UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

                                  ANNUAL REPORT

                     Pursuant to Section 13 of 15(d) of the
                         Securities Exchange Act of 1934

                    For the Fiscal year ended March 31, 1997
                        Commission File Number 0-15352NY

                                 US SERVIS, INC.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                     22-2467332
(State or other jurisdiction                   (I.R.S. Employer Identification
      of incorporation)                                     Number)

220 Davidson Avenue, Somerset, New Jersey            08873
(Address of principal executive offices)          (Zip Code)

                           (732) 764-9898
         (Registrant's telephone number, including area code)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

                                      NONE

        Securities  registered pursuant to Section 12(g) of the Act:

                          Common Stock, $0.01 par value
                                (Title of class)

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days.    Yes X           No.

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge, in a definitive proxy or information statements
incorporated  by reference in Part III of the Form 10-K or any amendment to this
Form 10-K.
[                 ]

At June  20,  1997,  the  aggregate  market  value  of the  voting  stock of the
registrant held by non-affiliates was approximately $8 million.

At June 20, 1997,  the  registrant  had 6,351,000  outstanding  shares of Common
Stock,  par value  $0.01 per  share,  1,500,000  shares of Series A  Convertible
Preferred  Stock,  par value $0.01 per share,  and 1,000,000  shares of Series B
Convertible Preferred Stock, par value $0.01 per share.

                      Documents Incorporated by Reference:

Specified  portions of the US Servis,  Inc. proxy statement to be distributed in
connection  with the  registrant's  1997  Annual  Meeting  are  incorporated  by
reference into Part III of this Form 10-K.




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                                             TABLE OF CONTENTS

ITEM 1:      BUSINESS..............................................................................................  1
             Company Overview......................................................................................  1
                Company Mission and Company Goal...................................................................  1
                Recent Developments................................................................................. 1
             Industry Overview.....................................................................................  3
                Physician Practice Management Services...............................................................4
                Hospital Billing and Accounts Receivable Management Services.......................................  4
             Regulation..............................................................................................5
             Governmental Constraints and Healthcare Reform..........................................................6
             Company's Principal Markets............................................................................ 6
             Company's Principal Products ...........................................................................7
             Company's Relationship with Clients.....................................................................9
             Information Systems..................................................................................  10
             Fiscal 1997 Financial Information....................................................................  11
             Company's Business Strategy........................................................................... 12
             Competition........................................................................................... 13
             Operations and Employees.............................................................................. 14
             Board of  Directors................................................................................... 15
             Executive Officers of the Company..................................................................... 16

ITEM 2:      PROPERTIES............................................................................................ 19

ITEM 3:      LEGAL PROCEEDINGS..................................................................................... 19

ITEM 4:      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................... 21

ITEM 5:      MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS............................. 21

ITEM 6:      SELECTED FINANCIAL DATA............................................................................... 22

ITEM 7:      MANAGEMENT'S DISCUSSION OF FINANCIAL RESULTS.......................................................... 24
             General............................................................................................... 24
             Liquidity and Capital Resources....................................................................... 24
             Results of Operations................................................................................. 25
             1997 Compared to 1996................................................................................. 26
             1995 Compared to 1994................................................................................. 26

ITEM 8:      FINANCIAL STATEMENTS AND SCHEDULES.................................................................... 27

ITEM 9:      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................. 27

ITEM 10:     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................................... 27

ITEM 11:     EXECUTIVE COMPENSATION................................................................................ 28

ITEM 12:     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................................ 28

ITEM 13:     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................................ 28

ITEM 14:     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K....................................... 28



</TABLE>
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ITEM 1:  BUSINESS

COMPANY OVERVIEW US Servis, Inc., together with its subsidiaries("US Servis" or
the  "Company"),  is a  management  services  company that  provides  outsourced
billing,  accounts  receivable  and other  business and  information  management
services to physicians and physician  networks,  hospital business offices,  and
ambulatory  care centers.  The Company's  primary market is Integrated  Delivery
Systems ("IDS"). As providers (physicians and hospitals)  consolidate into IDSs,
encounter more  competition  and higher managed care  penetration and experience
increased pressure to provide more services with fewer resources,  the Company's
management  believes that the managers of these systems will have sound business
reasons to outsource  some or all of their  business  management  activities and
contract with a management services company such as US Servis.

COMPANY  MISSION The Company's  mission is to provide  superior, cost-effective
business and information management services that support its customers' efforts
to improve their strategic  position and financial  performance and relieve them
of  administrative  burdens  so they can focus on  network  development  and the
efficient delivery of healthcare services.

COMPANY GOAL The Company's primary goal is to develop a leadership  position in
the healthcare business  management services industry.  Management believes this
goal will be achieved through internal growth aided by strategic  alliances with
companies and  organizations  that have  leadership  positions in the healthcare
services and  information  systems  market.  The achievement of these goals will
allow the Company to develop a network of regional  service  centers  capable of
providing high quality,  cost effective  accounts  receivable and other business
and  information  management  services to the Company's  clients.  The Company's
development  of its  service  center in central  New  Jersey to support  several
hospital business offices and a new, major northern New Jersey physician faculty
practice plan and its service center in Denver,  Colorado, where the Company was
awarded a contract to manage a major IDS's  physician  network,  are examples of
the  Company's  success  in  establishing  regional  service  centers to provide
accounts  receivable  and other  business  management  services  to  physicians,
physician  organizations,  and hospitals  associated  with  Integrated  Delivery
Systems.

RECENT DEVELOPMENTS   Key events during Fiscal 1997 include:

         (a)      SALES AND  MARKETING  PROGRESS  DURING  FISCAL  1997,  the
                  Company was  successful  in  obtaining business management
                  services contracts that, when fully implemented,  will provide
                  approximately $6.5 million of incremental  annual  revenues. 
                  These  contracts  include:  (1) an agreement with
                  University  Physician  Associates,  the Faculty  Practice Plan
                  associated with the University of Medicine and  Dentistry  of
                  New Jersey to develop and manage a central  business  office;
                  (2) an agreement  with the  Hospital  for  Special  Surgery 
                  in New York City to extend  the term of the
                  existing  hospital  outpatient  business  management  services
                  agreement and provide  outsourced inpatient  billing and 
                  accounts  receivable  management  services;  and (3) 
                  agreements to provide business  management services to the 
                  Medical Services  Organizations  ("MSO") associated with the

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                  Columbia  HealthOne System in Denver,  Colorado and the North 
                  General Hospital System in New York City.  The  Company  also
                  renewed for two years its  agreement  to provide  business 
                  management services to Mount Sinai Medical Group in Elmhurst,
                  New York and its agreement to provide  remote
                  computing  services to Beth Israel Medical Center in New York,
                  New York.  Contract  terminations in Fiscal 1997 will reduce
                  annual  revenues,  on a going forward  basis,  by  
                  approximately  $1.1  million.


         (b)      INSTALLATION   AND   CLIENT  RELATIONSHIP   DIFFICULTIES   AT
                  METROPLUS,  THE COMPANY'S  LARGEST CLIENT  During Fiscal 1997,
                  the Company experienced  material difficulties at its largest
                  client, MetroPlus.  MetroPlus, a public health HMO serving the
                  New York City Medicaid  population  is the Company's  only HMO
                  client.  During  Fiscal 1997,  MetroPlus  accounted for 21.2%,
                  ($4.7 million) of the Company's  revenues.  (See Item 3: Legal
                  Proceedings  for a more  complete  discussion  of the existing
                  dispute and litigation between the Company and MetroPlus).

