 30, 2000 under
 the 1997 stock option plan. Such options generally vest and
become exercisable in five equal installments beginning on the
first anniversary of the grant date and continuing thereafter on
an annual basis. Unvested options will terminate in the event
that the optionee ceases to be employed by AML or its
subsidiaries and vested but unexercised options will terminate
immediately if the optionee is terminated for cause, after
30 days if the optionee is terminated without cause, or
after 90 days in the case of death, disability or
retirement. Subsequent to the adoption of the long-term equity
incentive plan described below, no future grants will be made
under the 1997 stock option plan.
Long-Term Equity Incentive Plan
Prior to the closing of the offering, we will adopt the American
Medical Laboratories, Incorporated 2000 Equity Incentive Plan.
The equity incentive plan provides for grants of stock options,
stock appreciation rights, restricted stock and performance
awards. Directors, officers and other employees of us or our
subsidiaries and persons who engage in services for us are
eligible for grants under the plan. The purpose of the equity
incentive plan is to provide these individuals with incentives to
 maximize stockholder value and otherwise contribute to our
success and to enable us to attract, retain and reward the best
available persons for positions of responsibility.
A total of     shares of our common
stock, representing      % of our
currently outstanding common stock, will be available for
issuance under the equity incentive plan, subject to adjustment
in the event of a reorganization, stock split, merger or similar
change in our corporate structure or the outstanding shares of
common stock.
The compensation committee of our board of directors will
administer the equity incentive plan. Our board also has the
authority to administer the plan and to take all actions that the
 compensation committee is otherwise authorized to take under the
 plan. We anticipate that in connection with the offering, we
will grant options to purchase an aggregate of
approximately     shares of our common
stock to approximately
          employees.
 All of these options will have an exercise price equal to the
initial public offering price of the common stock in the offering
 and will be subject to vesting over a    -year
period.
Directors, officers and employees of us and our subsidiaries, as
well as other individuals performing significant services for us,
 or to whom we have extended an offer of employment, will be
eligible to receive
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grants under the equity incentive plan. However, only employees
may receive grants of incentive stock options. In each case, the
compensation committee will select the actual grantees.
Under the equity incentive plan, the compensation committee or
the board may award grants of incentive stock options conforming
to the provisions of Section 422 of the Internal Revenue
Code of 1986, as amended, non-qualified stock options, stock
appreciation rights, restricted stock grants and other
performance awards. The compensation committee may not, however,
award to any one person in any calendar year options to purchase
common stock equal to more than      %
of the total number of shares authorized under the plan, and it
may not award incentive options first exercisable in any calendar
 year whose underlying shares have a fair market value greater
than $100,000, determined at the time of grant.
The compensation committee will determine the exercise price of
any option in its discretion. However, the exercise price of an
incentive option may not be less than 100% of the fair market
value of a share of common stock on the date of grant, and the
exercise price of an incentive option awarded to a person who
owns stock constituting more than 10% of our voting power may not
 be less than 110% of such fair market value on such date.
Unless the compensation committee determines otherwise, the
exercise price of any option may be paid in any of the following
ways:
•
in cash,
•
by delivery of shares of common stock with a fair market value
	equal to the exercise price,
•
by simultaneous sale through a broker of shares of common stock
	acquired upon exercise, and/or
•
subject to certain conditions, by having us withhold shares of
	common stock otherwise issuable upon exercise.
If a participant elects to deliver or withhold shares of common
stock in payment of any part of an option's exercise price,
the compensation committee may in its discretion grant the
participant a "reload option." The reload option
entitles its holder to purchase a number of shares of common
stock equal to the number so delivered or withheld.
The compensation committee will determine the term of each option
 at its discretion. However, no term may exceed ten years from
the date of grant or, in the case of an incentive option granted
to a person who owns stock constituting more than 10% of our
voting power, five years from the date of grant. In addition, all
 options under the equity incentive plan, whether or not then
exercisable, generally cease vesting when a grantee ceases to be
a director, officer or employee of, or to otherwise perform
services for, us or our subsidiaries. Options generally expire
30 days after the date of cessation of service, so long as
the grantee does not compete with us during the 30-day period. In
 the case of a grantee's death or disability, however, all
options will become fully vested and exercisable and remain so
for up to 180 days after the date of death or disability. In
 the event of retirement, a grantee's vested options will
remain exercisable for up to 90 days after the date of
retirement, while his or her unvested options may become fully
vested and exercisable in the discretion of the compensation
committee. Upon termination for cause, all options will terminate
 immediately. In addition, the compensation committee has the
authority to grant options that will become fully vested and
exercisable automatically upon a change in control, whether or
not the grantee is subsequently terminated.
The compensation committee may also grant stock appreciation
rights, restricted stock awards and other performance awards.
Upon exercise of stock appreciation right, the grantee will
receive an amount in cash and/or shares of common stock or other
of our securities equal to the difference between the fair market
 value of a share of common stock on the date of exercise and the
 exercise price of the right. Restricted stock awards will
consist of shares of stock granted to the recipient subject to
vesting restrictions imposed in connection with the award. A
grantee will be required to pay us at least the aggregate par
value of any shares of restricted stock within ten days of the
date of grant, unless the shares are treasury shares.
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The compensation committee may grant performance awards
contingent upon achievement by the grantee or the company of set
goals and objectives regarding specified performance criteria,
such as return on equity, over a specified performance cycle, as
designated by the compensation committee. A performance award may
 be paid out in cash and/or shares of common stock or other of
our securities.
The board may amend or terminate the equity incentive plan in its
 discretion, except that no amendment will become effective
without prior approval of our stockholders if such approval is
necessary for continued compliance with the performance-based
compensation exception of Section 162(m) of the Code or any
stock exchange listing requirements. Furthermore, any termination
 may not materially and adversely affect any outstanding rights
or obligations under the equity incentive plan without the
affected participant's consent. If not previously terminated
 by the board, the equity incentive plan will terminate on the
tenth anniversary of its adoption.
One Million Dollar Compensation Limit
The Revenue Reconciliation Act of 1993 limits the annual
deduction a publicly held company may take for compensation paid
to its chief executive officer or any of its four other highest
compensated officers in excess of $1.0 million per year.
This limitation excludes compensation that is
"performance-based" within the meaning of
Section 162(m) of the Code. We intend that compensation
realized upon the exercise of an option or other award granted
under the equity incentive plan be regarded as
"performance-based" under Section 162(m) and that
such compensation be deductible without regard to the limits
imposed by Section 162(m) on compensation that is not
"performance-based."
Compensation paid under the equity incentive plan will not
qualify as performance-based except to the extent paid pursuant
to grants made under the plan following the approval of the plan
by the Company's stockholders in accordance with
Section 162(m)(4)(c) of the Code and the related Treasury
Regulations, and except to the extent that other requirements are
 satisfied. However, based on a special rule contained in
regulations issued under Section 162(m), the $1.0 million
deduction limitation described above should not apply to any
options or other awards under the equity incentive plan prior to
our annual meeting of shareholders in the calendar year following
 the close of the third calendar year after the offering.
Employee Stock Purchase Plan
The 2000 Employee Stock Purchase Plan, which we refer to as the
stock purchase plan, will be adopted by our board of directors
and stockholders prior to the completion of this offering. The
stock purchase plan will be established to give employees
desiring to do so a convenient means of purchasing shares of
common stock through payroll deductions. The stock purchase plan
provides an incentive to participate by permitting purchases at a
 discounted price. We believe that ownership of stock by
employees will foster greater employee interest in our success,
growth and development.
Subject to restrictions, each of our employees is eligible to
participate in the stock purchase plan if he or she has been
employed by us for more than six months. Participation is
discretionary with each eligible employee. We have
reserved     shares of common stock for
issuance in connection with the stock purchase plan. Each
eligible employee is entitled to purchase a maximum
of     shares per year. Elections to
participate and purchases of stock will be made on a quarterly
basis. Each participating employee contributes to the stock
purchase plan by choosing a payroll deduction in any specified
amount. A participating employee may increase or decrease the
amount of such employee's payroll deduction, including a
change to a zero deduction as of the beginning of any calendar
quarter. Elected contributions will be credited to
participants' accounts at the end of each calendar quarter.
In addition, employees may make lump sum contributions at the end
 of the year to enable them to purchase the maximum number of
shares available for purchase during the plan year.
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Set forth below is a summary of how the stock purchase plan will
operate:
•
Each participating employee's contributions will be used to
	purchase shares for the employee's share account within
	15 days after the last day of each calendar quarter.
•
The cost per share is 85% of the lower of the closing price of
	our common stock on the Nasdaq Stock Market on the first or the
	last day of the calendar quarter.
•
The number of shares purchased on each employee's behalf and
	 deposited in his/her share account is based on the amount
	accumulated in such participant's cash account and the
	purchase price for shares with respect to any calendar quarter.
•
Shares purchased under the stock purchase plan carry full rights
	to receive dividends declared from time to time.
•
Any dividends attributable to shares in the employee's share
	 account are automatically used to purchase additional shares for
	 such employee's share account.
•
Share distributions and share splits will be credited to the
	participating employee's share account as of the record date
	 and effective date, respectively.
•
A participating employee has full ownership of all shares in
	his/her share account and may withdraw them for sale or otherwise
	 by written request to the compensation committee of the board of
	 directors following the close of each calendar quarter.
Subject to applicable federal securities and tax laws, the board
of directors has the right to amend or to terminate the stock
purchase plan. Amendments to the stock purchase plan will not
affect a participating employee's right to the benefit of
the contributions made by such employee prior to the date of any
such amendment. In the event the stock purchase plan is
terminated, the compensation committee is required to distribute
all shares held in each participating employee's share
account plus an amount of cash equal to the balance in each
participating employee's cash account.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding our
beneficial ownership as of September 15, 2000, on an actual
basis and as adjusted to reflect completion of the offering, by:
•
each person or entity known to us to own more than 5% of any
	class of outstanding voting securities;
•
each of our named executive officers;
•
each of our directors; and
•
all of our directors and executive officers as a group.
To our knowledge, each of such stockholders has sole voting and
investment power as to the shares shown unless otherwise noted.
You should keep the following points in mind as you read the
information in the table.
•
The amounts and percentage of our common stock beneficially owned
	 by a holder are reported on the basis of the regulations of the
	SEC that govern the determination of beneficial ownership of
	securities. Under these regulations, a person or group of persons
	 is deemed to be a "beneficial owner" of a security if
	that person or group has or share "voting power," which
	 includes the power to dispose of or to direct the disposition of
	 the security. A person or group of persons is also deemed to be
	a beneficial owner of any securities that such person has the
	right to acquire within 60 days of September 15, 2000.
	Under these rules, more than one person may be deemed a
	beneficial owner of the same security and a person may be deemed
	to be a beneficial owner of securities as to which that person
	has no economic interest.
•
The percentage of our common stock outstanding is based on the
	20,807,765  shares of our common stock outstanding as of
	September 15, 2000, including shares of common stock deemed
	outstanding pursuant to the definition of beneficial ownership in
	 the preceding paragraph. These shares are deemed to be
	outstanding when computing the percentage of ownership of each
	person or group of persons named above, but are not deemed to be
	outstanding for the purpose of computing the percentage ownership
	 of any other person or group.
Unless otherwise provided herein, the street address of each
director and executive officer is 14225 Newbrook Drive,
Chantilly, VA 20153.
Shares Beneficially Owned
Percentage
Prior to
After
Number
the
the
of Shares
Offering
Offering
Principal Stockholders:
Golder, Thoma, Cressey, Rauner Fund V, L.P. (1)
13,427,025
64.5%
Directors and Executive Officers:
Timothy J. Brodnik (2)
1,182,691
5.7
John E. Bergstrom (3)
567,346
2.7
Charles Krambuhl
67,500
0.3
Alvin Ezrin
31,250
0.1
Jerrold L. Glick (4)
2,082,200
10.0
Bruce V. Rauner (5)
13,427,025
64.5
Donald J. Edwards (5)
13,427,025
64.5
All directors and executive officers as a group (8 persons)
17,366,345
83.1
(1)
Includes 23,417 shares of common stock held by GTCR
	Associates V, a partnership affiliated with Golder, Thoma,
	Cressey, Rauner Fund V, L.P. The address of each of Golder,
	Thoma, Cressey, Rauner Fund V, L.P. and GTCR Associates V is 6100
	 Sears Tower, Chicago, Illinois 60606.
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(2)
Includes 1,182,691 shares of common stock held by Timothy J.
	 Brodnik with his spouse as joint tenants.
(3)
Includes 567,346 shares of common stock held by John E.
	 Bergstrom with his spouse as joint tenants.
(4)
Includes shares of common stock held by affiliates of
	Mr. Glick as follows: J. Glick Co., LLC — 454,300;
	 Glick Family Investment — 84,130; Lemnos
	Corporation — 168,260; and Columbia Trading II,
	L.L.C. — 134,605. Mr. Glick disclaims beneficial
	ownership of such shares. The address of each of these holders is
	 1600 Wynkoop Street, Suite 200, Denver, Colorado 80202.
(5)
Includes 13,403,608 shares of common stock held by Golder, Thoma,
	 Cressey, Rauner Fund V, L.P. of which GTCR V, L.P. is the
	general partner, and also includes 23,416 shares of common stock
	held by GTCR Associates V. Each of Messrs. Rauner and
	Edwards is a principal of Golder, Thoma, Cressey, Rauner, Inc.,
	the general partner of GTCR V, L.P. and the managing general
	partner of GTCR Associates V, and therefore may be deemed to
	share investment and voting control over the shares of common
	stock held by Golder, Thoma, Cressey, Rauner Fund V, L.P. and
	GTCR Associates V. Each of Messrs. Rauner and Edwards
	disclaims beneficial ownership of the shares of common stock
	owned by Golder, Thoma, Cressey, Rauner Fund V, L.P. and GTCR
	Associates V. The address of each of these holders is 6100 Sears
	Tower, Chicago, Illinois 60606.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Loans to Executives
In May 1997, we loaned $35,524 to Timothy J. Brodnik
and $14,365 to John E. Bergstrom pursuant to promissory
notes to finance their purchase of our common and preferred
stock. See "Management — Management Employment
Agreements." Each of the promissory notes is secured by a
pledge of the securities purchased with the promissory note. The
promissory notes bear interest at a rate per annum equal to the
applicable federal rate. The principal amount of the promissory
notes and all accrued interest matures on December 31, 2005. The
promissory notes may be prepaid in full or in part at any time at
 the payor's option. In connection with the loans to
executives in April 1999 described below, these loans were
repaid.
In April 1999, we loaned Mr. Brodnik $1,530,000 in
cash. This loan is evidenced by a promissory note which bears
interest at 8.1% per annum, compounded annually. This note is
secured by a pledge of all of Mr. Brodnik's common
stock and preferred stock, but is recourse only to that stock.
The principal amount of this promissory note and all accrued
interest matures on December 31, 2005. The promissory note
may be prepaid in full or in part at any time at
Mr. Brodnik's option.
In April 1999, we loaned Mr. Bergstrom $30,000 in cash. This
 loan is evidenced by a promissory note which bears interest at
10.0% per annum, compounded annually. This note is secured by a
pledge of all of Mr. Bergstrom's common stock and
preferred stock, but is recourse only to that stock. The
principal amount of this promissory note and all accrued interest
 matures on December 31, 2005. The promissory note may be
prepaid in full or in part at any time at Mr. Bergstrom's
option.
In April 1999, we loaned Jerrold L. Glick and his
affiliate stockholders $950,000 in cash. This loan is evidenced
by a promissory note which bears interest at 10.0% per annum,
compounded annually. This note is secured by a pledge of all of
Mr. Glick's and his affiliate stockholders' common
 stock and preferred stock, but is recourse only to that stock.
The principal amount of this promissory note and all accrued
interest matures on December 31, 2005. The promissory note
may be prepaid in full or in part at any time at
Mr. Glick's option.
In August 1999, we loaned Mr. Bergstrom $250,000 in
cash. This loan is evidenced by a promissory note which bears
interest at 8.0% per annum, compounded annually. This note is
secured by a pledge of all of Mr. Bergstrom's common
stock and preferred stock, but is recourse only to that stock.
The principal amount of this promissory note and all accrued
interest matures on December 31, 2005. The promissory note
may be prepaid in full or in part at any time at Mr.
Bergstrom's option.
Redemptions of Preferred Stock and Common Stock
In April 1999, we repurchased 293,779 shares of common stock
 from Timothy J. Brodnik for $1,440,000 in cash.
In May 1999, we redeemed all 7,181.46 shares of preferred
stock from GTCR for $8,714,070 in cash consisting of an aggregate
 liquidation value of $7,181,460 and accrued and unpaid dividends
 of $1,532,610.
In August 1999, we repurchased 51,004 shares of common stock
 from John E. Bergstrom for $250,000 in cash.
In September 2000, we repurchased 189,295 shares of common
stock from Jerrold L. Glick for the original cost of $3,786
in cash.
At the time of the offering, we anticipate redeeming all of our
remaining 1,490.71 outstanding shares of preferred stock for a
price equal to the sum of the preferred stock's aggregate
liquidation value of $1,490,710 and accrued and unpaid dividends.
 Such dividends equaled $562,396 as of September 30, 2000.
Of this, the approximately $346,301 portion payable to
Messrs. Brodnik, Bergstrom and Glick as holders of
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917.92 shares of preferred stock would be satisfied by offsetting
 a like amount against their promissory notes discussed above
under "Certain Loans to Executives" and the remaining
approximately
$          payable
 to the other holders of the remaining 572.79 shares of preferred
 stock would be paid in cash.
Professional Services Agreement
We are party to a professional services agreement with GTCR under
 which GTCR has agreed to consult with us on business and
financial matters, including corporate strategy, budgeting of
corporate investments, acquisition and divestiture strategies and
 debt and equity financings. In exchange for such services, GTCR
is entitled to an annual management fee of up to $150,000, plus
reimbursement of out-of-pocket expenses, and a fee of 1% of the
amount of debt or equity capital raised by us from any source. In
 October 1999, in connection with our acquisition of APL, we
 raised $140.0 million of debt financing and thus a
$1.4 million fee would have been owed to GTCR. GTCR agreed
to amend the professional services agreement to eliminate this
fee in exchange for our agreement to pay a $1.4 million
one-time success fee, plus interest at 8% per annum from
October 1999, upon consummation of a change of control or an
 initial public offering. This fee will be paid to GTCR upon
consummation of the offering. This agreement will automatically
terminate upon consummation of the offering, and except as
provided above, no fee is payable with respect to the issuance of
 the common stock in the offering. Bruce V. Rauner and
Donald J. Edwards, each of whom is a principal of GTCR, will
 continue to serve as directors of the Company.
Stock Purchase Agreement
We are party to a purchase agreement with GTCR dated as of
May 2, 1997, pursuant to which GTCR made its investment in
our company. At that time, GTCR purchased 13,427,025 shares
of our common stock at a price of $0.02 per share and
7,181.46 shares of our preferred stock at a price of $1,000
per share. The purchase agreement provides that as long as GTCR
owns at least 15% of the securities purchased thereunder, we must
 obtain GTCR's prior consent before taking certain actions,
including paying dividends, issuing equity securities, acquiring
other businesses or merging with other entities. The provisions
of the purchase agreement providing GTCR with such consent rights
 will be terminated upon completion of the offering.
Consulting and Non-Competition Agreement
We have a consulting and non-competition agreement with Jerrold
L. Glick dated as of May 2, 1997 pursuant to which
Mr. Glick provides consulting services to us. The agreement
will terminate upon the first to occur of:
•
the resignation or removal of Mr. Glick from our board of
	directors;
•
the termination of the agreement by either party upon thirty days
	 prior written notice; and
•
the death or incapacity of Mr. Glick.
We agreed to reimburse Mr. Glick for all reasonable expenses
 incurred by him in the course of performing his duties under the
 agreement. During the term of the agreement, Mr. Glick has
agreed not to compete with us or solicit any of our employees or
customers. In 1999, Mr. Glick received a total of $87,484 in
 compensation or reimbursement of expenses from us under this
agreement or otherwise.
