According to the Company’s FORM 10-Q or the quarterly period ended March 31, 2000, on January 27, 2000, the Company agreed to a settlement of the Class Action, pursuant to which the Company has deposited $.3 million in escrow to cover the costs of notice to the class, administration of the settlement and plaintiff attorneys' expenses and will, upon final approval of the settlement, issue 886,437 shares of common stock to class members and class counsel (subject to possible enhancement if the Company's stock price drops below a certain level or if the Company authorizes and issues additional stock). The District Court held a hearing on April 18, 2000 and approved the settlement.

From July 1 through August 17, 1998, eleven putative class actions were filed in the United States District Court for the Southern District of New York, all of which have been consolidated under the caption In re Advanced Health Corporation Securities Litigation (the "Class Action"). The consolidated complaint, filed in February 1999, alleged that the Company and its current or former officers or directors are liable for certain misrepresentations and omissions regarding, among other matters, the Company's operations, performance, and financial condition. The consolidated class action complaint sought, among other remedies, certification as a class action and unspecified damages.