         (c)      THE  CREATION  OF A STRATEGIC  ALLIANCE  WITH IDX SYSTEMS 
                  CORPORATION.  IDX Systems  Corporation ("IDX") is a leading 
                  provider of  healthcare  information  systems to medical  
                  group  practices, physician  delivery systems and faculty 
                  practice plans.  IDX software  products are installed in
                  more than 1000  client  sites  nationwide.  Under the  terms 
                  of a  strategic  alliance  agreement executed in December 
                  1996,  the Company and IDX will provide the physician  market
                  with a "total solution"  consisting  of IDX  providing  
                  state-of-the-art  information  systems,  and US  Servis
                  providing business office outsourcing  servicing and  
                  appropriate  consulting,  implementation and
                  support  services.  The two firms will work  together to  
                  identify  and  promote  their  combined
                  "total  solution"  to  prospective  clients as well as current
                  IDX and US Servis  customers.  The alliance  includes 
                  provisions  under which the two firms  agree that each will be
                  the  preferred provider  of their  respective  products  and 
                  services  to current  and  prospective  customers.
                  Management  believes  that  the  IDX  strategic  alliance  
                  will  enhance  the  Company's  product offerings  and  provide
                  the  Company  with the  opportunity  to  become  involved  in
                  new  sales opportunities that may not have been otherwise
                  possible.

         (d)      RESTRUCTURING  OF THE  COMPANY'S  SALES  AND  MARKETING  
                  ORGANIZATION  The  creation  of the  IDX strategic  alliance 
                  together with the  difficulties  at MetroPlus have resulted in
                  management's re-evaluation  and subsequent  restructuring  of
                  the Company's sales and marketing  organization.
                  This  restructuring  included a  consolidation  and reduction
                  of the field sales  organization to focus  resources  on  
                  opportunities  created  as a  result  of  the  IDX  strategic 
                  alliance,  a de-emphasis  of  sales  and  marketing   efforts
                  directed  toward  managed  care   organizations
                  (including  HMOs),  and a  de-emphasis  of the  Company's 
                  sales  and  marketing  efforts  in the hospital  based 
                  physician  market where the Company's  management  concluded 

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                  that the sales and marketing model did not provide an adequate
                  economic return.

         (e)      COMPLETION  OF  A  SECOND  ROUND  OF  PRIVATE  EQUITY CAPITAL
                  FINANCING In October 1996, the Company closed a $4.0 million,
                  Series  B  Convertible   Preferred   Stock,   private   equity
                  financing.   Frontenac  VI  Limited  Partnership,  a  Chicago,
                  Illinois  based  venture  capital  firm,  served  as the  lead
                  investor.  Frontenac  VI also served as the lead  investor for
                  the  Company's  1995  Series  A  Convertible  Preferred  Stock
                  offering.  The Series B Convertible  Preferred Stock financing
                  provided  the  Company  with cash to fund  growth and  ongoing
                  operations.

         (f)      IMPLEMENTATION  OF A CHANGE IN THE  COMPANY'S  METHOD FOR  
                  REPORTING  REVENUE  ON ITS  FINANCIAL STATEMENTS  In June
                  1997,  the Company  requested  from the  Securities  and 
                  Exchange  Commission (the "SEC")  permission  to include work
                  in process as revenue on its financial  statements.  The
                  SEC, upon review,  concluded that such  recognition was 
                  appropriate.  The Company  believes this change  will allow it
                  to more  accurately  match  revenue  and  expense  and bring
                  the  Company's revenue  recognition  reporting  policies  in 
                  line  with  those  of most  other  publicly  traded
                  providers  of  healthcare  business  management  services. 
                  This  change in revenue  recognition, which is  retroactively 
                  applied in the Fiscal  1996 and 1995  financial  statements 
                  included in this  report,  does not have a material  effect on
                  the  income  statements  for  Fiscal  1996 and 1995.  It does,
                  however,  result in a material  increase  ($794,000)  in the
                  stated net worth of the Company.

INDUSTRY OVERVIEW The United States Healthcare Financing Administration("HCFA")
estimated healthcare  expenditures in the United States for 1994 at $1 trillion,
representing  more than 16% of the Gross National Product  ("GNP"),  an increase
from $666 billion,  or 12% of GNP, in 1990. In 1994,  expenditures  for hospital
services totaled $400 billion and expenditures for physician  services were $195
billion. In response to the pressure being placed on physicians and hospitals to
improve  access and stabilize  costs,  providers have moved more and more of the
focus of healthcare out of the institutional, inpatient setting into less costly
alternative  sites  that  include  physicians'  offices,   ambulatory/outpatient
centers and  alternative  care  sites.  Based on  information  released by HCFA,
between 1981 and 1991, the number of hospital  admissions  declined by 15% while
the  number of  hospital  outpatient  visits  increased  from 92  million to 360
million.  During the same period,  the  percentage  of the  national  healthcare
dollars spent on physician and professional services increased by 18%.

These trends,  together with increased penetration of managed care organizations
and other  pre-paid  health  plans,  have  made it  increasingly  difficult  for
physicians,   hospitals,  hospital  outpatient  departments  and  free  standing
ambulatory  care  centers  to  manage  their  billing  and  accounts  receivable
collection activities.

Healthcare providers receive payment for medical services from the patients they
serve  and a  variety  of  third  party  payors,  including  employers,  private
insurance   companies,   the  Medicare  program  and  state  Medicaid  programs.

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Healthcare  providers are under increasing  pressure to accept the assignment of
insurance benefits from their patients and assume the primary responsibility for
obtaining  payment from third party payors.  The task of collecting  these third
party  payments is  frequently  made more  difficult by the need to submit payor
specific  claims  forms,  secure  pre-approval  from the  payor  before  care is
provided and reconcile payments to amounts negotiated in provider agreements and
submitted claims.

The Company's management believes that shifts in the structure of the healthcare
delivery system,  efforts to optimize  revenue,  convert accounts  receivable to
cash more quickly,  and more effectively  manage the business of healthcare have
increased the demand for the types of services the Company offers. The Company's
management  also  believes  that  the  changes  currently  underway  in  today's
healthcare  environment,  including  healthcare  reform  initiatives,  create an
opportunity  for the Company to expand its scope of  services  and the number of
clients served.

PHYSICIAN  BUSINESS  MANAGEMENT  SERVICES  The market for  business and practice
management services to hospital based physicians and certain  sub-specialists is
well established. These physicians have historically been willing to utilize the
services of outside  contractors to manage their billing and accounts receivable
management activities and in many cases all of the non-clinical,  administrative
activities  of their  practices.  Based on American  Medical  Association  data,
management  estimates that there are currently  approximately  350,000  hospital
based physicians and specialists practicing in the United States.

Due to the size and financial  characteristics of their practices,  primary care
physicians (i.e., family  practitioners,  general internists,  pediatricians and
obstetrician/gynecologists)  have  historically  not been  significant  users of
contract business management  services.  Management believes,  however,  that as
primary  care  physicians   aggregate  into  larger  practice  groups  and  more
administrative  responsibilities  are placed on them by managed care  companies,
they  will  increasingly  utilize  practice  management,  billing  and  accounts
receivable  management  services to optimize  their  revenues  and  minimize the
non-clinical costs characteristics of their practices. Based on American Medical
Association data,  management  estimates that there are currently  approximately
250,000 primary care physicians practicing in the United States.