Stockholders Agreement
In connection with our formation, we and our stockholders entered
 into a stockholders agreement dated as of May 2, 1997, as
amended, which:
•
provides for the designation of our board of directors;
•
imposes certain restrictions on the transfer of our shares;
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•
requires the stockholders to take certain actions upon the
	approval by a majority of the stockholders in connection with an
	initial public offering or a sale of the company;
•
requires us to offer to sell shares to the stockholders under
	certain circumstances upon authorization of an issuance or sale
	of additional shares; and
•
grants certain of the stockholders participation rights in
	connection with a sale of shares by other stockholders.
Upon the completion of the offering, the stockholders agreement
will be terminated.
Registration Agreement
In connection with our formation, we and our stockholders entered
 into a registration agreement dated as of May 2, 1997, as
amended. Pursuant to the agreement, the existing stockholders are
 entitled to registration rights. Holders of at least a majority
of the shares of common stock held by the existing stockholders
may require us to effect the registration of their shares of
common stock from time to time. Such requirement is called a
demand registration. We are required to pay all registration
expenses in connection with all "short-form" demand
registrations and up to four "long-form" demand
registrations. In addition, if we propose to register any of our
common stock under the Securities Act, whether for our own
account or otherwise, the existing stockholders are entitled to
notice of the registration and, subject to certain priority
provisions, are entitled to include their shares of common stock
in such registration with all registration expenses being paid by
 us. Notwithstanding the foregoing, we will not be obligated to
effect a demand registration within six months after the
effective date of a prior demand registration or of a
registration we initiate. A request may be delayed by us for up
to six months, but on no more than once in any twelve-month
period. The existing stockholders have waived their registration
rights under the registration agreement in connection with the
offering.
Investment in LabPortal, Inc.
We recently sold certain of our intellectual property and
computer hardware and accessories to LabPortal in exchange for
$2.0 million of redeemable preferred stock of LabPortal.
LabPortal is a new business that will provide web-enabled
clinical laboratory connectivity software products and services.
At the same time, Park City Solutions, Inc., another GTCR
portfolio company, also sold certain of its intellectual property
 to LabPortal in exchange for $2.0 million of redeemable
preferred stock of LabPortal. Once LabPortal's software is
available for use, we expect to be a customer of LabPortal and to
 enter into a customary license or usage agreement with
LabPortal. GTCR is the majority investor in LabPortal; and
Timothy J. Brodnik, Jerrold L. Glick, and certain of
our other employees are also investors in LabPortal.
Mr. Brodnik and Donald J. Edwards are also directors of
 LabPortal. In connection with Mr. Brodnik's
appointment to the LabPortal board, he was granted an option to
acquire up to approximately 5% of LabPortal's common stock
at an exercise price significantly in excess of the current fair
market value of LabPortal's common stock.
Practice Management Agreement
We have a practice management agreement with Robert R. Belliveau,
 M.D., Thome J. Butler, M.D., Associated Pathologists,
Chartered, or APC, dated as of October 13, 1999, under which
 we provide administrative and management services to APC, and
APC provides pathology medical services to us. This agreement was
 entered into in connection with our acquisition of certain of
the assets of APC concurrent with our acquisition of APL. Our
compensation under this agreement is equal to the gross revenues
of APC less certain expenses of APC incurred under the agreement.
 During the term of the agreement and for at least five years
thereafter, APC agreed not to compete with us or solicit any of
our employees or customers of ours.
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DESCRIPTION OF CAPITAL STOCK
Under our certificate of incorporation, we are authorized to
issue    shares of common stock
and     shares of preferred stock.
Shares of each class have a par value of $.01 per share. The
 following description summarizes the material provisions of our
capital stock.
Common Stock
As of September 15, 2000, there
were     shares of common stock
outstanding, which were held of record by 45 shareholders. Each
share of our common stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the
election of directors. Subject to any preference rights of
holders of preferred stock, the holders of common stock are
entitled to receive dividends, if any, declared from time to time
 by the directors out of legally available funds. In the event of
 our liquidation, dissolution or winding up, the holders of
common stock are entitled to share ratably in all assets
remaining after the payment of liabilities, subject to any rights
 of holders of preferred stock to prior distribution.
The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares
 of common stock are fully paid and nonassessable and the shares
of common stock to be issued on completion of this offering will
be fully paid and nonassessable.
Serial Preferred Stock
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock and to
designate the rights, preferences and privileges of each series
of preferred stock, which may be greater than the rights attached
 to the common stock. It will not be possible to state the actual
 effect of the issuance of any shares of preferred stock on the
rights of holders of common stock until the board of directors
determines the specific rights attached to that preferred stock.
The effects of issuing preferred stock could include one or more
of the following:
•
restricting dividends on the common stock;
•
diluting the voting power of the common stock;
•
impairing the liquidation rights of the common stock; or
•
delaying or preventing a change of control of AML.
There will be no shares of preferred stock outstanding
immediately after this offering, and we have no current plan to
issue any shares of preferred stock outstanding.
Options
As of June 30, 2000, options to purchase a total of
      shares of common stock were
outstanding, of which
          have
vested. The exercise prices of the vested options range from
$          to
$          . In
 addition,    of the outstanding options have an
exercise price equal to the initial public offering price of our
common stock.
Anti-Takeover Effects of Provisions of Delaware Law and our
Certificate of Incorporation and Bylaws
Some provisions of our certificate of incorporation and bylaws
may be deemed to have an anti-takeover effect and may delay or
prevent a tender offer or takeover attempt that a stockholder
might consider to be in its best interest, including those
attempts that might result in a premium over the market price for
 the shares held by stockholders.
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These provisions include:
Classified Board of
Directors
Our board of directors is divided into three classes of directors
 serving staggered three-year terms. As a result, approximately
one-third of the board of directors is elected each year. These
provisions, when coupled with the provision of our certificate of
 incorporation authorizing the board of directors to fill vacant
directorships or increase the size of the board of directors, may
 deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by
filling the vacancies created by this removal with its own
nominees.
Cumulative Voting
Our certificate of incorporation expressly denies our
stockholders the right to cumulative voting in the election of
directors. As a result, stockholders may not aggregate their
votes for a single director.
Stockholder Action;
Special Meeting of Stockholders
Our certificate of incorporation eliminates the ability of
stockholders to act by written consent. It further provides that
special meetings of our stockholders may be called only by the
chairman of the board of directors, the president or a majority
of the board of directors. As a result, stockholders must rely on
 management to call a special meeting or wait until the next
annual meeting to hold a vote on extraordinary matters like a
significant transaction.
Advance Notice
Requirements for Stockholder Proposals and Directors Nominations
Our bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of
stockholders, must provide timely notice in writing. To be
timely, a stockholder's notice must be delivered to or
mailed and received at our principal executive offices not less
than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders. However, in
 the event that the annual meeting is called for a date that is
not within 30 days before or after that anniversary date,
notice by the stockholder in order to be timely must be received
not later than the close of business on the tenth day following
the date on which notice of the date of the annual meeting was
mailed to stockholders or made public, whichever first occurs.
Our bylaws also specify requirements as to the form and content
of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of
stockholders or from making nominations for directors at an
annual meeting of stockholders.
Authorized But Unissued
Shares
The authorized but unissued shares of common stock and preferred
stock will be available for future issuance without stockholder
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 shares of common
stock and preferred stock could render more difficult or
discourage an attempt to obtain control of AML by means of a
proxy contest, tender offer, merger or otherwise.
Amendments; Supermajority
 Vote Requirements
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on
any matter is required to amend a corporation's certificate
of incorporation or by-laws, unless either a corporation's
certificate of incorporation or bylaws require a greater
percentage. Our certificate of incorporation imposes
supermajority vote requirements in connection with business
combination transactions and the amendment of provisions of our
certificate of incorporation and bylaws,
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including those provisions relating to the classified board of
directors, action by written consent and the ability of
stockholders to call special meetings.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American
 Stock Transfer & Trust Company. Its address is 40 Wall
Street, New York, New York 10005.
Listing
We are applying to list our common stock on the Nasdaq National
Market under the symbol "AMLS."
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common
stock. Future sales in the public markets of substantial amounts
of common stock, including shares issued on the exercise of
outstanding options, could adversely affect the market prices
prevailing from time to time for the common stock. It could also
impair our ability to raise capital through future sales of
equity securities.
After completion of this offering, we will
have     shares of common stock
outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. All
 of the     shares of common stock sold
in this offering will be freely transferable without restriction
or further registration under the Securities Act, except for any
of the shares that are acquired by affiliates as that term is
defined in Rule 144 under the Securities Act.
Shares acquired by affiliates and the remaining shares held by
existing shareholders are restricted securities as that term is
defined in Rule 144 under the Securities Act. Restricted
securities may be sold in the public market only if registered or
 if they qualify for an exemption from registration under
Rule 144, which is summarized below. The following table
illustrates the shares eligible for sale in the public market
assuming Credit Suisse First Boston Corporation does not release
any portion of the shares subject to lock-up agreements described
 below and under "Underwriting."
NUMBER OF SHARES
DATE
Upon the date of this prospectus subject, in some cases, to
	volume and manner of sale limitations under Rule 144.
After 90 days from the date of this prospectus.
After 180 days from the date of this prospectus, subject, in
	 some cases, to volume and manner of sale limitations under
	Rule 144.
At various times after 180 days after the date of this
	prospectus on expiration of applicable one year holding periods,
	subject to volume and manner of sale limitations under
	Rule 144.
Lock-Up
We have agreed that, without the prior written consent of Credit
Suisse First Boston, we will not, directly or indirectly, offer,
sell or otherwise dispose of any shares of capital stock or any
securities that may be converted into or exchanged for shares of
capital stock for a period of 180 days from the date of this
 prospectus. Each of our officers, directors and substantially
all of our existing stockholders have also entered into an
agreement to the same effect.
Rule 144
In general, Rule 144 has the effect that, beginning
90 days after the date of this prospectus, a person who has
beneficially owned ordinary shares for at least one year would be
 entitled to sell within any three month period a number of
shares that does not exceed the greater of:
•
1% of the total number of shares of common stock then
	outstanding; or
•
the average weekly trading volume of the common stock on The
	Nasdaq National Market during the four calendar weeks preceding
	the filing of notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of
current public information about us.
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Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been
one of our affiliates at any time during the 90 days
preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, including the holding
 period of any prior owner which was not an affiliate, is
entitled to sell the shares without complying with the manner of
sale, public information, volume limitation or notice provisions
of Rule 144. Therefore, unless otherwise restricted, shares
eligible for sale under Rule 144(k) may be sold immediately
upon completion of this offering.
Rule 701
In general, under Rule 701, any of our employees, directors,
 officers, consultants or advisors who purchases ordinary shares
from us in connection with a compensatory stock or option plan or
 other written agreement before the effective date of this
prospectus is entitled to resell those shares 90 days after
the effective date of this prospectus in reliance on
Rule 144, without having to comply with the restrictions,
including the holding period, contained in Rule 144.
Rule 701 permits affiliates to sell their Rule 701
shares under Rule 144 without complying with the holding
period requirements of Rule 144. It permits non-affiliates
to sell their Rule 701 shares in reliance on Rule 144
without having to comply with the holding period, public
information, volume limitation or notice provisions of
Rule 144. All holders of Rule 701 shares are required
to wait until 90 days after the date of this prospectus
before selling those shares.
Stock Options
Following the completion of this offering, we intend to file a
registration statement on Form S-8 under the Securities Act
covering shares of common stock issued or reserved for issuance
under our various stock option plans. The registration statement
will become effective automatically upon filing. As of
June 30, 2000, options to
purchase     shares of common stock were
 issued and outstanding, of which
          options
 had vested. Accordingly, shares registered under the
registration statement will, subject to vesting provisions and
Rule 144 volume limitations applicable to our affiliates, be
 available for sale in the open market immediately after the
180-day lock-up agreements expire.
Registration Rights
The existing stockholders of the Company have certain
registration rights described under "Certain Relationships
and Related Transactions — Registration
Agreement."
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MATERIAL UNITED STATES TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
General
The following is a general discussion of the principal U.S.
federal income and estate tax consequences of the ownership and
disposition of our common stock by a Non-U.S. Holder. For this
purpose, the term "Non-U.S. Holder" is defined as any
person or entity that is, for U.S. federal income tax purposes:
•
a foreign corporation or other entity taxable as a corporation;
•
a non-resident alien individual; or
•
a foreign estate or trust.
If an entity treated as a partnership for U.S. federal income tax
 purposes holds our common shares, the tax treatment of each
partner will generally depend upon the status of the partner and
upon the activities of the partnership. If you are a partner of a
 partnership holding our common shares, you should consult your
tax advisor.
This discussion is based on currently existing provisions of the
Code, existing, temporary and proposed Treasury regulations
promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the date
 hereof and all of which are subject to change, possibly with
retroactive effect, or different interpretations. This discussion
 is limited to Non-U.S. Holders who hold shares of common stock
as capital assets within the meaning of section 1221 of the Code.
 Moreover, this discussion is for general information only and
does not address all of the tax consequences that may be relevant
 to:
•
particular Non-U.S. Holders in light of their personal
	circumstances;
•
special tax rules that may apply to some Non-U.S. Holders,
	including banks, insurance companies, dealers in securities and
	traders in securities who elect to apply a market-to-market
	method of accounting;
•
special tax rules that may apply to a Non-U.S. Holder that holds
	our common stock as part of a "straddle,"
	"hedge" or "conversion transaction"; and
•
to individuals who relinquish their U.S. citizenship or
	residence.
An individual may, subject to certain exceptions, be deemed to be
 a resident alien, as opposed to a nonresident alien, by virtue
of being present in the U.S. for at least 31 days in the
calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year,
counting for these purposes all of the days present in the
current year, one-third of the days present in the immediately
preceding year, and one-sixth of the days present in the second
preceding year are counted. Resident aliens are subject to U.S.
federal income tax as if they were U.S. citizens and thus, are
not Non-U.S. Holders for purposes of this discussion.
We have not and will not seek a ruling from the IRS with respect
to the U.S. federal income tax consequences described below, and
as a result, there can be no assurance that the IRS will not
disagree with or challenge any of the conclusions set forth in
this discussion.
Each prospective purchaser of common stock is advised to
consult a tax advisor with respect to current and possible future
 tax consequences of purchasing, owning and disposing of common
stock as well as any tax consequences that may arise under the
laws of any U.S. state, municipality or other taxing
jurisdiction, or non-U.S. taxing jurisdiction
.
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Dividends
We do not anticipate paying dividends on our common stock in the
foreseeable future. However, in the event that dividends are paid
 on shares of common stock, dividends paid to a Non-U.S. Holder
of common stock generally will be subject to withholding of U.S.
federal income tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. To claim the
benefit of a lower federal income tax rate under an income tax
treaty, a Non-U.S. Holder of common stock must properly file with
 the payor an IRS Form 1001 or an IRS Form W-8BEN, or
successor form, claiming an exemption from or reduction in
withholding under such tax treaty. A Form 1001 is replaced
with a Form W-8BEN for payments after December 31,
2000.
Any dividends paid on shares of common stock to a Non-U.S. Holder
 will not be subject to withholding tax, but instead will be
subject to U.S. federal income tax on a net basis at applicable
graduated individual or corporate rates if:
•
dividends are effectively connected with the conduct of a trade
	or business by the Non-U.S. Holder within the United States or,
	where a tax treaty applies, are attributable to a U.S. permanent
	establishment, or, in the case of an individual, a "fixed
	base" in the U.S., of the Non-U.S. Holder (collectively
	referred to as "U.S. trade or business income"); and
•
an IRS Form 4224 or a Form W-8ECI, or successor form,
	is filed with the payor.
Any U.S. trade or business income received by a foreign
corporation may, under certain circumstances, be subject to an
additional "branch profits tax" at a rate of 30% or
such lower rate as may be specified by an applicable income tax
treaty. A Form 4224 is replaced with a Form W-8ECI for
payments after December 31, 2000.
Unless the payor has knowledge to the contrary, dividends paid
prior to January 1, 2001 to an address outside the United
States are presumed to be paid to a resident of such country for
purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. However,
recently finalized Treasury Regulations pertaining to U.S.
federal withholding tax, the "Final Withholding Tax
Regulations",provide that a Non-U.S. Holder must comply with
 certification procedures, or, in the case of payments made
outside the United States with respect to an offshore account,
certain documentary evidence procedures, directly or under
specified circumstances through an intermediary, to obtain the
benefits of a reduced rate under an income tax treaty with
respect to dividends paid after December 31, 2000. In
addition, the Final Withholding Tax Regulations will require a
Non-U.S. Holder who provides an IRS Form W-8BEN or successor
 form, as discussed above, also to provide its U.S. taxpayer
identification number.
A Non-U.S. Holder of common stock eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain
a refund of any excess amounts withheld by filing an appropriate
claim for refund with the IRS.
Gain on Disposition of Common Stock
A Non-U.S. Holder generally will not be subject to U.S. federal
income tax with respect to gain recognized on a sale or other
disposition of common stock unless:
(1)  the gain is a U.S. trade or business income;
(2)
in the case of a Non-U.S. Holder who is an individual and holds
	the common stock as a capital asset, such holder is present in
	United States for 183 or more days in the taxable year of the
	sale or other disposition and certain other conditions are met;
	or
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(3)
We are or have been a "U.S. real property holding
	corporation," or a "USRPHC," for U.S. federal
	income tax purposes at any time within the shorter of the
	five-year period preceding the disposition or the Non-U.S.
	Holding period for its common stock as discussed below.
An individual Non-U.S. Holder who falls under clause
(1) above will, unless an applicable treaty provides
otherwise, be taxed on his or her net gain derived from the sale
under regular graduated U.S. federal income tax rates. An
individual Non-U.S. Holder who falls under clause (2) above
will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by certain U.S. capital losses.
A Non-U.S. Holder that is a foreign corporation falling under
clause (1) above will be taxed on its gain under regular
corporate U.S. federal income tax rates and may be subject to an
additional branch profits tax equal to 30% of its
"effectively connected earnings and profits" within the
 meaning of the Internal Revenue Code, for the taxable year, as
adjusted for certain items, unless it qualifies for a lower rate
under an applicable income tax treaty.
A corporation is a USRPHC if the fair market value of the U.S.
real property interests held by the corporation is 50% or more of
 the aggregate fair market value of its U.S. and foreign real
property interests and any other assets used or held for use by
the corporation in a trade or business. Based on our current and
anticipated assets, we believe that we are not currently, and are
 likely not to become, a USRPHC. However, since the determination
 of USRPHC status is based upon the composition of our assets
from time to time, and because there are uncertainties in the
application of certain relevant rules, there can be no assurance
that we will not become a USRPHC. If we were to become a USRPHC,
then gain on the sale or other disposition of common stock by a
Non-U.S. Holder generally would be subject to U.S. federal income
 tax unless both
•
the common stock was "regularly traded" on an
	established securities market within the meaning of applicable
	Treasury regulations; and
•
the Non-U.S. Holder actually or constructively owned 5% or less
	of the common stock during the shorter of the five-year period
	preceding such disposition or the Non-U.S. Holder's holding
	period.
Non-U.S. Holders should consult their tax advisors concerning any
 U.S. tax consequences that may arise if we were to become a
USRPHC.
Federal Estate Tax
Common stock owned or treated as owned by an individual Non-U.S.
Holder at the time of death will be included in such
holder's gross estate for U.S. federal estate tax purposes,
and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding Tax
We must report annually to the IRS and to each Non-U.S. Holder
the amount of dividends paid to each holder and the tax withheld
with respect to dividends, regardless of whether withholding was
required. Copies of the information returns reporting such
dividends and withholding may also be made available by the IRS
to the tax authorities in the country in which the Non-U.S.
Holder resides under the provisions of an applicable income tax
treaty or certain other agreements.