According to HCFA,  in 1993  physicians  generated  revenues of $195 billion and
spent  8%  of  revenues,  or  $15.6  billion,  on  non-clinical   administrative
activities. Estimates provided by industry analysts indicate that the 50 largest
physician practice management companies accounted for less than 10% of the total
amount spent on non-clinical administrative activities.

HOSPITAL BILLING AND ACCOUNTS RECEIVABLE MANAGEMENT SERVICES  Hospitals and free
standing  ambulatory  care  centers  have  historically  relied  upon  their own
personnel and in-house or turnkey  software  systems to manage their billing and
account  receivable  activities.  Because  the  healthcare  industry  has  had a
historical  focus on inpatient  care, the policies,  procedures and  information
systems  developed  to support  patient  registration,  scheduling,  billing and
accounts  receivable  management  activities have  historically been designed to
meet the needs of  inpatient  billing and  accounts  receivable  management.  As
hospitals  experience  increased  levels of managed care  penetration and as the

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volume of outpatient activity increases (in the outpatient setting the number of
transactions  is  relatively  high and the  dollar  volume  per  transaction  is
relatively low),  hospitals and free standing ambulatory care centers have found
it increasingly difficult to manage their workloads and efficiently covert their
accounts  receivables to cash.  Management  believes that the trend towards more
outpatient activity and the lack of state-of-the art information systems to meet
the needs of the outpatient  market,  particularly with regard to multiple visit
patients, presents the Company with a unique opportunity to build on its base of
expertise and increase the number of clients served. Management further believes
that the  business of  providing  billing  and  accounts  receivable  management
services to hospital business offices and free standing  ambulatory care centers
is relatively  new, and that the demand for such services will increase and that
the  Company's  core  competencies  will  provide  opportunities  to expand  its
contract management activities.

Outsourcing of hospital billing and accounts receivable  activities is typically
provided to  hospitals  with more than 6,000  annual  inpatient  discharges  and
50,000 annual outpatient  visits.  Management  believes that an estimated 50% of
the country's  hospitals  are  candidates to outsource all or a portion of their
business office  activities to third parties which,  in  management's  judgment,
creates a $10 billion potential market.


REGULATION   Billing and collection activities are governed by numerous  Federal
and state civil and criminal  laws.  In general,  these laws provide for various
fines,  penalties,   damages  and  assessments  and  sanctions  for  violations,
including the possible  exclusion from  Medicare,  state Medicaid and commercial
payment programs.

Physicians and hospitals are permitted to assign  Medicare  claims to a contract
business  management  services  provider under certain limited  circumstances as
outlined  in  Medicare  regulations  in the  Medicare  Carrier's  Manual.  These
regulations  dictate that a contract business  management  services company that
prepares and sends bills for a hospital or physician  not receive and  negotiate
checks made payable to the provider or violate the  restrictions  provided  with
regard to the  assignment  of  Medicare  claims.  Management  believes  that its
practices do not violate the restrictions on assignment of Medicare claims.  The
Company bills only in the name of the medical provider (its client).  Checks and
payments for Medicare services are made payable to the medical provider.

A business management  services provider's  submission of claims for services or
procedures that were not actually provided may lead to civil monetary penalties,
criminal fines,  imprisonment  and/or exclusion from certain state and Federally
funded  programs.  The Federal False Claims Act allows a private person to bring
suit alleging false  Medicare  and/or  Medicaid  claims and to participate in as
much  as 30%  of the  amounts  paid  to the  government  in  damages  and  civil
penalties.  Such acts increase the likelihood that providers of medical services
and providers of business  management  services,  (i.e.,  the  Company),  may be
subject to  governmental  investigations  and/or false claims.  Some states also
have laws that  provide for private  persons to  participate  in amounts paid to
state  government for damages and civil penalties if the private person assisted
in the identification of fraudulent billing activities.  Although the Company is

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not aware of it being the  subject of any such  investigations,  there can be no
assurance that such investigation may not occur in the future.

GOVERNMENTAL  CONSTRAINTS AND  HEALTHCARE  REFORM   In recent years, the Federal
government has placed increased scrutiny on the billing and accounts  receivable
collection  activities of healthcare  providers.  Much of this scrutiny has been
directed toward fraudulent billing practices.

The Health  Insurance  Portability  and Accounting Act  of  1996,   Pub. L.  No.
104-191,  1996  U.S.C.A.C.A.N.(110  Stat 1936)  includes an expansion of certain
fraud  and  abuse  provisions  such as  expanding  the  application  of Medicare
and Medicaid fraud penalties and creating additional criminal offenses relating
to "healthcare  benefit programs" which are defined as both public and private 
companies.

During the 1995 and 1996  sessions  of the Untied  States  Congress,  healthcare
budgeting  and funding  mechanisms  received  considerable  attention.  The 1995
Annual Report of the Board of Trustees of the Federal Hospital Insurance Program
projected  that the Medicare  "trust fund" is likely to become  insolvent by the
year 2002 if current growth rates continue. Federal and state expenditures under
the Medicaid program are also expected to increase  significantly  over the next
seven years. Although proposals by the Clinton Administration to reduce the rate
of increase in Federally sponsored healthcare insurance programs were not passed
during the 1996 legislative year, the Company anticipates that certain proposals
will be passed during the 1997 legislative year. The Company believes that these
changes may impact the  methodologies  used and amounts hospitals and physicians
are reimbursed for providing  medical services and could provide  incentives for
Medicare and Medicaid beneficiaries to join health maintenance organizations and
other  managed  care  plans.   The  Company   cannot  predict  the  impact  such
legislation, if enacted, would have on its operations.

A number of states in which the Company has  operations  have either  adopted or
are  considering  the adoption of  healthcare  reform  initiates to  incentivize
and/or require  Medicaid  recipients to join health  maintenance  organizations.
Such initiatives tend to cause delays and/or reductions in the amounts hospitals
and physicians are reimbursed for providing medical  services.  These reductions
and/or delays could have an impact on the Company's revenues.

COMPANY'S  PRINCIPAL MARKETS  The Company's principal markets are physicians and
hospitals.

Physician   business   management   services  are  services   that  address  the
non-clinical,  administrative aspects of a medical practice. The Company focuses
on providing these services primarily to physicians  affiliated with or owned by
Integrated  Delivery Systems.  Activities under a physician business  management
agreement  can be as  comprehensive  as to include  the  recruitment,  training,
supervision,  and evaluation of the  billing/accounts  receivable staff, billing
and accounts receivable management, financial management and reporting, practice
development  and  assistance  in  contract  negotiations  with  payors,  and the
development and implementation of management  information  systems.  The Company

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provides billing, accounts receivable management, information systems, and other
business  management  services to approximately  2500 physicians.  The Company's
1997 revenues  associated with these services were $7.3 million.  These services
are provided by Company personnel working at business service centers located in
central New Jersey,  suburban  Chicago,  Illinois and Denver,  Colorado.  During
Fiscal 1997, the Company  closed its processing  center in Florida in connection
with  the  termination  of  a  client  contract.  Billing,  accounts  receivable
management,  and  information  systems  management are core  competencies of the
Company  and  represent  the  majority  of  the  Company's   physician  business
management  revenues.  The  Company's  physician  clients cover a broad range of
medical  specialists and  sub-specialties,  including  hospital based physicians
(anesthesiologists,   radiologists,  pathologists,  emergency  room  physicians,
etc.), office based specialties (cardiologists, surgeons, etc.) and primary care
physicians   (general   practitioners   and   family   physicians,   internists,
pediatricians and obstetricians/gynecologists).