Backup withholding is imposed at the rate of 31% on certain
payments to persons that fail to furnish identifying information
to the payer. Backup withholding generally will not apply to
dividends paid prior to January 1, 2001 to a Non-U.S. Holder
 at an address outside the United States unless the payer has
knowledge that the payee is a U.S. person. In the case of
dividends paid after December 31, 2000, the Final
Withholding Tax Regulations provide that a Non-U.S. Holder
generally will be subject to withholding tax at a 31% rate unless
 specified certification procedures, or, in the case of payments
made outside the United States with respect to an offshore
account, documentary evidence procedures, are
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complied with, directly or under certain circumstances through an
 intermediary. Backup withholding and information reporting
generally will also apply to dividends paid on common stock at
addresses inside the United States to Non-U.S. Holders that fail
to provide identifying information in the manner required. The
Final Withholding Tax Regulations provide presumptions under
which a Non-U.S. Holder would be subject to backup withholding
and information reporting unless certification from the holder of
 the Non-U.S. Holder's Non-U.S. status is provided.
Payment of the proceeds of a sale of common stock effected by or
through a U.S. office of a broker is subject to both backup
withholding at the rate of 31% and information reporting unless
the beneficial owner provides the payer with its name and address
 and certifies under penalties of perjury that it is a Non-U.S.
Holder, or otherwise establishes an exemption. In general, backup
 withholding and information reporting will not apply to a
payment of the proceeds of a sale of common stock by or through a
 foreign office of a broker. If, however, such broker is, for
U.S. federal income tax purposes, a U.S. person, a controlled
foreign corporation, or a foreign person that derives 50% or more
 if its gross income for certain periods from the conduct of a
trade or business in the United States, or, in addition, for
periods after December 31, 2000, a foreign partnership that
at any time during its tax year either is engaged in the conduct
of a U.S. trade or business or has as partners one or more U.S.
persons that, in the aggregate, hold more than 50% of the income
or capital interest in the partnership, such payments will be
subject to information reporting, but not backup withholding,
unless such broker has documentary evidence in its records that
the beneficial owner is a Non-U.S. Holder and other specified
conditions are met or the beneficial owner otherwise establishes
an exemption.
The Final Withholding Tax Regulations unify current certification
 procedures and forms and clarify reliance standards. Except as
noted above with respect to foreign brokers that are
partnerships, the Final Withholding Tax Regulations do not
significantly alter the substantive withholding and information
reporting requirements but do alter the procedures for claiming
the benefits of an income tax treaty and change the certification
 procedures relating to the receipt by intermediaries of payments
 on behalf of the beneficial owner of shares of common stock.
Non-U.S. Holders should consult their own tax advisors regarding
the effect, if any, of the Final Withholding Tax Regulations on
their particular situations.
Backup withholding is not an additional tax. Any amounts withheld
 under the backup withholding rules generally will be allowed as
a refund or a credit against the Non-U.S. Holder's U.S.
federal income tax liability provided the required information is
 furnished in a timely manner to the IRS.
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UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement, dated
          ,
2000, we have agreed to sell to the underwriters named below, for
 whom Credit Suisse First Boston Corporation, Banc of America
Securities LLC and First Union Securities, Inc. are acting as
representatives, the following respective numbers of shares of
common stock.
Number of
Underwriter
Shares
Credit Suisse First Boston Corporation
Banc of America Securities LLC
First Union Securities, Inc.
Total
The underwriting agreement provides that the underwriters are
obligated to purchase all the shares of common stock in the
offering if any are purchased, other than those shares covered by
 the over-allotment option described below. The underwriting
agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be
increased or the offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase
on a pro rata basis up to
           additional
 shares from us at the initial public offering price less the
underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock
initially at the public offering price on the cover page of this
prospectus and to selling group members at that price less a
concession of $     per share. The
underwriters and selling group members may allow a discount of
$     per share on sales to other
broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may
be changed by the representatives.
The following table summarizes the compensation and estimated
expenses we will pay.
Per Share
Total
Without
With
Without
With
Over-allotment
Over-allotment
Over-allotment
Over-allotment
Underwriting Discounts and Commissions paid by us
$
$
$
$
Expenses payable by us
$
$
$
$
The underwriters do not intend to confirm sales to any accounts
over which they exercise discretionary authority.
Affiliates of Banc of America Securities LLC and First Union
Securities, Inc. have provided and will in the future likely
provide us with various financial services in the ordinary course
 of their business. In particular, an affiliate of First Union
Securities, Inc. is a lender under our senior credit facility. As
 a result of our use of the net proceeds of the offering to repay
 indebtedness under the senior credit facility, this affiliate
will receive more than 10% of the net offering proceeds. The
offering therefore is being conducted in accordance with the
applicable provision of Rule 2720 of the National
Association of Securities Dealers, Inc. Conduct Rules.
Rule 2720 requires that the initial public offering price of
 the shares of common stock not be higher than that recommended
by a "qualified independent underwriter" meeting
certain standards. Accordingly, Credit Suisse First Boston
Corporation is assuming the responsibilities of acting as the
qualified independent underwriter in pricing the offering and
conducting due diligence. The initial public
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offering price of the shares of common stock is no higher than
the price recommended by Credit Suisse First Boston Corporation.
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any shares of our
 common stock or securities convertible into or exchangeable or
exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of
Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, except issuances
 pursuant to the exercise of employee stock options outstanding
on the date hereof or pursuant to our 2000 Employee Stock
Purchase Plan.
Our officers, directors and substantially all of our stockholders
 have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any
shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock,
enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of
ownership of our common stock, whether any of these transactions
are to be settled by delivery of our common stock or such other
securities, in cash or otherwise, or publicly disclose the
intention to make any offer, sale, pledge or disposition, or
enter into any transaction, swap, hedge or other arrangement,
without, in each case, the prior written consent of Credit Suisse
 First Boston Corporation for a period of 180 days after the date
 of this prospectus.
The underwriters have reserved for sale, at the initial public
offering price up to     shares of the
common stock for employees, directors and other persons
associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for
sale to the general public in the offering will be reduced to the
 extent these persons purchase the reserved shares. Any reserved
shares not so purchased will be offered by the underwriters to
the general public on the same terms as the other shares.
We have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments which the
underwriters may be required to make in that respect.
We are applying to list our shares of common stock on The Nasdaq
Stock Market's National Market under the symbol
"AMLS."
Prior to this offering, there has been no public market for our
common stock. The initial public offering price for the common
stock will be negotiated by us and representatives of the
underwriters. Among the principal factors to be considered in
determining the initial public offering price will be:
•
market conditions for initial public offerings;
•
the history of and prospects for our business, our past and
	present operations;
•
our past and present earnings and current financial position;
•
an assessment of our management;
•
the market of securities of companies in businesses similar to
	ours; and
•
the general condition of the securities markets.
There can be no assurance that the initial public offering price
will correspond to the price at which the common stock will trade
 in the public market subsequent to the offering or that an
active trading market will develop and continue after the
offering.
68
Table of Contents
In connection with the offering the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids in accordance with
Regulation M under the Securities Exchange Act of 1934.
•
Stabilizing transactions permit bids to purchase the underlying
	security so long as the stabilizing bids do not exceed a
	specified maximum.
•
Over-allotment involves sales by the underwriters in excess of
	the number of shares the underwriters are obligated to purchase,
	which creates a syndicate short position. The short position may
	be either a covered short position or a naked short position. In
	a covered short position, the number of shares over-allotted by
	the underwriters is not greater than the number of shares that
	they may purchase in the over-allotment option. In a naked short
	position, the number of shares involved is greater than the
	number of shares in the over-allotment option. The underwriters
	may close out any short position by either exercising their
	over-allotment option and/or purchasing shares in the open
	market.
•
Syndicate covering transactions involve purchases of the common
	stock in the open market after the distribution has been
	completed in order to cover syndicate short positions. In
	determining the source of shares to close out the short position,
	 the underwriters will consider, among other things, the price of
	 shares available for purchase in the open market as compared to
	the price at which they may purchase shares through the
	over-allotment option. If the underwriters sell more shares than
	could be covered by the over-allotment option, a naked short
	position, the position can only be closed out by buying shares in
	 the open market. A naked short position is more likely to be
	created if the underwriters are concerned that there could be
	downward pressure on the price of the shares in the open market
	after pricing that could adversely affect investors who purchase
	in the offering.
•
Penalty bids permit the representatives to reclaim a selling
	concession from a syndicate member when the common stock
	originally sold by the syndicate member is purchased in a
	stabilizing or syndicate covering transaction to cover syndicate
	short positions.
These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding a
 decline in the market price of the common stock. As a result the
 price of the common stock may be higher than the price that
might otherwise exist in the open market. These transactions may
be effected on The Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
A prospectus in electronic form may be made available on the web
sites maintained by one or more of the underwriters participating
 in this offering. The representatives may agree to allocate a
number of shares to underwriters for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters that will make Internet
distributions on the same basis as other allocations.
69
Table of Contents
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only
 on a private placement basis exempt from the requirement that we
 prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are
made. Any resale of the common stock in Canada must be made under
 applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made
under available statutory exemptions or under a discretionary
exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice
 prior to any resale of the common stock.
Representations of Purchasers
By purchasing common stock in Canada and accepting a purchase
confirmation a purchaser is representing to us and the dealer
from whom the purchase confirmation is received that
•
the purchaser is entitled under applicable provincial securities
	laws to purchase the common stock without the benefit of a
	prospectus qualified under those securities laws;
•
where required by law, that such purchaser is purchasing as
	principal and not as agent; and
•
the purchaser has reviewed the test above under Resale
	Restrictions.
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and
Ontario purchasers will not receive the contractual right of
action prescribed by Ontario securities law. As a result, Ontario
 purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission
or rights of action under the civil liability provisions of the
U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the
experts named herein may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect
service of process within Canada upon the issuer or such persons.
 All or a substantial portion of the assets of the issuer and
such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer
or such persons in Canada or to enforce a judgement obtained in
Canadian courts against such issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the
Securities Act
(British Columbia) applies is advised that such purchaser is
required to file with the British Columbia Securities Commission
a report within ten days of the sale of any common stock acquired
 by the purchaser pursuant to this offering. The report must be
in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from
us. Only one report must be filed for common stock acquired on
the same date and under the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own
legal and tax advisors with respect to the tax consequences of an
 investment in the common stock in their particular circumstances
 and about the eligibility of the common stock for investment by
the purchaser under relevant Canadian legislation.
70
Table of Contents
LEGAL MATTERS
Some of the legal matters in connection with the issuance of the
common stock will be passed upon for us by Kirkland & Ellis
(a partnership including professional corporations), Chicago,
Illinois. The underwriters have been represented by Latham &
Watkins, Washington, D.C. Kirkland & Ellis has, from time to
time, represented, and may continue to represent, some of the
underwriters in connection with various legal matters and GTCR
and some of their affiliates in connection with legal matters. In
 addition, Latham & Watkins has, from time to time,
represented and may continue to represent affiliates of GTCR in
connection with legal matters.
EXPERTS
The consolidated financial statements of American Medical
Laboratories, Incorporated and subsidiaries as of
December 31, 1998 and 1999, and for each of the years in the
 three year period ended December 31, 1999 included in this
prospectus and registration statement have been included herein
in reliance upon the report of KPMG LLP, independent certified
public accountants, appearing elsewhere in this prospectus, given
 on the authority of that firm as experts in accounting and
auditing.
The combined financial statements of APL Healthcare Group, Inc.
and affiliates as of December 31, 1997 and 1998 and
September 30, 1999, and for each of the years in the three
year period ended December 31, 1998 and for the nine month
period from January 1, 1999 to September 30, 1999
included in this prospectus and registration statement have been
included herein in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere in
this prospectus, given on the authority of that firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1 under the Securities Act for the common stock
offered by this prospectus. This prospectus, which is a part of
the registration statement, does not contain all of the
information in the registration statement or the exhibits and
schedules which are part of the registration statement.
For more information about our company and the common stock
offered by this prospectus, we refer you to the registration
statement and the exhibits and schedules filed as part of the
registration statement. You may read and copy any document we
file at the SEC's public reference room at 450 Fifth Street,
 N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from the
SEC's world wide web site at http://sec.gov.
Upon completion of this offering, we will become subject to the
information and periodic reporting requirements of the Securities
 and Exchange Act and will file periodic reports, proxy
statements and other information with the SEC. These periodic
reports, proxy statements and other information will be available
 for inspection and copying at the SEC's public reference
rooms and the web site of the SEC.
71
Table of Contents
INDEX TO FINANCIAL STATEMENTS
Page
American Medical Laboratories, Incorporated
Annual Financial Statements
Independent Auditors' Report
F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999
F-3
Consolidated Statements of Operations for the period
	January 1, 1997 to May 1, 1997, the period May 2,
	1997 to December 31, 1997 and the years ended
	December 31, 1998 and 1999
F-4
Consolidated Statement of Changes in Redeemable Preferred Stock
	and Stockholders' Equity for the period January 1, 1997
	 to May 1, 1997, the period May 2, 1997 to
	December  31, 1997 and the years ended December 31,
	1998 and 1999
F-5
Consolidated Statements of Cash Flows for the period
	January 1, 1997 to May 1, 1997, the period May 2,
	1997 to December 31, 1997 and the years ended
	December 31, 1998 and 1999
F-6
Notes to Consolidated Financial Statements
F-8
Interim Financial Statements (unaudited)
Condensed Consolidated Balance Sheet as of June 30, 2000
F-27
Condensed Consolidated Statements of Operations for the six
	months ended June 30, 1999 and 2000
F-28
Condensed Consolidated Statements of Cash Flows for the six
	months ended June 30, 1999 and 2000
F-29
Notes to Condensed Consolidated Financial Statements
F-30
APL Healthcare Group, Inc. and Affiliates
Financial Statements
Independent Auditors' Report
F-32
Combined Balance Sheets as of December 31, 1997 and 1998 and
	 September 30, 1999
F-33
Combined Statements of Operations for the years ended
	December 31, 1996, 1997 and 1998 and the nine months ended
	September 30, 1999
F-34
Combined Statements of Stockholders' Deficit for the years
	ended December 31, 1996, 1997 and 1998 and the nine months
	ended September 30, 1999
F-35
Combined Statements of Cash Flows for the years ended
	December 31, 1996, 1997 and 1998 and the nine months ended
	September 30, 1999
F-36
Notes to Combined Financial Statements
F-37
F-1
Table of Contents
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
American Medical Laboratories, Incorporated:
We have audited the accompanying consolidated balance sheets of
American Medical Laboratories, Incorporated and subsidiaries as
of December 31, 1998 and 1999, and the related consolidated
statements of operations, changes in redeemable preferred stock
and stockholders' equity and cash flows for each of the
years in the three year period ended December 31, 1999.
These consolidated financial statements are the responsibility of
 the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
 also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
 above present fairly, in all material respects, the consolidated
 financial position of American Medical Laboratories,
Incorporated and subsidiaries as of December 31, 1998 and
1999, and the results of their operations and their cash flows
for each of the years in the three year period ended
December 31, 1999, in conformity with generally accepted
accounting principles.
KPMG
LLP
McLean, Virginia
April 7, 2000
F-2
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1999
(in thousands, except share data)
1998
1999
ASSETS
Current assets:
Cash and cash equivalents
$
—
$
869
Accounts receivable, less allowance for doubtful accounts of $904
	 in 1998 and $1,314 in 1999 (notes 7 and 15)
21,798
51,802
Inventory
1,692
5,456
Receivable from affiliate (note 5)
306
680
Notes receivable from officers and directors (note 13)
56
—
Income tax receivable
—
1,603
Deferred income taxes (note 12)
718
4,704
Prepaid expenses and other current assets
2,221
2,955
Total current assets
26,791
68,069
Restricted cash (note 7)
1,485
—
Property, plant and equipment, net (notes 3 and 7)
6,254
24,485
Notes receivable from officers and directors (note 13)
—
2,760
Deferred income taxes (note 12)
412
2,594
Other assets
131
3,863
Intangible assets, net (notes 4 and 6)
10,190
100,322
$
45,263
$
202,093
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
	 EQUITY
Current liabilities:
Bank overdraft
$
306
$
—
Accounts payable
4,959
12,932
Notes payable and capital lease obligations (note 7)
1,249
7,315
Accrued expenses (note 8)
9,063
31,079
Accrued income taxes
745
—
Deferred income taxes (note 12)
1,211
2,352
Total current liabilities
17,533
53,678
Deferred income taxes (note 12)
315
2,751
Notes payable and capital lease obligations, less current portion
	 (note 7)
11,224
114,154
Notes payable to shareholders (notes 6 and 7)
—
17,500
Investment in affiliate (note 5)
812
1,627
Other liabilities
1,355
1,890
Total liabilities
31,239
191,600
Redeemable preferred stock (note 10):
Class A redeemable cumulative 10% preferred stock, $0.01 par
	 value, 60,000 shares authorized, 8,672 and 1,491 shares issued
	and outstanding in 1998 and 1999, respectively, stated at
	liquidation value
10,161
1,909
Stockholders' equity (note 11):
Common stock; $0.01 par value, 25,000,000 shares authorized,
	18,864,255 and 20,671,191 shares issued and outstanding in 1998
	and 1999, respectively
189
207
Additional paid-in capital
189
5,802
Retained earnings
3,485
2,575
Total stockholders' equity
3,863
8,584
Commitments and contingencies (notes 5, 6, 7, 9, 13, 14, 15
	and 16)
$
45,263
$
202,093
See accompanying notes to consolidated financial statements.
F-3
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from January 1, 1997 to May 1, 1997, period
from May 2, 1997
to December 31, 1997, and years ended December 31,
1998 and 1999
(in thousands, except share data)
Predecessor
Period from
Period from
May 2, 1997
January 1, 1997
to
to
December 31,
May 1, 1997
1997
1998
1999
Net revenue
$
28,340
$
59,234
$
102,729
$
143,436
Operating expenses:
Cost of services
20,055
41,748
69,888
96,067
Selling, general and administrative
6,151
13,071
23,131
33,575
Depreciation and amortization
524
1,073
2,170
4,803
Total operating expenses
26,730
55,892
95,189
134,445
Operating income
1,610
3,342
7,540
8,991
Interest expense
130
619
927
4,578
Other (income) expense
(49
)
331
14
100
Share in loss of affiliate (note 5)
165
694
443
815
Income before income taxes and extraordinary item
1,364
1,698
6,156
3,498
Provision for income taxes (note 11)
612
683
2,197
1,820
Income before extraordinary item
752
1,015
3,959
1,678
Extraordinary item — loss on early extinguishment of
        debt, net of tax benefit of $261,000 (note 7)
—
—
—
442
Net income
$
752
1,015
3,959
1,236
Less dividends on preferred stock (note 10)
566
923
462
Income applicable to common stockholders
$
449
$
3,036
$
774
Net income per common share — basic and diluted:
Income before extraordinary item, less preferred dividends
$
0.02
$
0.16
$
0.06
Extraordinary item
—
—
(0.02
)
Net income per common share
$
0.02
$
0.16
$
0.04
Weighted-average common shares outstanding
18,596,525
18,864,255
19,102,026
Diluted average common shares outstanding
18,596,525
19,569,464
19,813,351
See accompanying notes to consolidated financial statements.
F-4
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Period from January 1, 1997 to May 1, 1997, period
from May 2, 1997 to
December 31, 1997, and years ended December 31, 1998
 and 1999
(in thousands, except share data)
Stockholders' Equity
Class A
Redeemable
Preferred Stock
Common Stock
Additional
Notes Receivable
Paid-in
Treasury
from Stockholders
Shares
Amount
Shares
Amount
Capital
Stock
and Benefit Plan
Predecessor
Balance, December  31, 1996
—
$
—
342,300
$
342
$
1,307
$
—
$
(434
)
Net income
—
—
—
—
—
—
—
Effect of adjustments relating to the acquisition of all
	outstanding stock by Successor and resulting change in basis of
	accounting (note 1)
—
—
(342,300
)
(342
)
(1,307
)
—
434
Balance, May 1, 1997
—
—
—
—
—
—
—
Successor
Issuance of common stock
—
—
17,793,335
178
178
—
—
Issuance of preferred stock
8,099
8,099
—
—
—
—
—
Exercise of stock options
573
573
1,070,920
11
11
Accrued dividends on redeemable preferred stock
—
566
—
—
—
—
—
Net income
—
—
—
—
—
—
—
Balance, December  31, 1997
8,672
9,238
18,864,255
189
189
—
—
Accrued dividends on redeemable preferred stock
—
923
—
—
—
—
—
Net income
—
—
—
—
—
—
—
Balance, December  31, 1998
8,672
10,161
18,864,255
189
189
—
—
Repurchase of treasury stock (note 11)
—
—
—
—
—
(1,690
)
—
Retirement of treasury stock (note 11)
—
—
(344,783
)
(3
)
(3
)
1,690
—
Redemption of preferred stock (note 10)
(7,181
)
(8,714
)
—
—
—
—
—
Issuance of stock related to acquisition (note 6)
—
—
2,151,719
21
5,616
—
—
Accrued dividends on redeemable preferred stock (note 10)
—
462
—
—
—
—
—
Net income
—
—
—
—
—
—
—
Balance, December  31, 1999
1,491
$
1,909
20,671,191
$
207
$
5,802
$
—
$
—
[Additional columns below]
[Continued from above table, first column(s) repeated]
Stockholders' Equity
Total
Retained
Stockholders'
Earnings
Equity
Predecessor
Balance, December  31, 1996
$
15,575
$
16,790
Net income
752
752
Effect of adjustments relating to the acquisition of all
	outstanding stock by Successor and resulting change in basis of
	accounting (note 1)
(16,327
)
(17,542
)
Balance, May 1, 1997
—
—
Successor
Issuance of common stock
—
356
Issuance of preferred stock
—
—
Exercise of stock options
22
Accrued dividends on redeemable preferred stock
(566
)
(566
)
Net income
1,015
1,015
Balance, December  31, 1997
449
827
Accrued dividends on redeemable preferred stock
(923
)
(923
)
Net income
3,959
3,959
Balance, December  31, 1998
3,485
3,863
Repurchase of treasury stock (note 11)
—
(1,690
)
Retirement of treasury stock (note 11)
(1,684
)
—
Redemption of preferred stock (note 10)
—
—
Issuance of stock related to acquisition (note 6)
—
5,637
Accrued dividends on redeemable preferred stock (note 10)
(462
)
(462
)
Net income
1,236
1,236
Balance, December  31, 1999
$
2,575
$
8,584
See accompanying notes to consolidated financial statements.
F-5
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from January 1, 1997 to May 1, 1997, period
from May 2, 1997 to December 31, 1997,
years ended December 31, 1998 and 1999
(in thousands)
Predecessor
period from
Period from
January 1, 1997
May 2, 1997 to
to
December 31,
May 1, 1997
1997
1998
1999
Cash flows from operating activities:
Net income
$
752
$
1,015
$
3,959
$
1,236
Adjustments to reconcile net income to net cash provided by
	operating activities:
Depreciation and amortization
524
1,073
2,170
4,803
Provision for bad debts
172
1,530
2,259
4,817
Deferred income taxes
(909
)
(205
)
649
1,723
Share in loss of affiliate
165
694
443
815
Net loss (gain) on disposal of property, plant and equipment
—
(26
)
—
23
Changes in:
Accounts receivable
(2,992
)
(2,625
)
(6,681
)
(11,229
)
Inventory
83
(249
)
(441
)
(1,769
)
Prepaid expenses and other current assets
(377
)
338
(64
)
268
Receivable from affiliate
—
—
(263
)
(374
)
Income tax receivable
—
—
—
(1,603
)
Other assets
—
—
(21
)
(273
)
Accounts payable
(939
)
1,196
(113
)
3,174
Accrued expenses
(520
)
1,151
725
309
Accrued income taxes
1,521
802
(1,578
)
(746
)
Other liabilities
127
280
420
536
Net cash provided by (used in) operating activities
(2,393
)
4,974
1,464
1,710
Cash flows from investing activities:
Net proceeds from disposal of property, plant and equipment
31,329
4,166
20
8
Purchase of property, plant and equipment
(175
)
(1,564
)
(2,948
)
(5,464
)
Change in restricted cash
—
(1,218
)
(267
)
1,485
Payment related to business acquisition
—
—
—
(1,000
)
Acquisitions of businesses, net of cash acquired
—
(22,929
)
(4,193
)
(83,460
)
Net cash provided by (used in) investing activities
31,154
(21,545
)
(7,388
)
(88,431
)
Cash flows from financing activities:
Borrowings on notes payable and capital lease obligations
—
59,943
96,628
181,192
Payments on notes payable and capital lease obligations
(27,216
)
(55,428
)
(90,806
)
(76,343
)
Issuance of shareholder notes
—
—
—
(2,760
)
Proceeds from shareholder notes
—
—
—
56
Payments on obligations relating to acquisition
—
—
(87
)
—
Cost of purchase and redemption of preferred stock
—
8,672
—
(8,714
)
Proceeds from issuance of common stock
—
377
—
—
Cost of purchase and retirement of treasury stock
—
—
—
(1,690
)
Debt issuance costs paid
—
(212
)
(24
)
(3,845
)
Bank overdraft
—
93
213
(306
)
Net cash provided by (used in) financing activities
(27,216
)
13,445
5,924
87,590
Net increase in cash and cash equivalents
1,545
(3,126
)
—
869
Cash and cash equivalents, beginning of period
1,581
3,126
—
—
Cash and cash equivalents, end of period
$
3,126
$
—
$
—
$
869
F-6
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
Period from January 1, 1997 to May 1, 1997, period
from May 2, 1997 to December 31, 1997,
years ended December 31, 1998 and 1999
(in thousands)
Predecessor
period from
Period from
January 1, 1997
May 2, 1997 to
to
December 31,
May 1, 1997
1997
1998
1999
Supplemental disclosure of cash flow information:
Cash paid for interest
$
347
$
626
$
914
$
3,543
Cash paid for income taxes
—
—
3,125
2,017
Supplemental schedule of noncash investing and financing
	activities:
Acquisitions accounted for as a purchase:
Assets acquired
$
—
$
35,298
$
6,079
$
135,281
Less:
Liabilities assumed (including capital lease obligations
	disclosed in note 6)
—
12,369
1,886
46,184
Issuance of stock
—
—
—
5,637
Acquisitions, net of cash acquired
$
—
$
22,929
$
4,193
$
83,460
See accompanying notes to consolidated financial statements.
F-7
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997, 1998 and 1999
Note 1 — Organization
American Medical Laboratories, Incorporated and its subsidiaries
(the Company) is a clinical laboratory testing company. The
Company's primary source of revenue is derived from the
performance of medical laboratory tests used by physicians to
diagnose, treat and monitor diseases and other medical
conditions. These tests include esoteric testing as well as
routine clinical testing. The Company's customers include
physicians, managed care organizations, hospitals, employers and
other clinical laboratories. The Company operates in one
reportable segment, the medical laboratory industry. The
Company's main laboratory facilities are located in
Chantilly, Virginia and Las Vegas, Nevada. The Company also
maintains patient and service centers in various states
throughout the United States.
On May 2, 1997, AML Inc., a Delaware corporation, acquired
all of the outstanding stock of Medical Laboratories Corporation,
 a Virginia corporation (Predecessor). The purchase price,
including related costs, was approximately $23.0 million.
The excess of the purchase price over the fair value of the net
assets acquired was $5.6 million. The accompanying 1997
financial statements include the operations, cash flows and
changes in stockholders' equity in two separate statements,
one of which presents the Company for the period from May 2,
 1997 to December 31, 1997, and the other presents the
Predecessor for the period from January 1, 1997 to
May 1, 1997.
American Medical Laboratories, Incorporated is a Delaware holding
 company which was incorporated in 1999. During 1999, the
stockholders of AML Inc., contributed all their outstanding stock
 of AML Inc. to American Medical Laboratories, Incorporated in
exchange for the same share class and amounts of stock in
American Medical Laboratories, Incorporated. The ownership
interests in American Medical Laboratories, Incorporated were the
 same as the ownership interests in AML Inc. prior to the
exchange of shares. Accordingly, the accompanying American
Medical Laboratories, Incorporated financial statements include
the historical financial information of AML Inc. as if the
exchange of shares occurred as of the beginning of the periods
presented.
On October 13, 1999, American Medical Laboratories,
Incorporated acquired all of the stock of APL Healthcare Group,
Inc. (APL). This business combination was accounted for by the
purchase method of accounting (see note 6). Simultaneously
with the purchase of stock of APL, Robert R. Belliveau M.D.,
Thorne J. Butler, M.D. Associated Pathologists, Chartered
(APC) sold, assigned, transferred and delivered
substantially all of its assets to APL, and the members of APL
Properties, LLC (APL Properties) transferred all of the LLC
interests to APL. APC is a professional corporation that employs
pathologists licensed to practice medicine in Nevada and other
states. APL Properties is a limited liability company, formerly
owned by six stockholders of APC, that owns the building that APL
 occupies in Las Vegas, Nevada. Prior to these transactions APL,
APC, and APL Properties were commonly controlled. On
October 13, 1999, APL entered into a practice management
agreement with APC to provide management services to APC. This
practice management agreement gives APL a controlling financial
interest in APC and therefore APC has been combined with APL for
financial reporting purposes.
Note 2 — Summary of Significant Accounting Policies
(a)
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of American Medical Laboratories, Incorporated, and its
wholly owned subsidiaries, AML Inc. (AML), Medical
F-8
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
Laboratories Corporation, APL Healthcare Group, Inc. and APL
Properties, LLC. The accompanying consolidated financial
statements also include the accounts of APC, in which APL has a
controlling financial interest. All significant intercompany
balances and transactions have been eliminated in consolidation.
(b)
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 consolidated financial
statements. Estimates also affect the reported amounts of net
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
(c)
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash in banks and
highly liquid investments with original maturities of three
months or less.
(d)
Restricted Cash
Restricted cash consists of lock box accounts which are
restricted to pay down a revolving credit facility. In
April 1999, this restriction was lifted as a result of the
refinancing of the Company's credit facility (see note 7).
(e)
Revenue Recognition
The Company operates in one reportable segment, the medical
laboratory industry. Revenue from laboratory tests is recorded on
 the accrual basis at the time test results are reported at the
estimated net realizable amounts from patients, third party
payors and others for services rendered. The Company is
reimbursed for services under fee schedules, contractual and
other payor arrangements. Final adjustments to the estimated net
realizable amounts are based on final payments from third party
payors.
(f)
Accounts Receivable
Accounts receivable include billed and unbilled revenue for
testing performed, and are presented net of an allowance for
doubtful accounts and contractual allowances. The allowance for
doubtful accounts is an estimate based upon actual historical
trends and management's judgment.
(g)
Property, Plant and Equipment
Property, plant and equipment are stated at cost, or if acquired
under capital leases, at the present value of the future minimum
lease payments. Depreciation and amortization are computed using
the straight-line method. The estimated useful lives are as
follows:
Estimated useful lives
Building
30 years
Office furniture and equipment
7-12 years
Laboratory furniture and equipment
5-12 years
Computer equipment and software
2-7 years
Leasehold improvements
Life of the lease
Vehicles
1.5-5 years
F-9
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
Expenditures for repairs and maintenance, which do not materially
 extend the useful lives of property, plant and equipment, are
charged directly to expense. Equipment under capital leases is
amortized over the estimated useful lives or the term of the
lease, if shorter.
(h)
Capitalized Software Costs
The Company capitalizes purchased software, which is ready for
service and capitalizes software development costs incurred on
significant projects. Research and development costs and other
computer software maintenance costs related to software
development are expensed as incurred. Capitalized software costs
are amortized using the straight-line method over the estimated
useful life of the underlying system, generally two to five
years.
(i)
Intangible Assets
Intangible assets, consisting of goodwill and other intangibles
are amortized on a straight-line basis over the expected periods
to be benefited, 20 years for goodwill and customer lists,
3 years related to certain patents and over the life of the
non-compete agreements.
The Company continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated
 useful life of goodwill and other intangibles might warrant
revision or that the remaining balance of goodwill and other
intangibles may not be recoverable. When factors indicate that
goodwill, other intangibles and other long-lived assets should be
 evaluated for possible impairment, the Company uses an estimate
of undiscounted future net cash flows over the remaining life of
goodwill, other intangibles and other long-lived assets to
determine if impairment has occurred. If this review indicates
that the cost of the recorded assets will not be recoverable, the
 Company writes down the cost to estimated fair value.
(j)
Cost of Borrowing
Expenses directly related to the issuance of debt are deferred
and amortized over the terms of the related debt by the interest
method.
(k)
Inventory
Inventory consists principally of purchased laboratory and
medical supplies and is stated at the lower of cost (first-in,
first-out) or market value.
(l)
Investment
The Company records its 49 percent-owned affiliate on the
equity method of accounting.
(m)
Interest Rate Swap
The Company has an interest rate swap agreement to manage
interest rate exposure. The agreement is accounted for on an
accrual basis. Amounts to be paid or received under this
agreement are recognized over the life of the related debt and
are included in interest income or expense.
(n)
Accrued Loss on Capitated Contracts
Losses under laboratory testing contracts with managed care
organizations are recognized when it is probable that the
expected future costs under a contract will exceed the
anticipated future revenues
F-10
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
from the contract. The loss contracts were recorded in
conjunction with the APL acquisition on October 13, 1999.
The unamortized balance of these loss accruals totaled
approximately $1.2 million at December 31, 1999.
(o)
Income Taxes
Income taxes are accounted for in accordance with Financial
Accounting Standards Board Statement No. 109 (Statement
109). Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and
laws that are expected to apply to taxable income in the years in
 which those temporary differences are expected to be recovered
or settled.
(p)
Net Income Per Common Share
Basic net income per common share is computed by dividing net
income, less accrued preferred stock dividends, by the
weighted-average number of common shares outstanding and diluted
net income per common share is computed using the
weighted-average number of common shares outstanding and dilutive
 stock options, using the treasury stock method.
The following table reconciles the weighted-average common shares
 used in the basic net income per common share calculation and
the weighted-average common shares and common share equivalents
used in the diluted net income per common share calculation:
1997
1998
1999
Weighted-average common shares (basic)
18,596,525
18,864,255
19,102,026
Employee stock option equivalent shares
—
705,209
711,325
Weighted-average common shares and common shares equivalents
        (diluted)
18,596,525
19,569,464
19,813,351
(q)
Fair Value of Financial Instruments
The fair value of cash and cash equivalents, restricted cash,
accounts receivable, receivable from affiliate, shareholder loans
 receivable, accounts payable, accrued expenses, and capital
lease obligations are equivalent to their carrying value due to
the short-term maturity of those instruments. The carrying values
 of the Company's revolving credit facility and long-term
debt (see note 7) are considered to be representative of their
respective values as their interest rates are based on market
rates.
(r)
Stock Option Plan
The Company accounts for stock-based compensation in accordance
with the provisions of Accounting Principles Board
(APB) Opinion No. 25,
Accounting for Stock Issued to
 Employees,
and related interpretations, and complies with
the disclosure provisions of SFAS No. 123,
Accounting for
 Stock-Based Compensation
. Under APB 25, compensation is
based on the difference, if any, on the date of grant between the
 fair value of the Company's stock and the exercise price.
F-11
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
Note 3 — Property, Plant and Equipment
Property, plant and equipment consists of the following at
December 31:
1998
1999
(in thousands)
Land
$
—
1,091
Buildings
31
6,964
Office furniture and equipment
672
1,593
Laboratory furniture and equipment
2,373
4,679
Computer equipment and software
5,487
11,926
Leasehold improvements
102
2,479
Vehicles
61
782
8,726
29,514
Less accumulated depreciation and amortization
2,472
5,029
Property, plant and equipment, net
$
6,254
24,485
Note 4 — Intangible Assets
Intangible assets consist of the following at December 31:
1998
1999
(in thousands)
Customer lists
$
—
64,965
Non-compete agreements
530
2,332
Patents
—
4,309
Goodwill
10,021
30,854
10,551
102,460
Less accumulated amortization
361
2,138
Intangible assets, net
$
10,190
100,322
Note 5 — Investment in Affiliate-Shared Laboratory
Services, L.L.C.
The Company has a 49 percent ownership in Shared Laboratory
Services, L.L.C. (SLS). The remaining 51 percent is shared
equally among four hospitals in the Norfolk and Virginia Beach,
Virginia area. All five owners have equal voting power on day to
day operating matters. SLS provides core laboratory services for
the four hospitals as well as community outreach services. The
Company provides laboratory testing services to SLS. As part of
the agreement, the Company has guaranteed 49 percent of $3.9
 million of SLS debt ($3.7 million outstanding at
December 31, 1999). Since the Company has guaranteed the
debt of SLS, the Company has provided for its share of additional
 losses to the extent of the Company's exposure under the
guarantee. The Company recorded its share of SLS losses of
approximately $694,000 for the period from May 2, 1997 to
December 31, 1997, and $443,000 and $815,000 for the years
ended December 31, 1998 and 1999, respectively. The Company
has outstanding receivables from SLS of approximately $306,000
and $680,000 at December 31, 1998 and 1999, respectively,
for lab work referred to AML and billing services provided to
SLS.
F-12
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
The Company's net investment, classified as a liability, is
summarized as follows:
1998
1999
(in thousands)
Initial investment
$
490
490
Accumulated losses
(1,302
)
(2,117
)
$
(812
)
(1,627
)
Summarized unaudited financial information for SLS is as follows
as of December 31:
1998
1999
(in thousands)
Current assets
$
1,859
1,108
Noncurrent assets
1,280
1,028
Total assets
$
3,139
2,136
Current liabilities
$
1,805
2,044
Noncurrent liabilities
3,156
3,519
Total liabilities
$
4,961
5,563
Years ended December 31,
1997
1998
1999
(in thousands)
Net laboratory service revenue
$
736
4,620
5,251
Net loss
(1,689
)
(1,025
)
(1,605
)
Note 6 — Acquisitions
(a)
Providence Laboratory Associates
On June 5, 1998, the Company purchased certain assets and
liabilities of Providence Laboratory Associates (PLA). The
business combination was accounted for as a purchase. The
purchase price exceeded the fair value of net assets acquired by
approximately $5.3 million, which is being amortized on a
straight-line basis over 20 years.
The purchase price of approximately $4.2 million, including
acquisition costs, has been allocated to the fair value of assets
 and liabilities acquired as follows (amounts in thousands):
Inventory
$
117
Property and equipment
548
Other assets
147
Non-compete agreements
530
Goodwill
4,737
Capital lease obligations
(568
)
Accrued liabilities
(1,318
)
Total
$
4,193
Contingency payments of $2.0 million, $1.0 million of
which was paid on August 10, 1999, were allocated to the
purchase in 1999. The remaining $1.0 million contingent
payment is expected to be paid in 2000. In 1999, the Company also
 increased goodwill related to the PLA purchase by
F-13
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
approximately $700,000 as a result of a change in estimate
relating to a liability assumed on a non-cancelable lease
obligation for a building that the Company no longer utilized.
(b)
APL Healthcare Group, Inc. and Affiliates
On October 13, 1999, the Company purchased all of the
outstanding capital stock of APL. The acquisition of APL has been
 recorded in the Company's consolidated financial statements
 under the purchase method of accounting and the operating
results of APL have been included in the Company's
consolidated results of operations from the date of acquisition.
The acquisition was effected through the payment of approximately
 $64.3 million in cash, assumption of debt of approximately
$17.8 million, the issuance of $17.5 million in
convertible subordinated promissory notes to the former
shareholders of APL and the issuance of common stock of the
Company preliminarily valued at $5.6 million.
$10.0 million of the cash consideration has been placed in
escrow to cover any potential unrecorded loss contingencies that
may develop. While the Company has not yet finalized the
valuation of the common stock issued and related purchase price
allocation, an estimate of the purchase price has been allocated
to tangible and intangible assets acquired and liabilities
assumed based on the estimated fair market value at the date of
acquisition and the balance of $18.0 million was recorded as
 goodwill and is being amortized over 20 years on a
straight-line basis. The portion identified as identifiable
intangibles includes customer lists, non-compete agreements and a
 patent. These intangibles were valued at $71.0 million and are
being amortized on a straight-line basis over their estimated
useful lives, between 3-20 years. The Company does not
believe that the final allocation of purchase price will produce
materially different results from those reflected herein.