The Company's management believes physicians are becoming increasingly sensitive
to the  business  aspects of medical  practice,  and are looking for  managerial
expertise and  technology to help manage the  complexities  of their  practices.
Management  believes that the  Company's  size,  commitment  to superior  client
service,  expertise in critical areas, such as the use of management information
systems, billing, accounts receivable and practice management, and its strategic
alliance  with IDX give the  Company a  competitive  advantage  over  "in-house"
alternatives,   small  billing  and  collection   companies  and  large,  highly
centralized  national companies that also offer these services to physicians and
physician networks.

HOSPITAL   BUSINESS  OFFICE   MANAGEMENT  The  Company  also  provides  business
management  and  information  systems  to  hospital  business  offices  and free
standing ambulatory care centers.  These services are provided under a "contract
management  model."  Under a this model,  a provider of inpatient or  outpatient
healthcare  services  outsources all or a portion of the  activities  associated
with its business offices to the Company.  Traditionally,  healthcare  providers
have  embraced  contract  management  for  certain  "hotel"  services  (dietary,
housekeeping,  maintenance)  associated  with their  operations.  More recently,
hospital boards and executives have embraced the  "outsourcing" of activities as
diverse as information  systems management  (facility  management),  billing and
accounts  receivable  management,  clinical  engineering,  and certain  clinical
services including laboratory,  radiology, physical medicine and rehabilitation.
In a business or contract management  engagement,  the Company interfaces its or
another  software  provider's  proprietary  software  to the  client  hospital's
information  system,  hires and  manages the  billing  and  accounts  receivable
management staff and directs the client  hospital's cash collection  activities.
The Company's  1997 revenues  attributed to hospital  outpatient  and ambulatory
billing and accounts receivable management were $6.1 million.

COMPANY'S  PRINCIPAL  PRODUCTS  US Servis' core  business is the outsourcing  of
billing,   accounts  receivable  and  information  management  services  to  the
physicians,  hospitals and free standing  ambulatory care centers  affiliated or
associated with Integrated Delivery Systems.

The Company's primary focus is the large physician networks that are aggregating
around hospital sponsored  Integrated Delivery Systems. In some situations,  IDS
sponsored MSOs serve as the aggregator.  MSOs typically  provide  administrative

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services  (i.e.,   registration,   scheduling,   billing,   accounts  receivable
collections,  financial  management  and  information  systems) to office  based
physicians  located in clinics or free standing  offices located  throughout the
IDS'  service  area.  Occasionally,   IDSs  have  sponsored  or  acquired  large
multi-specialty group practices. These multi-specialty group practices typically
have Central Billing  Offices  ("CBOs") that need to be integrated into the IDS'
administrative  organization.   Academic  Medical  Centers,  particularly  those
associated  with medical  schools,  frequently  have  associated  or  affiliated
Faculty  Practice Plans  ("FPPs").  FPPs are essentially  large  multi-specialty
group practices composed of members of the teaching faculty of a medical school.
Integrated  Delivery Systems  associated with academic medical centers recognize
the benefits of establishing CBOs for their Faculty Practice Plans. The creation
of a FPP-CBO is  frequently  the first  step in the  creation  of an  integrated
contracting  entity  that  affords the FPP the  opportunity  to  negotiate  more
comprehensive  at-risk payment agreements with managed care  organizations.  The
Company,  through its experience  and expertise and its strategic  alliance with
IDX, is in the business of  developing  and managing the CBO  activities  of the
physician  networks (i.e.,  MSOs,  multi-specialty  group practices and/or FPPs)
affiliated  with  IDSs.   During  Fiscal  1997,  these  activities   represented
approximately 18% ($4.0 million) of the Company's revenues.

The creation of CBOs to service the physicians  associated  with an IDS and/or a
multi-hospital  system  is a  large,  complex  undertaking.  As part of its core
business,  the Company provides  implementation  services designed to manage the
development of a CBO or the integration of new acquired physician practices into
an existing CBO. These services  include the management and the  installation of
the CBO's  legacy  billing  and  accounts  receivable  information  system,  the
introduction of standardized policies and procedures,  the training of the staff
and the  conversion  and/or  collection  of the "old accounts  receivable".  The
Company  believes that these  implementation  services  will be an  increasingly
important part of its revenues.

Company  management  expects  to  receive  substantial  benefits  from  its  IDX
strategic  relationship in the physician network market. It is the understanding
of the Company  management  that IDX software is the software of choice for most
of  the  country's  larger  physician  networks  and  FFPs  and  many  of  these
organizations  may be  candidates  for  outsourcing  their  billing and accounts
receivable activities to the Company.

In addition to managing the central  billing  offices  affiliated with IDSs, the
Company is a provider of billing and accounts receivable  management services to
hospital  based   physicians.   Hospital  based  physician   (anesthesiologists,
radiologists,  pathologists,  emergency  room  physicians)  billing and accounts
receivable  services  are  provided  through  the  Company's  suburban  Chicago,
Illinois  service center.  During Fiscal 1997,  billing and accounts  receivable
services provided to hospital based physicians  represented 15.2% ($3.3 million)
of the Company's revenues.

The Company also provides outsourced billing and accounts receivable  management
services to hospitals. This product line represented 27.6% ($6.1 million) of the
Company's  Fiscal 1997  revenues.  Outsourced  billing and  accounts  receivable

                                  8
<PAGE>
management  services  to  hospitals  encompass  both  inpatient  and  outpatient
services and are delivered  through a business model that typically  centralizes
the  majority of the billing and  accounts  receivable  management  staff at the
Company's  processing  center in Somerset,  New Jersey where  economies of scale
associated with critical mass can be attained.

In  addition  to its core  business  activities,  the  Company  provides  remote
computing services ("RCS") to hospitals. These RCS services provide clients with
access to the Company's  proprietary  billing and accounts  receivable  software
through  on-line  linkage to the Company's  central New Jersey data center.  The
Company also provides  implementation  services associated with the installation
of the  MedicaLogic  Automated  Medical  Records  System  and  support  services
associated with the MedTake  Clinical  Information  System.  During Fiscal 1997,
these activities  including  related  equipment sales and licenses,  represented
approximately $1.7 million of the Company's revenues.

As  discussed  in recent  developments,  the Company  also  provides  outsourced
business and  information  management  services to a single HMO. In light of the
difficulties  associated  with  MetroPlus (see Item 3: Legal  Proceedings),  the
Company has  temporarily  suspended its sales  activities  associated  with this
line.  During Fiscal 1997,  business  management  services provided to MetroPlus
represented 21.2% ($4.7 million) of the Company's revenues.

COMPANY'S  RELATIONSHIPS  WITH  CLIENTS The  Company's  portfolio of  business
management services includes billing and accounts receivable management,  claims
management, and related consulting services. With regard to billing and accounts
receivable management services, the Company typically enters into contracts with
its clients under contingent fee  arrangements  that are based upon a percentage
of cash  collected  with  performance  bonuses  paid  to the  Company  upon  the
attainment  of certain  performance  objectives.  The  Company  typically  bills
clients  on a  monthly  basis  for  services  provided  during  the  immediately
preceding  month.  The  Company's  fees for hospital  inpatient  and  outpatient
contract  management and physician  billing and accounts  receivable  management
services  range  from 2% to 14% of  collections  depending  upon the size of the
client and the financial sponsorship of patients serviced.

In  performing  billing and  accounts  receivable  management  services  for its
clients,  the Company  obtains  relevant  demographic,  financial  and  clinical
information  from its clients on paper forms,  magnetic tape and through  direct
interfaces with client in-house  information  computer systems.  Demographic and
medical records  information is then entered (or  transferred)  into the billing
and accounts  receivable  management  system.  The system then generates claims,
follow-up notices and other related  correspondence for patients and third party
payors.

In some  situations  the Company  utilizes  physician  practice  management  and
hospital inpatient billing and accounts receivable  management systems that have
been developed by other  companies and  subsequently  leased or purchased by the
Company's clients.  The company's creation of a strategic alliance with IDX will
create  the  opportunity  for the  Company  to become  an  expert  user of IDX's

                                 9
<PAGE>
practice  management  systems.  The Company  assigns an account  manager to each
major business  management  services client. The account manager is generally an
experienced accounts receivable  professional who manages the Company's business
management activities, including initial billing, monitoring third party payors'
responses to claims,  the collection of amounts due under claims, the receipt of
such payment  amounts by the client and the collection of co-payments or amounts
due on account of uncovered services.  The Company,  working through the account
manager,  provides  clients  with  periodic  status  reports and analyses of the
Company's  contract  management  performance  and uses these  reports to conduct
periodic  meetings with client  management.  In addition to billing and accounts
receivable  management,  the  Company  also  provides  consulting,   accounting,
financial  reporting,  contract/payor  negotiation  and  information  management
services.

INFORMATION  SYSTEMS The  information systems  used to support  the  Company's
business  management  services  operate  on IBM AS/400  and  RS/6000  computers,
various  processors  manufactured by Digital Equipment  Corporation  ("DEC") and
personal computers.

Physician business  management  services are provided using either the Company's
proprietary  practice  management  system,  known as  Infinity(TM)  or  practice
management systems developed by others.

The Company's  "Infinity(TM)"  Practice  Management System has been specifically
designed  and is  maintained  by the  Company  to meet the  practice  management
requirements of medical groups and physician delivery systems.  Infinity's major
applications   include  billing,   accounts  receivable   management,   resource
scheduling, and decision support.

As part of its  strategic  business  alliance  with IDX the  Company  intends to
become an  "expert  user" of the IDX  practice  management  systems.  IDX offers
several comprehensive  practice management systems. IDX systems are installed in
nearly 1,000  locations.  One of the Company's  clients,  HealthOne,  in Denver,
Colorado is currently  installing the IDX GPS system as the information  systems
for a CBO managed by the Company to serve the  billing and  accounts  receivable
needs of HealthOne's physician network.

Hospital  business  management  services are provided using either the Company's
proprietary  billing and accounts  receivable system known as Alliant(TM) or the
legacy systems installed at hospital client's location.

Alliant(TM) was developed by the Company to meet the complex ambulatory billing,
accounts receivable and collection requirements of hospitals, clinics, emergency
rooms and  ambulatory  care  centers.  Alliant(TM)  has  particular  strength in
dealing with the higher volume, lower per unit revenue  transactions  associated
with the delivery of  ambulatory  services.  It is  particularly  well suited to
process  multi-visit  transactions  associated with recurring  patients in renal
dialysis, physical,  occupational and speech therapy departments.  Alliant(TM)'s
features include  integrated and streamlined  triage,  on-line  registration and
check-in, unlimited patient data retention,  complete third party/patient bills,
recurring patient processing,  automatic  calculation and posting of third party

                                10
<PAGE>
billing, complete bad debt system, on-line patient financial history,  automatic
rebilling,  payor follow-up and write-off  parameters,  appointment  scheduling,
pre-registration,  complete statistic data capture on integrated text writer and
an ad hoc report generator.

The Company,  through a joint venture agreement,  markets a managed care product
(MG400) that  operates on the same  platform as its  Infinity(TM)  product.  The
MG400  product  was  developed  by  UniHealth   Ventures   Systems  of  Burbank,
California,  and is widely used by medical groups,  HMO's,  IPAs, PPOs and MSOs.
The MG400 product is available to the Company under an agreement  that gives the
Company  exclusive  use of the product in contract  management  situations.  The
MG400 module  provides  full  integration  of  membership,  claims and financial
administration  and  performs  precise  validation  of carrier,  plan and member
records.

Infinity(TM) is not currently year 2000 compliant. Management has estimated that
the costs  associated with making it year 2000 compliant are less than $250,000.
Alliant(TM)  is also not year 2000  compliant.  The Company has no present plans
for  making  Alliant(TM)  year  2000  compliant.  It  is  currently  considering
alternatives for Alliant(TM) which will be year 2000 compliant.

FISCAL 1997 FINANCIAL  INFORMATION During 1997,  business  management services
provided to hospitals,  physicians  and managed care  organizations  represented
approximately  82.4% ($18.1 million) of revenues.  Approximately $7.4 million of
these revenues were derived from physicians; $6.1 million were attributed to the
Company's hospital client base and $4.7 million related to the Company's managed
care client. (See Item 3: Legal Proceedings).

Business  management  services  provided  to  physicians  and  physician  groups
typically are provided under  agreements  having an initial term of three years,
automatically  renewable  on an annual  basis  following  the end of the initial
term. These contracts  typically  provide for cancellation for cause upon ninety
days  written  notice.  As of March 31,  1997,  the  Company  provided  billing,
accounts   receivable,   contract   management  and   information   services  to
approximately 2500 physicians.

Business  management  services  provided to the Company's  hospital  clients are
typically  provided  under  long-term  service  agreements of up to seven years.
During  Fiscal  1997,  the  Company  had four major  hospital  clients.  A fifth
contract for a new hospital client was signed late in the fiscal year.  Revenues
associated with this new client should materialize during Fiscal 1998

The  Company's   remote   computing   services  are  provided  under  multi-year
agreements.  During  Fiscal  1997,  revenues  associated  with remote  computing
services represented  approximately 8% ($1.7 million) of the Company's revenues.
The Company has two major hospital  remote  computing  service  clients.  Remote
computing  services to these two clients  represented  substantially  all of the
Company's  Fiscal 1997 remote computing  service  revenue.  In June of 1997, the

                                    11
<PAGE>
Company  negotiated  a  contract  extension  of 24 months  at its  major  remote
computing  service  client.  The  contract  for the  Company's  other RCS client
expires in November 1997.

Approximately  4.6% ($1.0 million) of the Company's Fiscal 1997 revenues related
to its clinical  information  systems products and services.  These products and
services have been provided through the Company's Clinical  Dimensions  division
and had been marketed under the MedTake and CarePoint product labels. As part of
its  restructuring  announced in Fiscal 1995, the Company is phasing out of this
line of business.

The  remaining  4.3% of revenues  ($1.0  million) in Fiscal  1997  revenues  was
derived  from  implementation  fees,  maintenance  and  service  fees on turnkey
products, interest income and other miscellaneous revenue items.