The purchase price, including acquisition costs of approximately
$2.0 million, was allocated as follows (amounts in
thousands):
Cash
$
526
Receivables
23,593
Inventory
1,996
Plant, property, and equipment
15,549
Deferred tax asset
4,313
Other assets
714
Customer list and other intangibles
71,076
Goodwill
18,040
Notes payable and capital lease obligations
(4,148
)
Accounts payable, accrued expenses and other liabilities assumed
(24,415
)
$
107,244
In addition to the initial purchase price, the APL acquisition
agreement provided for a purchase price adjustment based on a net
 worth calculation of the acquired entity as of the date of
closing. The Company calculated the net worth adjustment to be
approximately $2.4 million in favor of the former owners of
APL and has reflected this adjustment as an increase to the
purchase price as of the date of acquisition. The former owners
of APL have disputed the calculation of the net worth adjustment
by the Company claiming the net worth adjustment to be
approximately $3.6 million. The dispute concerning the
calculation of the net worth adjustment is subject to resolution
as set forth in the acquisition agreement and is not expected to
provide materially different results from those reflected herein.
F-14
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
As of December 31, 1999, the Company has recorded as accrued
 expenses $10.0 million in acquisition liabilities that
consist of $6.6 million in assumed liabilities,
$2.4 million for the net worth adjustment described above
and a $1.0 million contingency payment related to the PLA
acquisition. Subsequent to December 31, 1999, the Company
has paid approximately $9.0 million of these accrued
acquisition liabilities.
The following unaudited pro forma results of operations for the
years ended December 31, 1997, 1998, and 1999 have been
prepared as if the acquisition of PLA occurred on May 2,
1997, and the acquisition of APL occurred on January 1,
1998.
Period from
Years ended
May 2, 1997
December 31,
to December 31,
1997
1998
1999
(in thousands, except per share data)
Revenue
$
69,019
197,979
225,636
Net income (loss) before extraordinary item
796
(1,642
)
(92
)
Less dividends on preferred stock
566
923
462
Pro forma net income (loss) applicable to common shareholders
	before extraordinary item
$
230
(2,565
)
(554
)
Basic net income (loss) per share to common shareholders
$
0.01
(0.12
)
(0.03
)
Diluted net income (loss) per share to common shareholders
$
0.01
(0.12
)
(0.03
)
The historical financial results of the Company for 1997, 1998
and 1999, have been adjusted primarily for the historical results
 of PLA in 1997 and 1998 and APL in 1998 and 1999, an increase in
 interest expense due to the additional debt incurred to purchase
 APL, the elimination of salaries and bonuses in excess of
contractual obligations of the former owners and key members of
management of APL, an increase in amortization of intangible
assets and goodwill, and the pro forma tax effects of the
acquisitions of PLA and APL.
The unaudited pro forma information presented above does not
purport to be indicative of the results that actually would have
been obtained if the combined operations had been conducted
during the periods presented or of future operations of the
combined operations.
F-15
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
Note 7 — Notes Payable and Capital Lease Obligations
Notes payable and capital lease obligations consist of the
following at December 31:
1998
1999
(in thousands)
Term A note to Bankers Trust Company (as agent) bearing interest
	at Eurodollar rate plus 3.25% payable monthly (9.75% at
	December 31, 1999), principal payable in quarterly
	installments of $2.0 million beginning June 30, 2000,
	$2.5 million beginning December 2001,
	$3.25 million beginning December 2002, and
	$3.75 million beginning December 2003 through
	October 13, 2004.
$
—
50,000
Term B note to Bankers Trust Company (as agent) bearing interest
	at Eurodollar rate plus 3.875% payable monthly (10.375% at
	December 31, 1999), principal payable in quarterly
	installments of $325,000 beginning June 2000, $163,000
	beginning December 2000, and $10.3 million beginning
	December 2004 through April 13, 2006.
—
65,000
Revolving note to Bankers Trust Company (as agent) for up to
	$25.0 million, bearing interest at prime plus 2.25% (10.70%
	weighted-average interest rate for 1999), principal due
	October 13, 2004.
—
2,100
Note payable to Bank of America; monthly payments of $31,000
	including interest at 8.39% at December 31, 1999; remaining
	principal balance plus remaining interest due May  1, 2007;
	collateralized by certain real property and the personal
	guarantee of the former APL shareholders.
—
3,466
Note payable to Premium Financing Specialist; interest at 7.76%
	at December 31, 1999; remaining balance plus remaining
	interest due January 2000.
—
54
Term Note to Heller Business Credit, bearing interest at
	lender's base rate plus 0.75% payable monthly (8.50% at
	December 31, 1998), originally due May 2, 2000, with
	earlier prepayments required beginning March 31, 1999, if
	certain criteria are met. Facility was paid in full on
	October 13, 1999.
1,875
—
Revolving Note to Heller Business Credit for up to $17.75 
	million, consisting of the following at December 31, 1998:
Base rate loans bearing interest at lender's base rate
	payable monthly (7.75% at December 31, 1998), principal due
	May 2, 2000. Revolver was paid in full on October 13,
	1999.
1,307
—
LIBOR loan bearing interest at LIBOR plus 2.25% payable monthly
	(7.47% at December 31, 1998), principal due May 2,
	2000. Facility was paid in full on October 13, 1999.
7,000
—
Capex Revolving Note to Heller Business Credit, for up to
	$8.5 million bearing interest at lender's base rate
	plus 0.75% (9.1% weighted average interest rate for 1998), due in
	 monthly principal installments of $57,000, plus interest through
	 December 1999, and monthly principal installments of
	$36,000, plus interest, from January 2000 through
	April  2000 and the remaining principal balance of $615,000
	due May 2, 2000. Revolver was paid in full on
	October 13, 1999.
1,445
—
F-16
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
1998
1999
(in thousands)
Various capital lease obligations for laboratory equipment,
	furniture and office equipment and vehicles; monthly payments
	totaling $121,000 at December 31, 1999 with interest ranging
	 from 6% to 12%; remaining principal balance plus unpaid interest
	 with varying maturity dates through June 2004.
846
849
12,473
121,469
Less current portion
1,249
7,315
$
11,224
114,154
(a)
Term Notes and Revolving Credit Agreements
On May 2, 1997, the Company entered into a
$20.0 million credit agreement with Heller Financial, Inc.
The commitment consisted of a term loan of $2.25 million and
 an accounts receivable based line of credit for up to
$17.75 million. The credit agreement was secured by the
Company's assets. As of December 31, 1998, the Company
had pledged approximately $1.5 million of cash as collateral
 on the outstanding revolving note which was considered
restricted cash. On April 30, 1998, the Company entered into
 a loan agreement to increase the capital advances of its Capex
loan from $500,000 to $8.5 million. In April 1999, the
Company refinanced its credit agreement with Heller Financial,
Inc., which consisted of a term loan of $20.0 million,
payable in quarterly installments through December 31, 2003
and a revolving facility of $15.0 million, payable by
December 31, 2003. On October 13, 1999, the Company
repaid all outstanding debt related to its credit agreement with
Heller Financial, Inc. Commitment fees paid under these
agreements totaled approximately $28,000, $39,000 and $31,000 in
1997, 1998 and 1999, respectively.
On October 13, 1999, the Company entered into a
$140.0 million senior credit facility with the Bankers Trust
 Company. The senior credit facility consists of a Term A loan of
 $50.0 million, a Term B loan of $65.0 million, a
revolving line of credit of $25.0 million of which
$2.1 million was drawn as of December 31, 1999. APL
entered into a $2.5 million line of credit agreement on
December 28, 1999 with the Bankers Trust Company in favor of
 the state of Nevada, Department of Insurance, as beneficiary, of
 which $0 was drawn as of December 31, 1999.
The senior credit facility is secured by the Company's
underlying assets. Under the terms and conditions of the senior
credit facility, the Company is subject to certain financial and
reporting covenants. The Company was in full compliance with the
financial covenants at December 31, 1999. Commitment fees
under this senior credit facility totaled approximately $26,000
in 1999.
(b)
Notes Payable to Stockholders
Notes payable to stockholders consists of the following at
December 31:
1998
1999
(in thousands)
Notes payable to the former stockholders of APL; interest at 10%
	per annum; payable semi-annually on June 30 and
	December 31; principal balance due on October 13, 2006;
	 subject to prepayment at the time of an initial public offering
	or sale of the Company; subordinated to all other debt of the
	Company.
—
$
17,500
F-17
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
The notes payable to stockholders are subject to prepayment
without penalty at the Company's option and at the note
holders' option from the date of consummation of an initial
public offering or sale of the Company until the seventh
anniversary of the date of the notes. The note holders'
prepayment options are subject to receiving the consent of the
holders of the firm and revolving notes described above and the
underwriters of the initial public offering.
These notes are convertible at the option of the note holders
into shares of the Company's common stock simultaneously
with an initial public offering at a share value equal to 80% of
the price per share paid by the public in the initial public
offering.
Maturities of notes payable and capital lease obligations are as
follows:
Notes payable
Capital leases
(in thousands)
2000
$
6,956
414
2001
9,248
257
2002
11,506
140
2003
14,265
121
2004
24,255
35
Thereafter
71,890
—
138,120
967
Less interest payments
—
118
$
138,120
849
(c)
Extraordinary Item — Early
Extinguishment of Debt
In conjunction with the acquisition of APL, the Company repaid
the entire amount outstanding under its then existing credit
agreement with Heller Financial, Inc. The extraordinary loss
recorded in 1999 represented approximately $703,000 ($442,000,
net of tax) of deferred financing costs written off in connection
 with the early extinguishment of the related credit agreement.
(d)
Interest Rate Swap Agreement
The Company has entered into an interest rate swap agreement to
reduce its exposure to adverse fluctuations in interest rates
related to the Company's outstanding term notes payable. The
 Company does not utilize financial instruments for trading or
other speculative purposes. The agreement entitles the Company,
on a quarterly basis, to receive a LIBOR-based floating rate of
interest and pay a fixed rate of interest of 6.6 percent.
The interest rate swap has a total notional amount of
$58.0 million and expires on December 23, 2002.
The differential to be paid or received under the swap agreement
is accrued as the interest rates change and is recognized over
the life of the agreement. As a result of the swap agreement,
interest expense increased by approximately $67,000 in 1999. The
Company is exposed to credit loss in the event of nonperformance
by the other party to the interest rate swap agreement. The
Company, however, does not anticipate nonperformance by the
counterparty.
F-18
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
Note 8 — Accrued Expenses
Accrued expenses consists of the following at December 31:
1998
1999
(in thousands)
Accrued salaries, bonus, and payroll withholding
$
2,737
6,206
Accrued sick leave and vacation
1,946
2,166
Accrued expenses
2,730
9,519
Accrued loss on capitated contracts (note 2)
—
1,223
Accrued acquisition liabilities (note 6)
—
10,026
Declared contributions (note 14)
1,650
1,939
$
9,063
31,079
Note 9 — Lease Commitments
The Company has an operating lease for its Chantilly, Virginia
laboratory facility. The lease is for 20 years with two
five-year renewal options. The lease requires annual lease
payments of approximately $3.9 million, plus property taxes,
through 2004. Beginning in 2005 and through the remainder of the
lease, a 2.5 percent annual escalator applies.
The Company also leases various equipment, patient and service
center facilities, and other office space under noncancelable
lease arrangements expiring at various dates through
December 2005.
Future minimum lease payments under these noncancelable operating
 leases are as follows (amounts in thousands):
2000
$
6,099
2001
5,592
2002
4,836
2003
4,296
2004
4,060
Thereafter
55,461
$
80,344
Total rent expense under all operating leases was approximately
$1.9 million for the period from January 1, 1997 to
May 1, 1997, $4.2 million for the period from May 2,
1997 to December 31, 1997, and $6.5 million and $6.9 million
 for the years ended December 31, 1998 and 1999,
respectively.
Note 10 — Redeemable Class A Preferred Stock
The Company's Certificate of Incorporation authorizes the
issuance of 60,000 shares of Class A redeemable preferred
stock with a par value of $0.01 per share. As of
December 31, 1999, 1,491 shares have been issued for $1,000
per share or approximately $1.5 million. Dividends accrue at the
rate of 10 percent per annum on the sum of the liquidation
value ($1,000 per share) plus all accumulated and unpaid
dividends thereon. Accumulated and unpaid preferred stock
dividends totaled approximately $1.5 million or $171.75 per share
 and $418,000 or $280.73 per share as of December 31, 1998
and 1999, respectively. All Class A preferred shares must be
 redeemed by the Company on December 31, 2007 at a price
equal to the liquidation value plus all accrued and unpaid
dividends. The Company may redeem any or all of the shares at any
 time prior to that date. In
F-19
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
addition, the Company shall, at the request of a majority of the
Class A preferred stockholders, redeem the shares at the
liquidation value plus accrued dividends at the time of a Public
Offering or if a change in ownership of the Company, as defined,
were to occur. Under certain circumstances, including bankruptcy
and failure to pay all accrued preferred dividends by
December 31, 2003, the preferred stockholders may require
their shares to be immediately redeemed or they may gain voting
majority of the Company's Board of Directors. The Company
may not pay dividends on common stock without the consent of a
majority of preferred stockholders. Preferred stockholders shall
be entitled to 1,750 votes per share on all matters to be voted
on by the Company's stockholders.
On May 5, 1999, AML repurchased and retired 7,181.46 shares
of Class A preferred stock. The aggregate redemption price
was approximately $8.7 million, of which approximately $7.2
million related to the aggregate liquidation value of the shares
and the remaining $1.5 million related to accrued and unpaid
dividends.
Note 11 — Stockholders' Equity
(a)
Common Stock
The Company's Certificate of Incorporation authorizes the
issuance of 25.0 million shares of common stock, with a par value
 of $.01 per share. On December 16, 1998, the Company
effected a five-for-one stock split on the Company's common
stock. All common stock and common stock per share amounts were
retroactively restated for all periods presented to reflect this
split. At December 31, 1999, 20,671,191 shares of common
stock have been issued for $.01 per share or $206,711. Common
stockholders may cast one vote per share regarding matters to be
voted on by the Company's stockholders.
(b)
Treasury Stock
During 1999, the Company repurchased and retired 344,783 shares
of common stock at an aggregate cost of $1.7 million. The
difference between the cost of treasury shares retired and the
original issue price was charged as a reduction to retained
earnings (see note 13(b)).
F-20
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
Note 12 — Income Taxes
Provision for income taxes on income before income taxes and
extraordinary item consists of the following:
Predecessor
Period from
Period from
January 1, 1997
May 2, 1997 to
to May 1, 1997
December 31, 1997
1998
1999
(in thousands)
Current:
Federal
$
1,212
738
1,304
—
State
309
150
244
—
Total current
1,521
888
1,548
—
Deferred:
Federal
(828
)
(154
)
575
1,650
State
(81
)
(51
)
75
170
Total deferred
(909
)
(205
)
650
1,820
Total
$
612
683
2,198
1,820
The tax benefit associated with the extraordinary charge from the
 early extinguishment of debt is $261,000. A reconciliation of
tax expense computed at the statutory federal tax rate on income
from operations before income taxes and extraordinary item to the
 actual income tax expense is as follows:
Predecessor
Period from
Period from
January 1, 1997
May 2, 1997 to
to May 1, 1997
December 31, 1997
1998
1999
(in thousands)
Tax provision computed at the statutory rate
$
464
673
2,093
1,224
State income taxes, net of federal income tax provision
37
74
230
110
Intangibles amortization and other book expenses not deductible
	for tax purposes
11
22
47
483
Other
100
(86
)
(173
)
3
Total income tax expense
$
612
683
2,197
1,820
Deferred income taxes reflect temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
F-21
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
Significant components of deferred tax assets and liabilities as
of December 31, 1998 and 1999 are as follows:
1998
1999
(in thousands)
Deferred tax assets:
Bad debt reserves
$
(72
)
(992
)
Accrued compensation costs
(337
)
(4,464
)
Investment in affiliate
(120
)
(247
)
Book in excess of tax depreciation
(292
)
—
Deferred rent
—
(459
)
Reserves and other non-deductible accruals
—
(525
)
Other
(309
)
(214
)
Net operating loss carryforwards
—
(397
)
Total deferred tax assets
(1,130
)
(7,298
)
Deferred tax liabilities:
Prepaid expenses
600
1,511
Deferred compensation
611
942
Accelerated depreciation
—
1,542
Accelerated amortization
315
370
Loss contingency
—
540
Other
—
198
Total deferred tax liabilities
1,526
5,103
Net deferred tax liabilities (assets)
$
396
(2,195
)
At December 31, 1999, the Company had net operating loss
carryforwards available for federal and state income tax purposes
 of approximately $1.0 million, which expire in 2019. The
annual utilization of these net operating loss carryforwards may
be subject to certain limitations under the Internal Revenue
Code.
Note 13 — Related Party Transactions
(a)
Notes Receivable from Officers and Directors
The Company held various notes receivable from officers and
directors of the Company with balances totaling approximately
$56,000 and $2.8 million at December 31, 1998 and 1999,
 respectively. These notes bear interest rates ranging from
8 percent to 10 percent, which are compounded annually,
 commencing on December 31, 1999. The notes are payable on
the earlier of December 31, 2005 or in the event of the sale
 of the Company, at the time of the sale. The loans are
collateralized by the stockholders' interest in the Company,
 totaling 4,163,871 shares of the Company's common stock,
and 944.93 shares of the Company's Class A redeemable
preferred stock.
(b)
Repurchase of Common Stock
In April 1999, the Company repurchased approximately 293,779
shares of common stock from the Chairman and Chief Executive
Officer of the Company for approximately $1.4 million in
cash. In August 1999, the Company repurchased 51,004 shares of
common stock from an officer of the Company for $250,000 in cash.
F-22
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
(c)
Professional Services Agreement with
Stockholder
The Company has entered into a professional services agreement
with a stockholder of the Company, whereby the stockholder is to
provide financial and management consulting services to the
Company for up to $150,000 per year. The agreement stipulates a
one-percent investment fee to be paid to the stockholder at the
time of certain debt or equity financings. The agreement also
includes a success fee to be paid to the stockholder upon the
earlier of the sale of the Company at an aggregate implied common
 equity value of at least $40.0 million or upon the consummation
of a public offering. The success fee will be equal to
$1.4 million plus 8 percent interest per year,
compounded annually, from October 1999 through the date of
payment.
Note 14 — Employee Benefit Plans
(a)
Cash Deferred Profit-Sharing Plan
The Company has various employee benefit plans including a cash
deferred profit-sharing plan and a 401(k) plan for employees. The
 Company made contributions to these plans of approximately
$116,000 during the period from May 2, 1997 to
December 31, 1997, and $565,000 and $829,000 for the years
ended December 31, 1998 and 1999, respectively. The
Predecessor made contributions of approximately $76,000 during
the period from January 1, 1997 to May 1, 1997.
In December 1998 and 1999, the Company's Board of
Directors declared a $1.7 million and $1.9 million
contribution, respectively, to the cash deferred profit-sharing
plan for the years ended December 30, 1999 and 2000, and
recorded a related liability. The contribution is recorded as a
deferred compensation asset and is amortized to compensation
expense ratably during the year following declaration as the
services of employees are rendered to the Company.
(b)
Stock Option Plan
The Company adopted an amended stock option plan (the
"Plan") in October 1999. The Plan was originally
adopted by AML Inc. in May 1997. Options to purchase common
stock under the Plan are granted to employees of the Company at
prices determined by the Board of Directors. Options to purchase
up to 1,514,325 shares of common stock may be granted under the
Plan.
The Company applies APB Opinion No. 25 in accounting for its
 Plan. Options to purchase common stock under the Plan are
granted to employees at prices which are at or exceed fair market
 value as determined by the Board of Directors. Options vest
beginning one year after date of grant over a five-year period.