One of the  Company's  clients,  MetroPlus,  represented  21.2% of the Company's
total Fiscal 1997  revenues.  A second  client,  the  University of Medicine and
Dentistry  of New  Jersey,  represented  11.6% of Fiscal  1997  revenues.  Other
clients,  the Hospital for Special  Surgery,  located in New York City,  and the
Mount Sinai Medical  Practice Group,  Elmhurst,  New York,  represented 8.4% and
7.4%,  respectively,  of the Company's 1997 revenues.  No other single  customer
represented more than 6.5% of 1997 revenues.

COMPANY'S BUSINESS STRATEGY The Company's business strategy is to build on its
strategic  alliance  relationships,  its  relationships  with  large  integrated
delivery  systems and its core  competencies of billing and accounts  receivable
management  and the expert use of  information  systems  management  to become a
leading provider of business and information  management services to physicians,
physician networks and hospitals. Management believes that these segments of the
market will continue to aggregate and integrate in response to increased managed
care penetration and intensified  pressure to control costs and improve quality.
Management further believes that the growth and complexity associated with these
trends will create increased  demand for the Company's  business and information
management services.

Specific elements of this strategy are:

1.  Form Strategic Alliances:

The Company believes in the need to develop synergistic relationships with other
companies to acquire additional services, products, and additional market share.
The  Company's  recently  executed  strategic  business  alliance  with  IDX  is
indicative  of  management's  commitment  and  ability to  establish  and expand
strategic business relationships.

2.  Emphasis on internal growth:

The  Company's  business  strategy  is to expand its  business  with  physicians
through the efforts of its internal  sales  efforts by building on its strategic
business  alliances to create a network of regional  client service centers from
which  high  quality,  cost  effective,  business  management  services  can  be

                                  12
<PAGE>
provided.  The Company's  business  strategy to grow its hospital  inpatient and
outpatient billing and accounts  receivable  contract  management business is to
leverage its  existing  client base to increase  business  from new and existing
clients.

3.  Provide superior customer service at an affordable cost:

An important  element of the Company's  strategy is its commitment to expand and
augment the skills and expertise of its employees so they can better understand,
analyze  and  manage  its  client's  business  activities.  Investments  in  the
Company's  employees  allows them to help optimize client  revenues,  streamline
operating procedures and increase cash collections.  The Company also recognizes
the  importance  of  establishing   and  maintaining   long-term   "partnership"
relationships  with its clients.  The  Company's  service  standard is reflected
through  its  customer  focused  culture  and  its  performance   based  pricing
philosophy that aligns the Company's and the client's objectives.

Management  believes it is important to have a local presence in order to better
serve its  clients,  keep  abreast  of  regional  issues  and  achieve  the cost
advantages associated with efficient,  regional  service/processing centers. The
Company  presently has service centers in central New Jersey,  suburban Chicago,
and Denver,  Colorado. The Company anticipates  establishing additional regional
service centers as part of initial sales to large Integrated Delivery Systems.

4.  Cross sell to existing clients:

A key reason that the Company selected hospital  sponsored  integrated  delivery
systems as a target market is significant  opportunity  that exists within these
integrated  delivery  systems  for cross  selling  the  Company's  business  and
information management services. Within a single integrated delivery system, the
Company has the  opportunity  to sell a portfolio  of business  and  information
management  services  to a number  of  constituencies:  MSOs  created  to manage
acquired   physician   practicees  and  provide   services  to  community  based
physicians;  PHOs created to contract  with payors for  hospital  and  physician
services;  faculty  practice plans related to academic  medical center  clients;
affiliated hospital based physicians and hospital business offices.  The Company
believes  that once it has  established  its  presence in a client's  integrated
delivery  system,  it can  leverage its  performance  to identify and obtain new
business.

COMPETITION The industry segment that provides  billing and accounts receivable
management services to hospital based physicians, office based practitioners and
hospitals is becoming  increasingly  competitive.  Medaphis,  a public  (Nasdaq)
company,  headquartered in Atlanta, Georgia, is a national provider of physician
business  management  services and a dominant provider in this industry segment.
Physician  Support  Systems,  Inc., a public (Nasdaq)  company  headquartered in
Mount Joy,  Pennsylvania,  is also a national  provider of  business  management
services to physicians and  hospitals.  There are also a large number of smaller
companies  providing  these  services.  Most of these  companies are regional in
nature and  privately  owned.  Management  believes that there may be as many as
1,200 local and regional companies in the U.S.  providing  business  management,

                                    13
<PAGE>
billing and accounts receivable  management services to physicians and physician
delivery  systems.  Recent  industry  estimates  indicate that over 99% of these
regional companies have revenues less than $20 million.

The  Company  also  competes  with the  "in-house  mentality"  in the  physician
business management services market. In these situations,  typically  restricted
to larger,  better  established  physician groups,  the physicians hire practice
managers  and utilize  turnkey  software  and their own  administrative/clerical
personnel to manage billing and accounts receivable  collections  activities and
other  practice  management  functions.  To a lesser  extent,  the Company  also
competes with certain  hospitals  that provide  billing and accounts  receivable
management  services to physicians  and physician  groups that are part of their
medical staffs or otherwise affiliated with the hospitals.

Over the past  several  years a  number  of  companies  that  acquire  physician
practices and provide  comprehensive  practice management services to physicians
and  multi-specialty  group  practices have begun to establish a presence in the
physician market.  These companies  include PhyCor,  Inc. and Med Partners and a
number of  sub-specialty  carve-out  companies.  Although  these  companies  may
compete with the Company in that they may acquire  physician  practices  and may
provide  comprehensive  practice  management  services to the  physicians  whose
practices they acquire,  they may also be prospective customers in that they may
entertain proposals to outsource the billing and accounts receivable  management
activities  associated  with  physicians  and  physician  groups  that they have
acquired.

The hospital billing and accounts receivable contract management industry is not
mature. Management believes that the Company's major competition in this area of
focus is the "in-house  mentality" - hospital  managers  utilizing  their own or
licensed  information  systems  products,  together  with their own  hospital or
clinic  employees  to mange their  billing and  accounts  receivable  management
activities.  In addition to publicly owned  companies  like Medaphis,  Physician
Systems  Services,  Inc., and QuadraMed,  the Company is aware of a few regional
firms that provide  inpatient  and  outpatient  billing and accounts  receivable
contract  management  services.  In  addition,  some  of  the  major  healthcare
information systems companies may be considering  entering this market. If major
healthcare  information  systems  companies  elect to  aggressively  pursue this
market segment,  they could mobilize  financial and other resources in excess of
those available to the Company.

In selling its contract management services to hospitals and integrated delivery
systems,  the Company  stresses the benefits of its proprietary  software and/or
its "expert user" capabilities;  its experience in managing billing and accounts
receivable  activities and its willingness to enter into  performance  based fee
arrangements. The Company believes that many of its hospital contract management
prospects will be institutions  that are having  difficulty  managing the volume
and  complexity  of their  current  billing and accounts  receivable  management
activities.

OPERATIONS AND EMPLOYEES In January of 1997, the Company moved its headquarters
and  metropolitan  New York/New  Jersey service center to a modern and efficient
facility at 220 Davidson Avenue,  Somerset, New Jersey 08873. In addition to the
Company's  corporate  offices,  the Somerset  facility  houses the  northeastern
region data  center,  sales  personnel,  the  software  development  and support

                                      14
<PAGE>
organization,  most of the  activities  associated  with the  hospital  contract
management  business and parts of the  physician  business  management  business
services business.  Approximately 50% of the Company's  employees are located at
the Somerset facility.  The remaining 50% of the Company's employees are located
at service  centers in suburban  Chicago,  Illinois and Denver,  Colorado or are
physically located "on-site" at client facilities providing billing and accounts
receivable management services under contract management agreements.