No options shall be granted or shares of common stock issued
under the Plan after December 31, 2006. Had the Company
determined compensation costs based on the fair value
F-23
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
at the grant date for its stock options under SFAS No. 123, the
Company's net income would have been reduced to the pro
forma amounts indicated below:
Years ended
December 31,
Period May 2, 1997
to December 31, 1997
1998
1999
(in thousands, except per share data)
Net income available to common shareholders:
As reported
$
449
$
3,036
$
774
Pro forma
$
449
$
3,027
$
713
Net income per share:
As reported
$
0.02
$
0.16
$
0.04
Pro forma
$
0.02
$
0.16
$
0.04
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
1997
1998
1999
Dividend yield
0
%
0
%
0
%
Risk-free interest rate
6.4
%
4.5
%
5.4
%
Expected volatility
0.1
%
0.1
%
0.1
%
Expected holding period in years
5
5
5
A summary of the status of the Company's stock options as of
 December 31, 1997, 1998, and 1999 and changes during the
years then ended is presented below.
The following table summarizes information about stock options
outstanding at December 31, 1999:
1997
1998
1999
Weighted
Weighted
Weighted
average
average
average
exercise
exercise
exercise
Shares
price
Shares
price
Shares
price
Outstanding at beginning of year
370,000
$
0.02
365,000
$
0.02
722,000
$
0.02
Granted
—
—
362,000
0.02
125,000
4.90
Exercised
—
—
—
—
—
—
Forfeited
(5,000
)
0.02
(5,000
)
0.02
(2,000
)
0.02
Outstanding at end of year
365,000
0.02
722,000
0.02
845,000
0.74
Options exercisable at end of year
—
—
90,000
0.02
253,500
0.02
Weighted-average fair value of options granted during the year
$
0.10
$
0.67
$
—
F-24
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
The following table summarizes information about stock options
outstanding at December 31, 1999:
Outstanding
Options Exercisable
Weighted-
Weighted-
Weighted
average
average
average
Exercise
remaining
exercise
exercise
prices
Number
contractual life
price
Number
price
$       0.02
720,000
7
$
0.02
253,500
$
0.02
4.90
125,000
7
4.90
—
—
$0.02 – $4.90
845,000
7
$
0.74
253,500
$
0.02
Note 15 — Concentrations of Credit Risk
The Company grants credit without collateral to its customers,
which are composed primarily of health care providers, Medicare
and other health plans. The mix of receivables from patients and
third-party payors at December 31, 1998 and 1999, was as
follows:
1998
1999
Medicare
16
%
14
%
Blue Cross Blue Shield
13
6
Private Insurers
13
29
All others (none greater than 5%)
58
51
100
%
100
%
Note 16 — Contingencies
The Company is involved in legal actions and disputes arising in
the ordinary course of business. With respect thereto, the
Company believes that it has adequate legal defenses and
insurance coverage and believes that their ultimate outcome will
not have a material adverse effect on the Company's
financial position.
F-25
Table of Contents
AMERICAN MEDICAL LABORATORIES, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements —
(Continued)
December 31, 1997, 1998 and 1999
AMERICAN MEDICAL LABORATORIES,
INCORPORATED AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF JUNE 30, 2000 AND
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND
JUNE 30, 2000
F-26
Table of Contents
American Medical Laboratories, Incorporated
Unaudited Condensed Consolidated Balance Sheet
June 30, 2000
(in thousands)
Assets
Current assets:
Cash and cash equivalents
$
1,008
Accounts receivable, less allowance for doubtful accounts of
	$2,263 in 2000
58,864
Inventory
6,222
Receivable from affiliate
96
Income tax receivable
—
Deferred income taxes
2,845
Prepaid expenses and other current assets
2,214
Total current assets
71,249
Property, plant, and equipment, net
25,015
Intangible assets, net
96,889
Notes receivable from officers and directors
2,760
Deferred income taxes
2,346
Other assets
4,093
$
202,352
Liabilities, Redeemable Preferred Stock and Stockholders'
	 Equity
Current liabilities:
Accounts payable
$
18,982
Notes payable and capital lease obligations
9,887
Accrued expenses
15,363
Declared contribution
136
Accrued income taxes
92
Deferred income taxes
2,422
Total current liabilities
46,882
Deferred income taxes
2,594
Notes payable and capital lease obligations, less current portion
118,432
Notes payable to shareholders
17,500
Investment in affiliate
1,911
Other liabilities
1,819
Total liabilities
189,138
Redeemable preferred stock
2,004
Stockholders' equity
11,210
$
202,352
See notes to unaudited condensed consolidated statements.
F-27
Table of Contents
American Medical Laboratories, Incorporated
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
Six months
Six months
ended
ended
June 30, 1999
June 30, 2000
Net revenue
$
58,609
$
129,895
Operating expenses:
Cost of services
38,530
83,816
Selling, general and administrative
14,077
27,070
Depreciation and amortization
1,356
6,425
Total operating expenses
53,963
117,311
Operating income
4,646
12,584
Interest expense
835
7,602
Other (income) expense
(13
)
—
Share in loss of affiliate
407
284
Income before income taxes and extraordinary item
3,417
4,698
Provision for income taxes
1,338
2,152
Income before extraordinary item
2,079
2,546
Extraordinary item — loss on early extinguishment of
        debt, net of tax benefit of $39,836
67
—
Net income
2,012
2,546
Less dividends on preferred stock
375
95
Income applicable to common stockholders
$
1,637
$
2,451
Net income per common share — basic:
Income before extraordinary item, less preferred dividends
$
0.09
$
0.12
Extraordinary item
—
—
Net income
$
0.09
$
0.12
Net income per common share — diluted:
Income before extraordinary item, less preferred dividends
$
0.08
$
0.11
Extraordinary item
—
—
Net income
$
0.08
$
0.11
Weighted-average common shares outstanding
18,749,080
20,807,765
Diluted average common shares outstanding
19,426,013
21,332,500
See notes to unaudited condensed consolidated statements.
F-28
Table of Contents
American Medical Laboratories, Incorporated
Unaudited Condensed Consolidated Statement of Cash Flow
(in thousands)
Six months
ended
June 30,
1999
2000
Cash flows from operating activities:
Net income
$
2,012
$
2,546
Adjustments to reconcile net income to net cash provided by
	operating activities:
Depreciation and amortization
1,356
6,425
Provision for doubtful accounts
1,182
6,710
Deferred income taxes
946
2,020
Share in loss of affiliate
407
284
Stock compensation
—
172
Net changes in operating assets and liabilities
(3,845
)
(11,323
)
Net cash provided by operating activities
2,058
6,834
Cash flow from investing activities:
Purchases of property and equipment
(2,003
)
(3,172
)
Net proceeds from sale of assets
7
—
Investment in affiliate
—
(350
)
Payments related to business acquisition
(1,000
)
(10,026
)
Change in restricted cash
1,485
—
Net cash used in investing activities
(1,511
)
(13,548
)
Cash flows used in financing activities:
Borrowings on notes payable and capital lease obligations
49,465
25,361
Payments on notes payable and capital lease obligations
(35,261
)
(18,511
)
Issuance of stockholder notes
(2,510
)
—
Proceeds from stockholder notes
56
—
Proceeds from exercise of common stock options
—
3
Cost of purchase of preferred stock
(8,714
)
—
Cost of purchase and retirement of treasury stock
(1,440
)
—
Debt issuance costs paid
(612
)
Bank overdraft
(306
)
—
Net cash provided by financing activities
678
6,853
Net increase in cash and cash equivalents
$
1,225
$
139
Cash and cash equivalents, beginning of period
$
—
$
869
Cash and cash equivalents, end of period
$
1,225
$
1,008
Supplemental disclosures of cash flow information:
Cash paid for interest for the six-month period ended
$
836
$
5,064
Taxes paid for the six-month period ended
1,538
1
See notes to unaudited condensed consolidated statements.
F-29
Table of Contents
American Medical Laboratories, Incorporated
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 — Summary of Significant Accounting Policies
Financial statement note disclosures, normally included in
financial statements prepared in conformity with generally
accepted accounting principles, have been omitted in these
unaudited condensed consolidated financial statements pursuant to
 the Form 10Q rules and regulations of the Securities and
Exchange Commission. However, in the opinion of the Company, the
disclosures contained herein are adequate to make the information
 presented not misleading when read in conjunction with the notes
 to consolidated financial statements of the Company for the year
 ended December 31, 1999.
In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements reflect all
adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the Condensed Consolidated Balance
Sheet at June 30, 2000, the Condensed Consolidated
Statements of Operations for the six months ended June 30,
1999 and 2000, and the Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 1999 and 2000.
Note 2 — Redeemable Preferred Stock and
Stockholders' Equity
The changes in redeemable preferred stock are as follows (amounts
 in thousands):
Balance at December 31, 1999
$
1,909
Accrued dividends on redeemable preferred stock
95
Balance at June 30, 2000
$
2,004
The changes in stockholders' equity are as follows (amounts
in thousands):
Balance at December 31, 1999
$
8,584
Net income
2,546
Accrued dividends on redeemable preferred stock
(95
)
Stock based compensation
172
Stock options exercised
3
Balance at June 30, 2000
$
11,210
Note 3 — Stock-based Compensation
The Company accounts for stock-based compensation in accordance
with the provisions of Accounting Principles Board
("APB") No. 25,
Accounting for Stock Issued to
Employees
, and related interpretations, and complies with the
 disclosure provisions of SFAS No. 123,
Accounting for
Stock-Based Compensation.
Under APB 25, compensation is
based on the difference, if any, on the date of grant between the
 fair value of the Company's stock and the exercise price.
These amounts are amortized over the respective vesting periods
of the individual stock options, generally four years. In
connection with the grant of stock options to employees, the
Company has recorded gross deferred compensation expense of
approximately $1.7 million and related amortization of
approximately $172,000 for the six months ended June 30,
2000. This deferred compensation is subject to reduction for any
employee who terminates employment prior to the expiration of
such employee's option vesting period.
F-30
Table of Contents
American Medical Laboratories, Incorporated
Notes to Unaudited Condensed Consolidated Financial
Statements — (Continued)
Note 4 — Notes Payable
On October 13, 1999, the Company entered into a
$140.0 million senior credit facility with the Bankers Trust
 Company. The senior credit facility consists of a Term A loan of
 $50.0 million, a Term B loan of $65.0 million, a
revolving line of credit of $25.0 million of which
$10.8 million was drawn as of June 30, 2000 (weighted
interest rate of 11.22% at June 30, 2000). Total outstanding debt
 under this senior credit facility was approximately
$123.5 million at June 30, 2000.
Under the terms and conditions of the senior credit facility, the
 Company is subject to certain financial and reporting covenants.
 For the three month period ended June 30, 2000, the Company was
not in compliance with the senior leverage ratio covenant in the
senior credit facility. The Company received a waiver from the
lender for this noncompliance. The Company was in compliance with
 all other debt covenants at June 30, 2000.
F-31
Table of Contents
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
APL Healthcare Group, Inc.:
We have audited the accompanying combined balance sheets of APL
Healthcare Group, Inc. and affiliates as of December 31,
1997 and 1998 and September 30, 1999, and the related
combined statements of operations, changes in stockholders'
deficit and cash flows for each of the years in the three year
period ended December 31, 1998 and for the nine months ended
 September 30, 1999. These combined financial statements are
 the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
 also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
 audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the financial
position of APL Healthcare Group, Inc. and affiliates as of
December 31, 1997 and 1998 and September 30, 1999, and
the results of their operations and their cash flows for each of
the years in the three year period ended December 31, 1998
and for the nine months ended September 30, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
McLean, Virginia
December 23, 1999
F-32
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
December 31, 1997 and 1998 and September 30, 1999
December 31,
September 30,
1997
1998
1999
ASSETS
Current assets:
Cash and cash equivalents
$
3,201,797
$
4,380,848
$
3,047,459
Accounts receivable, less allowance for doubtful accounts of
	$2,443,085 in 1997, $3,037,295 in 1998 and $5,190,203 in 1999
	(notes 6 and 12)
14,329,958
14,665,164
20,074,719
Inventory
1,969,391
1,773,697
2,020,128
Prepaid expenses
422,905
449,402
682,994
Other current assets
222,385
145,204
382,978
Deferred income taxes (note 10)
2,926,615
—
—
Total current assets
23,073,051
21,414,315
26,208,278
Property, plant and equipment, net (notes 3 and 6)
9,163,579
10,514,536
10,322,247
Investment in affiliate (note 4)
513,950
459,850
419,344
Other assets
204,828
85,847
45,503
Intangible assets, net (note 5)
83,964
55,437
35,070
$
33,039,372
$
32,529,985
$
37,030,442
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable
$
3,022,764
$
3,175,282
$
4,420,302
Line of credit (note 6)
—
—
1,179,923
Notes payable and capital lease obligations (notes 6 and 8)
3,442,089
2,897,835
3,020,979
Notes payable to stockholders (note 6)
2,029,104
2,568,606
2,323,962
Dividends payable to stockholders (note 14)
—
—
308,750
Accrued expenses (note 7)
9,179,271
9,726,709
9,472,531
Income tax payable
258,483
—
—
Total current liabilities
17,931,711
18,368,432
20,726,447
Notes payable and capital lease obligations, less current portion
	 (notes 6 and 8)
8,419,369
10,582,277
10,260,064
Notes payable to stockholders, less current portion (note 6)
3,905,895
6,395,420
4,657,566
Deferred income taxes (note 10)
61,827
—
—
Accrued loss on capitated contracts (note 2)
5,412,377
2,774,752
1,872,982
Total liabilities
35,731,179
38,120,881
37,517,059
Stockholders' deficit (note 13):
Common stock
2,708
7,251
7,251
Stock-based deferred compensation
—
(4,773,408
)
(1,200,655
)
Additional paid-in capital
66,471
7,645,040
2,678,142
Accumulated deficit
(2,760,986
)
(8,469,779
)
(1,971,355
)
(2,691,807
)
(5,590,896
)
(486,617
)
Commitments and contingencies (notes 8, 11, 12 and 16)
$
33,039,372
$
32,529,985
$
37,030,442
See accompanying notes to combined financial statements.
F-33
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
Years ended December 31, 1996, 1997 and 1998
and nine months ended September 30, 1999
Nine months
Years ended December 31,
ended
September 30,
1996
1997
1998
1999
Net revenue
$
70,263,230
$
81,004,431
$
90,729,555
$
78,414,890
Expenses:
Operating
44,614,120
50,076,200
56,286,320
49,859,848
Selling, general and administrative
10,574,833
11,329,568
14,815,687
9,107,984
Depreciation and amortization
1,845,750
2,133,562
2,531,353
1,907,385
Interest expense
910,234
1,296,390
1,353,409
979,488
Provision for bad debts
7,173,235
7,978,911
8,846,141
8,850,311
Other, net (note 15)
(1,798,629
)
11,302
25,220
2,700
Total expenses
63,319,543
72,825,933
83,858,130
70,707,716
Income before income taxes
6,943,687
8,178,498
6,871,425
7,707,174
Provision for income taxes (note 10)
639,178
931,050
2,619,306
—
Net income
$
6,304,509
$
7,247,448
$
4,252,119
$
7,707,174
See accompanying notes to combined financial statements.
F-34
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Years ended December 31, 1996, 1997 and 1998
and nine months ended September 30, 1999
APC
APL
Common Stock
Common Stock
Class A
Class A
Class A-1
Class A-2
Class B
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Balance, December  31, 1995
394
$
394
2,314
$
2,314
—
$
—
—
$
—
—
$
—
Net income
—
—
—
—
—
—
—
—
—
—
Dividends
—
—
—
—
—
—
—
—
—
—
Balance, December  31, 1996
394
394
2,314
2,314
—
—
—
—
—
—
Net income
—
—
—
—
—
—
—
—
—
—
Dividends
—
—
—
—
—
—
—
—
—
—
Balance, December  31, 1997
394
394
2,314
2,314
—
—
—
—
—
—
Issuance of restricted common stock to executives (note 13)
—
—
—
—
—
—
—
—
857
857
Recapitalization of existing shares (note 13)
—
—
(2,314
)
(2,314
)
60
60
5,940
5,940
—
—
Net income
—
—
—
—
—
—
—
—
—
—
Dividends
—
—
—
—
—
—
—
—
—
—
Balance, December  31, 1998
394
$
394
—
$
—
60
$
60
5,940
$
5,940
857
$
857
Dividends
—
—
—
—
—
—
—
—
—
—
Net income
—
—
—
—
—
—
—
—
—
—
Amortization of deferred compensation (note 13)
—
—
—
—
—
—
—
—
—
—
Balance, September  30, 1999
394
$
394
—
$
—
60
$
60
5,940
$
5,940
857
$
857
[Additional columns below]
[Continued from above table, first column(s) repeated]
Additional
Total
Deferred
Paid-in
Retained
Stockholders'
Compensation
Capital
Deficit
Deficit
Balance, December  31, 1995
$
—
$
66,471
$
(4,763,543
)
$
(4,694,364
)
Net income
—
—
6,304,509
6,304,509
Dividends
—
—
(5,502,400
)
(5,502,400
)
Balance, December  31, 1996
—
66,471
(3,961,434
)
(3,892,255
)
Net income
—
—
7,247,448
7,247,448
Dividends
—
—
(6,047,000
)
(6,047,000
)
Balance, December  31, 1997
—
66,471
(2,760,986
)
(2,691,807
)
Issuance of restricted common stock to executives (note 13)
(4,773,408
)
7,582,255
—
2,809,704
Recapitalization of existing shares (note 13)
—
(3,686
)
—
—
Net income
—
—
4,252,119
4,252,119
Dividends
—
—
(9,960,912
)
(9,960,912
)
Balance, December  31, 1998
$
(4,773,408
)
$
7,645,040
$
(8,469,779
)
$
(5,590,896
)
Dividends
—
—
(1,208,750
)
(1,208,750
)
Net income
—
—
7,707,174
7,707,174
Amortization of deferred compensation (note 13)
3,572,753
(4,966,898
)
—
(1,394,145
)
Balance, September  30, 1999
$
(1,200,655
)
$
2,678,142
$
(1,971,355
)
$
(486,617
)
See accompanying notes to combined financial statements.
F-35
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1997 and 1998 and the
nine months ended September 30, 1999
December 31,
September 30,
1996
1997
1998
1999
Cash flows from operating activities:
Net income
$
6,304,509
$
7,247,448
$
4,252,119
$
7,707,174
Adjustments to reconcile net income to net cash provided by
	operating activities:
Depreciation and amortization
1,845,750
2,133,562
2,531,353
1,907,385
Amortization of loss on capitated contracts
(2,685,385
)
(2,646,037
)
(2,637,625
)
(1,948,736
)
Provision for bad debts
7,173,235
7,978,911
8,846,141
8,850,311
Deferred income taxes
606,079
595,816
2,877,789
—
Stock compensation
—
—
2,809,704
(1,394,145
)
Net loss on disposal of property, plant and equipment
61,089
35,360
34,307
27,325
Changes in:
Accounts receivable
(7,698,498
)
(9,405,194
)
(9,181,347
)
(14,259,866
)
Inventory
(186,227
)
(546,414
)
195,694
(246,431
)
Prepaid expenses
(178,880
)
286,485
(26,497
)
(233,592
)
Other current assets
126,733
(72,799
)
77,181
(237,774
)
Other assets
(61,142
)
40,906
118,981
40,344
Accounts payable
416,681
332,065
152,518
1,245,020
Accrued expenses
831,722
3,481,570
547,438
(254,178
)
Income tax payable
33,099
335,234
(258,483
)
—
Accrued loss on capitated contracts
201,872
—
—
1,046,966
Other liabilities
(45,000
)
(35,800
)
—
—
Net cash provided by operating activities
6,745,637
9,761,113
10,339,273
2,249,803
Cash flows from investing activities:
Net proceeds from disposal of property, plant and equipment
31,748
31,341
9,950
—
Purchase of property, plant and equipment
(4,967,481
)
(2,127,768
)
(3,125,059
)
(1,504,888
)
Investment in affiliate
—
(175,000
)
—
—
Acquisition of business
(225,500
)
—
—
—
Net cash used in investing activities
(5,161,233
)
(2,271,427
)
(3,115,109
)
(1,504,888
)
Cash flows from financing activities:
Borrowings on notes payable and capital lease obligations
7,306,353
4,195,053
7,212,631
2,320,604
Payments on notes payable and capital lease obligations
(3,708,398
)
(2,433,992
)
(3,296,832
)
(4,678,831
)
Borrowings on line of credit
6,589,007
18,265,172
17,390,955
19,180,050
Payments on line of credit
(6,589,007
)
(18,265,172
)
(17,390,955
)
(18,000,127
)
Dividends paid
(5,502,400
)
(6,047,000
)
(9,960,912
)
(900,000
)
Increase (decrease) in bank overdraft
1,950
(1,950
)
—
—
Net cash used in financing activities
(1,902,495
)
(4,287,889
)
(6,045,113
)
(2,078,304
)
Net increase (decrease) in cash
(318,091
)
3,201,797
1,179,051
(1,333,389
)
Cash and cash equivalents, beginning of period
318,091
—
3,201,797
4,380,848
Cash and cash equivalents, end of period
$
—
$
3,201,797
$
4,380,848
$
3,047,459
Supplemental disclosure of cash flow information:
Cash paid for interest
$
1,151,409
$
1,518,517
$
1,648,466
$
1,252,460
Supplemental schedule of non-cash investing and financing
	activities:
Investment in affiliate acquired through note payable
$
—
$
365,500
$
—
$
—
Capital lease obligation incurred for property and equipment
—
—
731,881
176,660
See accompanying notes to combined financial statements.