The Company's physician business  management  activities are conducted primarily
from its New Jersey  corporate  office and service centers in suburban  Chicago,
Illinois and Denver, Colorado.

On June 20, 1997, the Company employed 304 persons.

The  Company's  employees  are not  represented  by any labor  organization  and
management  believes  that its  relationships  with its  employees are generally
good.

BOARD OF  DIRECTORS  A Board of  Directors  consisting  of eight  individuals 
was  elected at the August 27,  1996 Annual  Meeting  to serve  until the next 
annual  meeting or until  successors  are  elected  and  qualified.  The
following individuals are currently members of the Board of Directors.

                Name                                   Position
          Graham O. King                        Chairman of the Board and Chief
                                                Executive Officer

          S. M. Caravetta                       Vice Chairman of the Board

          Frederick R. Blume                    Director

          Robert C. Bowers                      Director

          James E. Cowie                        Director

          Stanford J. Goldblatt                 Director

          Robert E. King                        Director

          James A. Pesce                        President and Director


GRAHAM O. KING joined the Company on October 12, 1994 as the Company's  Chief 
Executive  Officer.  He was appointed Chairman of the Board of  Directors  at a
Board of  Directors  meeting  held on October 28,  1994.  He was formerly
with Shared Medical Systems,  Inc., a healthcare  information  service company,
from October 1, 1986 until October 31, 1993,  where he served as its President 
from April 1987.  From October 31, 1993 until joining the Company,  he
was a partner with Salt Creek  Ventures,  a private  investment  company. 
Mr. King currently  serves as a director for ADAC  Laboratories,  Inc. and
Optika  Imaging,  Inc. Mr. King and Mr. Robert E. King, another  director of the
Company, are brothers.

                                   15
<PAGE>


S. M. CARAVETTA was the Chairman of the Board of Directors,  and Chief Executive
Officer from its  organization in  1976  through  October  28,  1994.  He became
Vice  Chairman  of the  Board of  Directors  on October 28,  1994.  Mr.Caravetta
has been a director of the Company since 1976.

FREDERICK R. BLUME has been a director of the Company  since 1993. He has been a
Managing  Partner of Capital  Health  Venture  Partners,  a  healthcare  venture
capital firm, since June 1986. Prior to founding Capital Health, Mr. Blume was a
Managing Director of a Paine Webber group  specializing in corporate  healthcare
financing.  He  is  presently a  director of Cytyc  Corporation  and  Washington
National Corporation.

ROBERT C. BOWERS has been a director of the Company  since April 20, 1995. 
Since May 7, 1996,  Mr. Bowers has been Vice  President  and Chief  Financial  
Officer of COLLEGIS,  Inc.  From June 1995 through May 1996,  Mr. Bowers was
Vice  President  and Chief  Financial  Officer of HTE,  Inc., a software service
company.  From June 1985 through October 1994, Mr. Bowers was Senior Vice 
President and Chief  Financial  Officer of CA Newtrend,  Inc., the general
partner of Newtrend, L.P. (and its partnership and corporate predecessors).

JAMES E.COWIE has been a director of the Company since July 18, 1995. Mr. Cowie
has been a general  partner of Frontenac  Company,  a Delaware  general 
partnership that is the general partner of Frontenac VI and other venture
capital  partnerships,  since 1989.  He also serves on the Boards of  Directors 
of PLATINUM  technology,  inc. and 3Com Corporation.

STANFORD J.  GOLDBLATT  has been a director of the Company  since April 20,1995.
He has been a partner in the law firm of Hopkins & Sutter, counsel to the
Company, since 1979.

ROBERT E. KING has been a  director  of the  Company  since  April 20,  1995. 
Mr.  King is a partner in Salt Creek Ventures,  a private investment company and
Chairman of the Executive Committee of COLLEGIS,  Inc. an outsourcer of
information  systems  services to colleges and  universities.  For a twelve year
period prior to October 1994,  Mr. King was a director and Chief Executive 
Officer of CA Newtrend,  Inc., the general partner of Newtrend,  L.P. (and
its  partnership  and  corporate  predecessors),  a software,  service and 
outsourcing  provider in the  financial institutions market.  He is presently a
director of DEVRY, Inc. Mr. King and Mr. Graham O. King are brothers.

JAMES A. PESCE has been the  President and a director of the Company since 1982.
From  1979 to 1982 he was  employed  as the  Northeast  and  Southeast  Regional
Director of Client  Services for  McDonnell  Douglas  Automation  Company  which
provided healthcare data processing services.

EXECUTIVE  OFFICERS  OF THE  COMPANY The  following  table sets  forth certain
information  regarding  the officers of the Company.  Executive  Officers of the
Company,  for purposes of Section 16 of the Securities Exchange Act of 1934, are
designated with an asterisk.


                                     16
<PAGE>


<TABLE>
<S>                            <C>             <C>                                     <C> 
             Name               Age                   Position                           Year of
                                                                                        Employment
Graham O. King*                 57              Chairman and Chief Executive               1994
                                                Officer
James A. Pesce*                 53              President                                  1982
Michael B. Loscalzo*            52              Treasurer and Vice President               1995
Derek A. Pickell                36              Vice President, Sales                      1995
Robert E. Van Metre*            56              Secretary and Vice President,              1995
                                                Accounting and Finance
Sophia V. Bilinsky              31              Vice President, Physician                  1995
                                                Delivery Systems
</TABLE>

Graham O. King:  Chairman and Chief Executive Officer

Mr. King has been with the Company since October of 1994, when he was appointed
Chairman and CEO.  Previously, Mr. King was President of Shared Medical Systems,
the largest provider of software and outsourcing services to hospitals, clinics
and physician groups.

Mr. King has served as  president  of three  companies.  His  accomplishments at
these firms  included  successful direction of one company post-IPO and the 
implementation of a repositioning and restructuring  program at a second
firm to  facilitate  future  growth. Mr. King also served as Executive Assistant
to the President of IBM where he had broad exposure to the technology industry.

James A. Pesce:  President

Mr. Pesce has 31 years of experience in the healthcare  information  systems
industry.  Since April 1992, Mr. Pesce has  served as a  Director  of US Servis
and has held a variety of senior management  positions.  Currently,  Mr.Pesce is
responsible for all of the Company's development, data center and customer
support activities.

From 1979 to 1982,  Mr. Pesce was employed as Northeast and  Southeast  Regional
Director of Client  Services for  McDonnell  Douglas  Automation  Company  which
provided healthcare data processing services.

Michael B. Loscalzo:  Treasurer and Vice President

Mr. Loscalzo has 28 years of experience in the healthcare industry. From 1992 to
1995, Mr. Loscalzo served as Senior Vice President of Cain Brothers & Company, a

                                   17
<PAGE>
New York  healthcare  investment  banking  firm.  He has been a member of the US
Servis Management Team since 1995.

Mr. Loscalzo was a co-founder of The Hunter Group, a healthcare workout firm. As
Managing  Director  from 1988 to 1992,  he  served  as a member  of the  on-site
management team in a number of high profile healthcare turnarounds. Between 1988
and 1991,  he served  as CEO or CFO of  hospital  workout  clients  in  Seattle,
Washington, St. Paul, Minnesota, Miami, Florida, and San Francisco, California.