F-36
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial Statements
December 31, 1996, 1997 and 1998 and September 30, 1999
Note 1 — Organization
The accompanying combined financial statements include the
accounts of APL Healthcare Group, Inc. ("APL"), Robert
R. Belliveau, M.D., Thorne J. Butler, M.D., Associated
Pathologists, Chartered ("APC") and APL Properties, LLC
 ("APL Properties") (collectively "the
Company"). These entities are combined for financial
statement purposes as all three entities are under common voting
control.
APL is a medical laboratory located in Las Vegas, Nevada. APL was
 incorporated in Nevada in 1965. APL provides esoteric, specialty
 and routine testing to hospitals, physicians and other
laboratories. APL's services are used by healthcare
providers in the detection, diagnosis, evaluation, monitoring and
 treatment of diseases and other medical conditions.
Approximately 90 percent of APL's business is with
customers in Nevada.
APC is a privately held professional services firm incorporated
in Nevada in 1968. APC currently provides pathology services to
acute care hospitals primarily in Nevada and to APL.
APL Properties was formed by six shareholders of APC in 1997 and
owns the building that APL occupies in Las Vegas, Nevada. APL
Properties leases the building to APL and collects rental income.
On October 13, 1999, the Company completed a securities
purchase agreement with another independent laboratory company
whereby the Company sold all of its capital stock for
approximately $105.2 million plus ten percent of the equity
of the combined new company. The transaction was effected through
 receipt of approximately $54.3 million in cash, repayment
of all existing debt of approximately $17.8 million (except
for a note payable to Bank of America with a balance of
approximately $3.5 million at September 30, 1999),
receipt of cash placed in escrow of $10.0 million, issuance
of $17.5 million of subordinated promissory notes, and the
issuance of approximately 2.2 million shares of the
acquiror's, common stock to the stockholders.
Note 2 — Summary of Significant Accounting Policies
(a)
Principles of Combination
All significant intercompany accounts and transactions have been
eliminated in combination.
(b)
Net revenue
The Company operates in one reportable segment, the medical
laboratory industry. Revenue from laboratory tests is recorded at
 the time the tests are resulted and is reported at the estimated
 net realizable amounts from patients, third party payors and
others for services rendered. The Company is reimbursed for
services under fee schedules, contractual and other payor
arrangements. Adjustments to the estimated net realizable amounts
 are based on final payments from third party payors. Revenue
from laboratory directorship services is recorded as earned under
 contractual arrangements with hospitals.
Losses under laboratory testing contracts with managed care
organizations are recognized when it is probable that the
expected future costs under a contract will exceed the
anticipated future revenues from the contract. During 1995, 1996
and 1999, the Company recorded losses of $11,845,252, $201,872
and $1,046,966, respectively, associated with three managed care
contracts. The Company did not record any losses on laboratory
testing contracts during 1997 or 1998. The unamortized balance of
 these accrued losses totaled $5,412,377, $2,774,472 and
$1,872,982 at December 31, 1997 and 1998, and
September 30, 1999, respectively.
F-37
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
(c)
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash in banks and
highly liquid investments with original maturities of three
months or less.
(d)
Fair Value of Financial Instruments
The carrying amounts of accounts receivable, other assets,
accounts payable and accrued expenses approximate their fair
market values as of December 31, 1997 and 1998 and
September 30, 1999, due to the relatively short duration of
these financial instruments. The carrying amounts of the
Company's indebtedness approximate their fair values as of
December 31, 1997 and 1998 and September 30, 1999 as
they bear interest at rates that approximate market rates.
(e)
Accounts Receivable
Accounts receivable include billed and unbilled revenue for
testing performed and are presented net of allowances for
doubtful accounts and contractual allowances. The allowance for
doubtful accounts is an estimate based upon actual historical
trends and management's judgment.
(f)
Property, Plant and Equipment
Property, plant and equipment are stated at cost, or if acquired
under capital leases, at the present value of the future minimum
lease payments. Depreciation and amortization are computed using
the straight-line method. The estimated useful lives are as
follows:
Estimated useful lives
Building
39 years
Laboratory equipment
5-12 years
Computer equipment
5-7 years
Leasehold improvements
10 years
Furniture and fixtures
5-12 years
Software
3-5 years
Transportation equipment
3-5 years
Expenditures for repairs and maintenance, which do not materially
 extend the useful lives of property, plant and equipment, are
charged directly to expense. Equipment under capital leases is
amortized over the estimated useful lives or the term of the
lease, if shorter.
(g)
Inventory
Inventory consists principally of purchased laboratory and
medical supplies and is stated at the lower of cost (first-in,
first-out method) or market value.
(h)
Intangible Assets
Intangible assets, consisting of goodwill and noncompete
agreements, are carried at cost and are amortized on a
straight-line basis over 5 years. The Company evaluates the
recoverability of goodwill by determining whether the
amortization of the goodwill balance over its remaining life can
be recovered through undiscounted operating cash flows of the
acquired operation.
(i)
Investment in Affiliate
The Company records its 49 percent owned investment in
affiliate on the equity method of accounting.
F-38
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
(j)
Income Taxes
APL
Income taxes are accounted for in accordance with Financial
Accounting Standards Board Statement No. 109
("Statement 109") for the years ended December 31,
 1996 and 1997. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are
determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that are expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled.
Effective July 1, 1998, APL changed its tax status from a
taxable to a non-taxable enterprise (C to an S Corporation).
 Under Statement 109, deferred tax assets and liabilities
are eliminated when a taxable enterprise becomes a non-taxable
enterprise. The effect of eliminating the deferred tax assets was
 charged to income tax expense upon conversion.
APC
For all periods presented in the accompanying combined financial
statements, APC is considered an S Corporation as defined under
certain sections of the Internal Revenue Code. Accordingly, the
accompanying combined financial statements do not include a
provision for income taxes for APC.
APL Properties
For all periods presented in the accompanying combined financial
statements, APL Properties is a partnership; as such, all income
tax attributes are passed through to the partners. Accordingly,
the accompanying combined financial statements do not include a
provision for income taxes for APL Properties.
(k)
Accounting for Stock Based Compensation
The Company accounts for stock-based compensation using the
intrinsic value based method of accounting prescribed by APB
Opinion No. 25,
Accounting for Stock Issued to Employees
.
(l)
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amount of
 assets and liabilities and disclosure of contingent assets and
liabilities at the date of the combined financial statements.
Estimates also affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
 from those estimates.
F-39
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
Note 3 — Property, Plant and Equipment
Property, plant and equipment consists of the following:
December 31,
September 30,
1997
1998
1999
Land
$
491,347
$
491,347
$
491,347
Building
3,122,153
3,099,768
3,099,768
Laboratory equipment
6,500,249
6,624,648
7,128,700
Computer equipment
3,739,763
4,513,933
4,916,611
Leasehold improvements
2,048,610
3,049,219
3,310,803
Furniture and fixtures
1,396,179
1,435,907
1,622,038
Software
947,222
1,387,263
1,589,333
Transportation equipment
1,060,778
1,225,454
1,251,396
19,306,301
21,827,539
23,409,996
Less accumulated depreciation and amortization (including amounts
	 applicable to property and equipment acquired under capital
	leases of $175,948, $280,009 and $352,318 at December 31,
	1997 and 1998 and September 30, 1999, respectively
10,142,722
11,313,003
13,087,749
$
9,163,579
$
10,514,536
$
10,322,247
Note 4 — Investment in Affiliate
During 1997, the Company purchased a 49 percent share in LMC
 Laboratory Sciences, LLC ("LMC LLC") from LMC
Laboratories, Inc. ("LMC Inc."). LMC Inc. owns the
remaining 51 percent share of LMC LLC and has full voting
control of LMC LLC.
The Company paid $175,000 in cash and signed a secured promissory
 note for $365,500 to LMC Inc. The note is payable in five equal
annual installments of $94,900 including interest. The
outstanding balance of this note was $365,500, $304,887 and
$238,599 at December 31, 1997 and 1998 and September 30,
1999, respectively.
The Company is the exclusive provider of laboratory testing
services for LMC LLC. The Company is entitled to a percentage of
net revenues billed from LMC LLC for testing services provided as
 well as 49 percent of the net income from LMC LLC. Revenue
earned by the Company for performing laboratory testing services
totaled $337,054, $430,096 and $369,103 in 1997, 1998 and 1999,
respectively. The Company received a distribution of $0 in 1997,
$29,830 in 1998 and $27,004 in 1999 for its 49 percent
interest in the net income of LMC LLC. The Company recorded this
distribution as revenue in the accompanying combined financial
statements. The Company has a liability recorded of $22,382,
$30,000 and $50,000 at December 31, 1997 and 1998 and
September 30, 1999, respectively, to LMC LLC for testing
revenues earned but not remitted to LMC LLC. The Company is
amortizing its investment in LMC LLC over the 10 year term
of the agreement. The investment, classified separately on the
balance sheet, was $513,950, $459,850 and $419,344 at and
December 31, 1997 and 1998 and September 30, 1999,
respectively.
F-40
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
Note 5 — Intangible Assets
Intangible assets consist of the following at December 31:
December 31,
September 30,
1997
1998
1999
Goodwill
$
135,773
$
135,773
$
135,773
Non-compete
20,000
20,000
20,000
155,773
155,773
155,773
Less accumulated amortization
71,809
100,336
120,703
Intangible assets, net
$
83,964
$
55,437
$
35,070
Note 6 — Notes Payable and Capital Lease
Obligations
Notes payable and capital lease obligations consist of the
following:
December 31,
September 30,
1997
1998
1999
Note payable to Bank of America; monthly payments of $31,425
	including interest at 8.39%; remaining principal balance plus
	remaining interest due May  1, 2007; collateralized by
	certain real property and the personal guarantee of the
	stockholders
$
3,616,572
$
3,544,495
$
3,479,150
Non-revolving line of credit with term repayment option with Bank
	 of America for up to $3.5 million bearing interest at LIBOR
	 plus 2% payable monthly (7.31% at September 30, 1999);
	monthly principal payments of $58,333 beginning December 10,
	 1999, and remaining principal balance plus remaining interest
	due November 10, 2004; collateralized by receivables,
	equipment, furniture and the personal guarantee of the
	stockholders
—
1,319,689
3,166,299
Note payable to Bank of America; monthly payments of $198,945
	through July 1, 2000 including interest at 7.25%; monthly
	payments decrease to $142,150, $103,315 and $69,400 on
	August 1, 2000, September 1, 2001 and September 1,
	 2002, respectively; remaining principal balance plus remaining
	interest due August 1, 2003; collateralized by receivables,
	equipment, furniture, and the personal guarantee of the
	stockholders
—
6,738,258
5,271,119
F-41
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
December 31,
September 30,
1997
1998
1999
Non-revolving line of credit with term repayment option with Bank
	 of America for up to $2 million; monthly payments of
	$41,760 including interest at lender's reference rate plus
	.5% (9% at December 31, 1997); remaining principal balance plus
	remaining interest due July 1, 2001; collateralized by
	receivables, equipment, furniture and the personal guarantee of
	the stockholders. On September 30, 1998, this facility was
	deleted and refinanced into the 7.25% note payable described
	above
1,500,875
—
—
Note payable to Bank of America; monthly payments of $64,100
	including interest at lender's reference rate plus .5% (9%
	at December 31, 1997); remaining principal balance plus remaining
	 interest due June  30, 2000; collateralized by receivables,
	 equipment, furniture and the personal guarantee of the
	stockholders. On September 30, 1998, this facility was
	deleted and refinanced into the 7.25% note payable described
	above
1,643,230
—
—
Non-revolving line of credit with term repayment option with Bank
	 of America for up to $2.5  million; monthly payments of
	$52,200 including interest at lender's reference rate plus
	.5% (9% at December 31, 1997); remaining principal balance plus
	remaining interest due August 1, 2002; collateralized by
	receivables, equipment, furniture and the personal guarantee of
	the stockholders. On September 30, 1998, this facility was
	deleted and refinanced into the 7.25% note payable described
	above
1,741,906
—
—
Non-revolving line of credit with term repayment option with Bank
	 of America for up to $3.5 million bearing interest at
	lender's reference rate plus .25% (8.75% at
	December 31, 1997); monthly principal payments of $72,660
	beginning September  1, 1998 and remaining principal balance
	 plus remaining interest due August 1, 2003; collateralized
	by receivables, equipment, furniture and the personal guarantee
	of the stockholders. On September 30, 1998, this facility
	was deleted and refinanced into the 7.25% note payable described
	above
1,095,053
—
—
F-42
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
December 31,
September 30,
1997
1998
1999
Note payable to GE Capital; monthly payments of $39,228 including
	 interest at 30 day commercial paper rate plus 2.36% (8.26% at
	December 31, 1997); remaining principal balance plus
	remaining interest due December 31, 1998; collateralized by
	equipment and the personal guarantee of the stockholders
427,152
—
—
Note payable to GE Capital; monthly payments of $10,064 including
	 interest at 30 day commercial paper rate plus 2.36% (7.8% at
	December 31, 1998); remaining principal balance plus
	remaining interest due August 29, 1999; collateralized by
	equipment and the personal guarantee of the stockholders
187,122
86,512
—
Note payable to GE Capital; monthly payments of $15,098 including
	 interest at 30 day commercial paper rate plus 2.36% (7.8% at
	December 31, 1998); remaining principal balance plus
	remaining interest due August 4, 1999; collateralized by
	equipment and the personal guarantee of the stockholders
280,914
116,359
—
Note payable to GE Capital; monthly payments of $9,966 including
	interest at 7.875%; remaining principal balance plus remaining
	interest due June  23, 2003; collateralized by equipment
—
442,925
387,209
Note payable to LMC Laboratories, Inc.; annual payments of
	$94,900; imputed interest at 9%; remaining principal balance due
	June 1, 2002; collateralized by a security interest in the
	Company's ownership in LMC LLC
365,500
304,887
238,599
Note payable to a former stockholder; monthly payments of $3,126
	including interest at prime (7.75% at December 31, 1998);
	remaining principal balance plus unpaid interest due
	January 1999
166,490
147,298
—
Note payable to Premium Financing Specialists; monthly payments
	of $54,326 including interest at 7.76%; remaining principal
	balance plus unpaid interest due January 2000
51,141
53,934
213,949
F-43
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
December 31,
September 30,
1997
1998
1999
Various capital lease obligations for equipment; monthly payments
	 totaling $47,068 at September 30, 1999 with interest at
	rates ranging from 7.5% to 10%; remaining principal balance plus
	unpaid interest with varying maturity dates through June  1,
	 2004
785,503
725,755
524,718
11,861,458
13,480,112
13,281,043
Less current installments
3,442,089
2,897,835
3,020,979
$
8,419,369
$
10,582,277
$
10,260,064
Notes payable to stockholders consists of the following:
December 31,
September 30,
1997
1998
1999
Notes payable to various stockholders; monthly payments totaling
	$289,522 with interest at rates ranging from 7% to 9%; remaining
	principal balance plus unpaid interest with varying maturity
	dates through 2003; subordinated to Bank of America debt;
	personally guaranteed by stockholders
$
5,934,999
$
8,964,026
$
6,981,528
Less current installments
2,029,104
2,568,606
2,323,962
$
3,905,895
$
6,395,420
$
4,657,566
On October 13, 1999, all notes payable, except for the note
payable to Bank of America in the amount of $3,479,150, were paid
 off in conjunction with the purchase agreement. The note payable
 agreement with Bank of America is subject to financial
covenants. At September 30, 1999, the Company was in
compliance with these covenants.
Maturities of the remaining notes payable and capital lease
obligations are as follows:
Notes
Capital
payable
leases
Three months ending December 31, 1999
$
21,532
$
36,039
Years ending December 31:
2000
90,777
162,302
2001
98,693
128,922
2002
107,299
115,489
2003
116,656
121,047
Thereafter
3,044,193
34,823
3,479,150
598,622
Less interest
—
73,904
$
3,479,150
$
524,718
F-44
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
Line of Credit
As of December 31, 1997 and 1998 and September 30,
1999, the Company had a $1.5 million revolving line of
credit with Bank of America. The agreement bears interest at
prime plus .5 percent and is available through December 31,
1999. The weighted average interest rate was 8.96 percent,
8.81 percent and 8.75 percent at December 31, 1997 and
1998 and September 30, 1999, respectively. At
December 31, 1997 and 1998, there was no balance outstanding
 on the line of credit. At September 30, 1999 there was an
outstanding balance of $1,179,923 on the line of credit.
Note 7 — Accrued Expenses
Accrued expenses consists of the following at:
December 31,
September 30,
1997
1998
1999
Accrued salaries, bonus, and payroll withholding
$
4,943,634
$
4,337,547
$
3,840,926
Accrued sick leave and vacation
2,390,970
2,754,374
3,038,479
Accrued expenses and other
1,844,667
2,634,788
2,593,126
Total accrued expenses
$
9,179,271
$
9,726,709
$
9,472,531
Note 8 — Lease Commitments
The Company leases various equipment and office space under
noncancelable lease arrangements expiring at various dates
through June 1, 2004.
Future minimum lease payments under these noncancelable operating
 leases are as follows:
Three months ending December 31, 1999
$
250,570
Year ending December 31:
2000
796,468
2001
597,291
2002
728,515
2003
114,905
Thereafter
50,095
$
2,537,844
Total rent expense under all operating leases was $1,791,584,
$858,667 and $1,084,673 for the years ended December 31,
1996, 1997 and 1998, respectively and $1,041,600 for the nine
months ended September 30, 1999.
F-45
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
The Company has entered into certain non-cancelable agreements in
 connection with certain capital leases that specify minimum
monthly payments for maintenance and reagent supplies. Future
payments under these non-cancelable agreements are as follows:
Three months ending December 31, 1999
$
368,549
Year ending December 31:
2000
1,254,467
2001
802,974
2002
793,734
2003
660,833
Thereafter
99,139
$
3,979,696
During the years ended December 31, 1996, 1997 and 1998, the
 Company incurred expenses under these agreements of $761,300,
$900,539, and 1,552,648, respectively and $1,407,963 for the nine
 months ended September 30, 1999.
Note 9 — Employee Benefit Plan
The Company sponsors a 401(k) plan for the benefit of all
qualified employees. Profit sharing contributions to the plan are
 discretionary and are determined annually by the Board of
Directors. Contributions for the years ended December 31,
1996, 1997 and 1998 were $516,486, $582,555, and $593,347,
respectively, and $495,641 for the nine months ended
September 30, 1999.
Note 10 — Income Tax Expense
For all periods presented, APC has elected to be taxed as an S
Corporation as defined under certain sections of the Internal
Revenue Code, which provide that, in lieu of corporation income
taxes, the stockholders separately account for their pro rata
shares of APC's items of income, deductions, losses and
credits. As a result of this election, no income taxes on
APC's book income have been recognized in the accompanying
combined financial statements.
For all periods presented, APL Properties is a partnership; as
such, all income tax attributes are passed through to the
partners. Accordingly, no income taxes have been recognized in
the accompanying combined financial statements.
APL is taxed as a C Corporation for the years ended
December 1996 and 1997 and as a result, income tax expense
and deferred tax assets and liabilities have been recognized in
the accompanying combined financial statements. For the year
ended December 31, 1998, APL had a change in tax status
converting from a taxable to a nontaxable enterprise (C to an
S Corporation), effective July 1, 1998. APL was in a
net deferred tax asset position at the date of the change in tax
status and recognized a charge to income tax expense of
$3,037,354 in 1998 as a result of eliminating its net deferred
tax assets.
F-46
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
Income tax expense consists of the following:
1996
1997
1998
Federal
$
639,178
$
931,050
$
2,619,306
State
—
—
—
$
639,178
$
931,050
$
2,619,306
1996
1997
1998
Current
$
33,098
$
322,233
$
(418,048
)
Deferred
606,080
608,817
3,037,354
Total
$
639,178
$
931,050
$
2,619,306
A reconciliation of tax expense computed at the statutory federal
 tax rate of 34 percent on income from continuing operations
 before income taxes to the actual income tax expense is as
follows:
1996
1997
1998
Tax provision computed at the statutory rate
$
2,360,854
$
2,780,689
$
2,336,286
Intangibles amortization and other book expenses not deductible
	for tax purposes
13,960
17,866
10,351
Income from non-taxable entities combined
(1,735,636
)
(1,867,505
)
(2,764,683
)
Elimination of APL's deferred tax assets due to change in
	tax status from a taxable to non-taxable enterprise
—
—
3,037,354
Total income tax expense
$
639,178
$
931,050
$
2,619,308
Deferred income taxes reflect temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of deferred tax (assets) and
liabilities are as follows:
1997
Deferred tax assets:
Accrued vacation
$
(142,344
)
Accrued sick pay
(316,572
)
Bad debts
(172,513
)
Accrued loss on capitated contracts
(1,826,831
)
Other
(468,355
)
Total deferred tax assets
(2,926,615
)
Deferred tax liabilities:
Accelerated depreciation
41,974
Lease payments
19,853
Total deferred tax liabilities
61,827
Net deferred tax assets
$
(2,864,788
)
The valuation allowance on deferred tax assets and liabilities is
 $0 at December 31, 1997 due to available qualified tax
planning strategies and the Company's projection of future
taxable income.
F-47
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
Note 11 — Insurance
(a)
Self Insurance
The Company is self-insured for medical claims for certain of its
 employees and for workers compensation up to predetermined
amounts. For claims in excess of those amounts, the Company
carries certain individual and aggregate stop-loss reinsurance
policies. In order to qualify to participate in a self-insured
workers compensation program, the Company has provided a
$2,500,000 letter of credit in favor of the State of Nevada. The
Company also has provided a $120,000 surety bond in favor of the
workers compensation carrier.
The Company has accrued $213,000, $360,125 and $465,729 at
December 31, 1997 and 1998 and September 30, 1999
respectively, for incurred but not reported medical claims. The
Company has accrued $65,805, $73,685 and $71,256 at
December 31, 1997 and 1998, and September 30, 1999,
respectively, for estimated workers compensation liabilities.
(b)
Medical Malpractice
The Company has a claims-made professional insurance policy and
an occurrence basis general liability insurance policy to cover
medical malpractice claims and other incidents. On the
professional insurance policy, for the years ended
December 31, 1997, 1998 and the nine months ended
September 30, 1999 the Company was insured for individual
claims up to $1,000,000 with a total annual aggregate of up to
$5,000,000. Also, for the years ended December 31, 1997,
1998 and the nine months ended September 30, 1999, the
Company had excess insurance in the amount of $15,000,000 per
loss event with an aggregate of $15,000,000. On the general
insurance policy, for the years ended December 31, 1997,
1998 and the nine months ended September 30, 1999, the
Company was insured $1,000,000 per occurrence with a total annual
 aggregate of up to $2,000,000. Also, for the years ended
December 31, 1997, 1998 and the nine months ended
September 30, 1999, the Company had excess insurance in the
amount of $18,000,000 per loss event with an aggregate of
$18,000,000.
There are known claims and incidents that may result in the
assertion of additional claims, as well as claims from unknown
incidents that may be asserted arising from services provided to
clients. No accrual for possible losses attributable to incidents
 that may have occurred but that have not been reported to the
Company or insurance carrier has been made in the accompanying
combined financial statements because management believes such
amounts would be immaterial.
The Company has provided two letters of credit in the amounts of
$150,000 and $100,000 in favor of the insurance carriers.
F-48
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
Note 12 — Concentrations of Credit Risk
The Company grants credit without collateral to its customers,
which are comprised primarily of patients, health care providers,
 Medicare and other health plans. The mix of receivables from
patients and third party payors at December 31, 1997 and
1998 and September 30, 1999 was as follows:
December 31,
September 30,
1997
1998
1999
Medicare
8
%
9
%
8
%
Valley Health System
6
6
3
Private insurers
25
21
22
All others (none greater than 10%)
61
64
67
100
%
100
%
100
%
Note 13 — Stockholders' Deficit
(a)
Common Stock
APL
Prior to June 30, 1998, APL had authorized 25,000 shares of
Class A, voting common stock having a $1 par value per
share. On June 30, 1998, the Company amended and restated
its Articles of Incorporation in order to effect a plan of
recapitalization in conjunction with its election to switch from
a "C" Corporation to an
"S" Corporation for federal income tax purposes.
The amended Articles of Incorporation authorized the following
shares, all with a par value of $1; Class A-1, voting: 1,000
 shares, Class A-2, non-voting: 23,000 shares, and
Class B, non-voting: 1,000 shares. Each outstanding
Class A-1 share is entitled to one vote per share on all
matters to be voted on by the stockholders of the Company. All
share classes have equal rights in all distributions either
declared by the Board of Directors or upon dissolution of the
Company. The recapitalization was effected by issuing one
Class A-1 share plus 99 Class A-2 shares for each
38.5714 existing common shares. After the recapitalization, there
 were 60 Class A-1 shares and 5,940 Class A-2 shares
outstanding.
The Company had a buy-sell agreement with its stockholders. In
the event of the death of a stockholder or termination of
employment, the remaining stockholders have the right to purchase
 all of the shares of the deceased or terminated stockholder.
However, if the remaining stockholders do not agree to purchase
the shares, then the Company shall purchase all of the shares.
The price to be paid for such shares is based upon a multiple of
annual revenue as defined in the agreement.
APC
APC has authorized 2,500 shares of common stock having no par
value. The common shares may only be issued to an individual who
is licensed to practice medicine in the State of Nevada.
(b)
Restricted Stock
The Company granted 429 Class B common shares to two
executives on January 1, 1998. The shares are subject to
forfeiture if employment terminates prior to the end of the
prescribed vesting period, which is seven years. The fair value
of the shares granted was determined to be the redemption amount
outlined in the employment agreements with the two executives.
The redemption amount of the stock is calculated on
January 1 of each year. The fair value of the stock is
calculated as $7,582,255 and $2,615,357 on January 1, 1998
and January 1, 1999, respectively. The fair value is
F-49
Table of Contents
APL HEALTHCARE GROUP, INC. AND AFFILIATES
Notes to Combined Financial
Statements — (Continued)
December 31, 1996, 1997 and 1998 and September 30, 1999
recorded as deferred compensation and is being amortized to
selling, general, and administrative expenses as earned over a
seven-year vesting period.
Note 14 — Dividends
Dividends payable of $308,750 at September 30, 1999
represents dividends declared in September 1999 but not paid
 until October 1999 by APC. There were no dividends payable
at December 31, 1997 or 1998.
APC declared dividends of $5,502,400, $6,047,000, and $9,360,912
in the years ended December 31, 1996, 1997, and 1998,
respectively and $1,208,750 for the nine months ended
September 30, 1999. Dividends per share were $13,965,
$15,348 and $23,759 in 1996, 1997 and 1998, respectively, and
$3,068 for the nine months ended September 30, 1999.
APL declared dividends of $600,000 in 1998. Dividends per share
were $88 in 1998. APL declared no dividends in 1996, 1997 or
1999.
Note 15 — Sale of Certain Intangibles
On May 31, 1996, the Company sold certain intangible assets
of the clinical veterinary laboratory practice to an unrelated
party for approximately $1,800,000 in cash. The assets sold
included customer account lists, patient lists and potential
patient lists, and other proprietary information used in
conjunction with the veterinary lab practice. The gain on sale of
 $1.8 million was included in other income in 1996.
Note 16 — Commitments and Contingencies
On September 15, 1997, the Company was served with a
subpoena from the United States Attorney's Office for the
District of Arizona requesting numerous business documents
relating to the Company's operations since 1990. The
information sought by the government as well as conversations
with the United States Attorney's Office indicate that the
government is investigating the manner in which the Company added
 certain tests to test profiles and panels, the information
supplied to physician customers about such test add-ons, and the
manner in which such test add-ons and profiles were billed to
government health care programs such as Medicare, Medicaid, and
Champus. The Company has provided to the government all documents
 requested in the subpoena. On December 16, 1998, the
government disclosed to the Company through legal counsel that
the investigation arises out of a complaint filed in the United
States District Court under the qui tam provisions of the False
Claims Act. The Company has not yet been served with the
complaint and is awaiting a decision by the United States
Attorney's Office as to whether they will intervene. The
Company plans to vigorously defend itself should a complaint be
served and believes that the ultimate outcome of this complaint
will not have a material adverse effect on the Company's
financial position.
The Company is involved in legal actions and disputes arising in
the ordinary course of business. With respect thereto, the
Company believes that it has adequate legal defenses and
insurance coverage and believes that their ultimate outcome will
not have a material adverse effect on the Company's
financial position.
F-50
Table of Contents
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.  Other Expenses of Issuance and
Distribution.
The following table sets forth the estimated expenses to be
incurred in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts
and commissions, to be paid by the Registrant.
SEC registration fee
$
30,360
National Association of Securities Dealers, Inc. filing fee
12,000
Nasdaq National Market listing fee
*
Printing and engraving fees
*
Legal fees and expenses
*
Accounting fees and expenses
*
Blue Sky fees and expenses
*
Trustee fees
*
Miscellaneous
*
Total
$
*
*  To be included by amendment
Item 14.  Indemnification of Directors and
Officers.
The registrant is incorporated under the laws of the State of
Delaware. Section 145 ("Section 145") of the
General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (the "General Corporation
 Law"), inter alia, provides that a Delaware corporation may
 indemnify any persons who were, are or are threatened to be
made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an
 officer, director, employee or agent of such corporation as a
director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed
 to be in or not opposed to the corporation's best interests
 and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify any persons who are, were or are
threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by
 reasons of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at
the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees), actually and
reasonably incurred by such person in connection with the defense
 or settlement of such action or suit, provided such person acted
 in good faith and in a manner he reasonably believed to be in or
 not opposed to the corporation's best interests, provided
that no indemnification is permitted without judicial approval if
 the officer, director, employee or agent is adjudged to be
liable to the corporation. Where an officer, director, employee
or agent is successful on the merits or otherwise in the defense
of any action referred to above, the corporation must indemnify
him against the expenses which such officer or director has
actually and reasonably incurred. Section 145 further
authorizes a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against
II-1
Table of Contents
any liability asserted against him and incurred by him in any
such capacity, arising out of his status as such, whether or not
the corporation would otherwise have the power to indemnify him
under Section 145.
The registrant's Certificate of Incorporation and By-laws
provide for the indemnification of officers and directors to the
fullest extent permitted by the General Corporation Law.
Registrant maintains a policy of directors and officers liability
 insurance covering certain liabilities incurred by its directors
 and officers in connection with the performance of their duties.
Item 15.  Recent Sales of Unregistered
Securities.
During the last three years, AML has issued the following
securities without registration under the Securities Act of 1933
as amended (the "Securities Act"):
On October 13, 1999, Golder, Thoma, Cressey, Rauner Fund V,
L.P. and certain members of management and their affiliates
acquired a total of 18,519,477 shares of common stock in
exchange for an equal number of shares of common stock of AML
Inc. and 1,491 shares of preferred stock in exchange for an
equal number of shares of preferred stock of AML Inc.
On October 13, 1999, the sellers of APL acquired a total of
2,151,719 shares of common stock subordinated promissory notes in
 the aggregate principal amount of $17.5 million as a portion of
the purchase price of APL.
During the last three years, certain employees acquired a total
of 198,008 shares of common stock for $.02 per share for an
aggregate purchase price of $3,960.16 through the exercise of
stock options.
The sales and issuances listed above were deemed exempt from
registration under the Securities Act by virtue of
Section 4(2) and Rule 701 thereof. Certain defined
terms used herein not otherwise defined have the meanings
ascribed to them in the prospectus, which forms a part of this
registration statement.
Item 16.  Exhibits and Financial Statement
Schedules.
(a)  Exhibits.
Reference is made to the attached Exhibit Index.
(b)  Financial Statement Schedules.
The following financial statement schedules for the three years
ended December 31, 1999 are included in this registration
statement.
Item 17.  Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to provisions
described in Item 14 above, or otherwise, the Registrant has
 been advised that in the opinion of the SEC such indemnification
 is against public policy as expressed in the Securities 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 registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
 precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
 the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1)  For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424 (b)
(1) or (4) or 497
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(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2)  For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial
bona fide
offering thereof.
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting
Agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chantilly, State of
Virginia, on September 29, 2000.
American Medical Laboratories, Incorporated
By:
/s/ TIMOTHY J. BRODNIK
Name: Timothy J. Brodnik
Title: Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Timothy J. Brodnik, Steve
R. Pierce and Alvin Ezrin, and each of them, his/her true and
lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him/her and in his/her name,
 place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this
Registration Statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as
 amended, for the offering which this Registration Statement
relates), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any
of them, or their or his/her substitute or substitutes, 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 on Form S-1 and Power
of Attorney have been signed by the following persons in the
capacity and on the dates indicated:
Signature
Title(s)
Date
/s/ TIMOTHY J. BRODNIK
Timothy J. Brodnik
Chairman, President and Chief Executive Officer (Principal
	Executive Officer) and Director
September 29, 2000
/s/ STEVE R. PIERCE
Steve R. Pierce
Chief Financial Officer
(Principal Financial Officer)
September 29, 2000
/s/ ROBERT C. LOW
Robert C. Low
Controller
(Principal Accounting Officer)
September 29, 2000
/s/ JERROLD L. GLICK
Jerrold L. Glick
Director
September 29, 2000
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Signature
Title(s)
Date
/s/ BRUCE V. RAUNER
Bruce V. Rauner
Director
September 29, 2000
/s/ DONALD J. EDWARDS
Donald J. Edwards
Director
September 29, 2000
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EXHIBIT INDEX
Exhibit
No.
Description
**1.1
Form of Underwriting Agreement.
**3.1
Amended and Restated Certificate of Incorporation of AML.
**3.2
Amended and Restated By-Laws of AML.
**4.1
Form of certificate representing shares of Common Stock.
**4.2
Credit Agreement dated October 13, 1999, by and among AML
	and the lender banks named therein.
**5.1
Opinion of Kirkland & Ellis.
**10.1
Form of AML 2000 Equity Incentive Plan.
**10.2
Senior Management Agreement dated May 2, 1997, among AML and
	 Timothy J. Brodnik.
**10.3
Senior Management Agreement, dated May 2, 1997, among AML
	and John E. Bergstrom.
**10.4
Stockholders Agreement, dated May 2, 1997, among AML and
	certain AML stockholders.
**10.5
Registration Agreement, dated May 2, 1997, among AML and
	certain AML stockholders.
**10.6
Professional Services Agreement, dated May 2, 1997, among
	AML and Golder, Thoma, Cressey, Rauner Fund V, L.P.
**10.7
Consulting and Non-Competition Agreement, dated May 2, 1997,
	 among AML and Jerrold L. Glick.
**10.8
Stock Pledge Agreements, dated May 2, 1997, among AML and
	each person set forth on the Schedule of Glick Investors attached
	 thereto.
**10.9
Stock Pledge Agreement, dated May 2, 1997, among AML and
	Timothy J. Brodnik.
**10.10
Stock Pledge Agreement, dated May 2, 1997, among AML and
	John E. Bergstrom.
**10.11
Stock Redemption and Loan Agreement, dated April 7, 1999,
	among AML and Timothy Brodnik.
**10.12
Loan Agreement, dated April 7, 1999, among AML and the
	persons set forth on the Schedule of Investors attached thereto.
**10.13
Loan Agreement, dated April 7, 1999, among AML and John E.
	Bergstrom.
**10.14
Stock Pledge Agreement, dated April 7, 1999, among AML and
	the persons set forth on the Schedule of Glick Investors attached
	 thereto.
**10.15
Stock Pledge Agreement, dated April 7, 1999, among AML and
	Timothy Brodnik.
**10.16
Stock Pledge Agreement dated April 7, 1999, among AML and
	John E. Bergstrom.
**10.17
Stock Redemption Agreement, dated May 5, 1999 among AML and
	Golder, Thoma, Cressey, Rauner Fund V, L.P.
**10.18
Stock Redemption and Loan Agreement, dated August 31, 1999,
	among AML and John E. Bergstrom.
**10.19
Stock Pledge Agreement, dated August 31, 1999, among AML and
	 John E. Bergstrom.
**10.20
Employment Agreement, dated October 13, 1999, among APL and
	John P. Schwartz.
**10.21
Employment Agreement, dated October 13, 1999, among APL and
	Craig Shanklin.
**10.22
Form of Subordinated Notes, issued October 13, 1999, to
	Sellers of APL.
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Exhibit
No.
Description
**10.23
Practice Management Agreement, dated October 13, 1999 among
	APL and Robert R. Belliveau, M.D., Thorne J. Butler, M.D.k,
	Associated Pathologists, Chartered.
**11.1
Statement Regarding Computation of Earnings Per Share.
**21.1
Subsidiaries.
23.1
Consent of KPMG LLP.
**23.3
Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1
Powers of Attorney (included in Part II to the Registration
	Statement).
27.1
Financial Data Schedule.
**  To be filed by Amendment.
†
The Registrant agrees to furnish supplementally to the Commission
	 a copy of any omitted schedule or exhibit to such agreement upon
	 request by the Commission.
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Schedule II
American Medical Laboratories, Incorporated
Valuation and Qualifying Accounts
(Amounts in thousands)
Additions
Balance at
Charged to Costs
Balance at
Beginning of Period
and Expenses
Deductions
End of Period
Six months ended June 30, 2000 (unaudited):
Allowance for bad debts
$
1,314
$
6,710
$
5,761
$
2,263
Year ended December 31, 1999:
Allowance for bad debts
904
4,817
4,407
1,314
Year ended December 31, 1998:
Allowance for bad debts
755
2,259
2,110
904
Period May 2, 1999 to
December 31, 1999:
Allowance for bad debts
—
1,530
775
755
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Schedule II
APL Healthcare Group, Inc. and Affiliates
Valuation and Qualifying Accounts
Additions
Balance at
Charged to Costs
Balance at
Beginning of Period
and Expenses
Deductions
End of Period
Nine months ended September 30, 1999:
Allowance for bad debts
$
3,037,295
$
8,850,311
$
6,697,403
$
5,190,203
Year ended December 31, 1998:
Allowance for bad debts
2,443,085
8,846,141
8,251,931
3,037,295
Year ended December 31, 1997:
Allowance for bad debts
1,808,595
7,978,911
7,344,421
2,443,085
Year ended December 31, 1996:
Allowance for bad debts
1,317,526
7,173,235
6,682,166
1,808,595
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