Derek A. Pickell:  Vice President, Sales

Mr. Pickell has 14 years of experience in the healthcare  industry  providing  
management  services and information systems to healthcare providers.

Prior to joining US Servis, Mr. Pickell served as Senior Vice President of Sales
and Service for Wellmark  Incorporated.  He held this position from 1992 to 1995
and  had   national   sales,   implementation,   and  ongoing   client   support
responsibilities.  Prior to 1992, Mr. Pickell served as the National Director of
Sales for the Health  Care  Systems  Division  of  Ferranti  International.  Mr.
Pickell joined the US Servis Management Team in March 1995.

Robert E. Van Metre:  Secretary and Vice President, Accounting and Finance

Mr. Van Metre has over 21 years of experience in financial management in the
financial services industry.

From 1987-1994,  Mr. Van Metre held several senior management  positions with 
Integrated  Resources Life Companies,Inc. including: Senior Vice President-Chief
Financial Officer, Executive Vice President, and President.

From 1982-1987, Mr. Van Metre was Executive Vice President-Chief Financial
Officer for the Dasake Group, Inc.

Mr. Van Metre  held a variety  of senior  management  positions  with  Household
International  (HFC) from 1973-1982.  Prior to joining HFC, he was Administrator
of Finance for the Illinois State Toll Highway Authority.

Sophia V. Bilinsky:  Vice President, Physician Delivery Systems

Ms. Bilinsky joined the US Servis  management  team in June 1995.  Prior to 
joining US Servis,  Ms. Bilinsky served as President and Chief Operating Officer
of Healthnet,  Inc.  (currently a subsidiary of Coastal  Healthcare Group,
Inc.), a primary care group practice operating throughout Connecticut, New York
and New Jersey.

In 1991 and 1992, Ms. Bilinsky served as Director of the Direct Investment Group
at  Whitehead/Sterling.  She served as Assistant  Vice  President of the Medical

                                  18
<PAGE>
Markets Group at General Electronic  Corporation from 1989 to 1991. From 1986 to
1989,  Ms.  Bilinsky  served as  Relationship  Associate and  Corporate  Finance
Associate, World Corporate Group for Citibank, N.A.

ITEM 2:  PROPERTIES

The Company  leases one  facility in  Somerset,  New Jersey and one  facility in
suburban Chicago, Illinois.

The Somerset facility contains approximately 35,000 square feet.

The Elmhurst, Illinois facility serves as the primary location for the Company's
midwest  hospital-based  physician activities.  It includes approximately 13,000
square feet and is occupied under a lease that expires in fiscal 1999.

The following  table sets forth the minimum  future lease  payments on Somerset,
New Jersey and Elmhurst, Illinois facilities:

              Year Ending March 31,            Minimum Lease Payments
              ---------------------            ----------------------
                      1998                               $743,000
                      1999                                680,000
                      2000                                593,000
                      2001                                601,000
                      2002                                602,000
                      2003                                610,000
                      2004                                457,000
                                                       ----------
                      Total                            $4,286,000
                                                       ==========

Net rental expenses for office space were $877,000 in Fiscal 1997.

ITEM 3:  LEGAL PROCEEDINGS

Effective December 21, 1995, the Company entered into a contract (the "MetroPlus
Contract")  with New York Health and Hospitals  Corporation  ("HHC") through its
MetroPlus  Health  Plan,  a Public  Health  Law  Article  44 health  maintenance
organization  ("MetroPlus")  under  which the  Company  was to  provide  certain
administrative and claims processing  services to MetroPlus.  Concurrently,  the
Company  entered  into  contracts  with  UniHealth  Ventures  ("UniHealth")  and
CarePLUS  Network,  doing  business as VertiHealth  ("VertiHealth")  under which
UniHealth  and  VertiHealth  were to provide  certain  support  services  to the
Company in connection with its provision of services to MetroPlus.

The  MetroPlus  Contract  called for  MetroPlus  to pay the Company a minimum of
$449,000 per month,  making MetroPlus the Company's largest client.  The initial
term of the MetroPlus Contract was three years from the commencement of services
(February 26, 1996).

                                    19
<PAGE>

On July 17, 1996,  the Company  received a letter from  MetroPlus (the "July 17,
1996 Letter")  alleging that the Company was failing to fulfill its  obligations
under the MetroPlus  Contract and  indicating  that the letter was intended as a
notice of default.  It purported to give the Company 90 days to cure all alleged
breaches.  The Company vigorously rejected the allegation that it was in default
under the  MetroPlus  Contract  and that the July 17,  1996  Letter  was a valid
notice of default under such contract.  Nevertheless,  the Company  aggressively
worked with MetroPlus to correct any alleged deficiencies in its services.

On  November  15,  1996,  MetroPlus  rescinded  the July 17, 1996 Letter and the
Company,  HHC and MetroPlus executed an amendment to the MetroPlus Contract (the
"November 15, 1996 Amendment"). The November 15, 1996 Amendment describes itself
as a "full settlement with respect to the breach letter of July 17, 1996." Under
the November 15, 1996 Amendment, certain prior billed amounts and certain future
minimum payments under the MetroPlus Contract were reduced.  In addition,  until
February  28,  1998,  MetroPlus  was  specifically  entitled  to  terminate  the
MetroPlus Contract only upon a material breach by the Company;  thereafter,  the
MetroPlus  Contract  is  terminable  by either  party.  The  November  15,  1996
Amendment  further  provided  that  MetroPlus  was to pay certain  prior  billed
amounts upon the performance by the Company of certain  specified  actions.  The
Company performed such actions and MetroPlus made all requisite payments.

On February 14,  1997,  MetroPlus  delivered  another  letter (the  "February 14
Letter) alleging  multiple acts of breach by the Company and again purporting to
be a notice of default  giving the  Company 90 days to cure all events of breach
under the MetroPlus Contract.  This deadline was later extended to May 30, 1997.
Again,  the Company  vigorously  denied  that it was in breach of the  MetroPlus
Contract  and  sought to  resolve  any  issues  with  regard to the level of its
service.

Having failed to reach any accord with  MetroPlus,  on May 22, 1997, the Company
filed suit against  MetroPlus  and HHC in the Supreme  Court of the State of New
York,  County of New York (the "Court").  The suit seeks a permanent  injunction
prohibiting  MetroPlus and HHC from terminating the MetroPlus  Contract pursuant
to the  February  14 letter  and  seeks the  payment  of unpaid  fees  under the
MetroPlus  Contract in the amount of $447,593  and  damages  resulting  from the
actions of MetroPlus and HHC.

On May 30, 1997,  the Court  issued a temporary  restraining  order  prohibiting
MetroPlus and HHC from terminating the MetroPlus  Contract and set a hearing for
July 2, 1997 at which time the Court is scheduled to determine  whether to issue
a temporary injunction. The Company intends to vigorously pursue both injunctive
relief and  damages in this case.  In the event that the Court were to refuse to
issue a temporary  injunction and MetroPlus  were to  immediately  terminate the
MetroPlus  Contract,  such events  would have a material  adverse  effect on the
financial condition of the Company.

Since the  commencement  of the  lawsuit,  the Company has  continued to provide
services to MetroPlus  pursuant to the MetroPlus  Contract.  During this period,
MetroPlus  has  made  no  payments  to  the  Company.   As  of  June  20,  1997,
approximately  $900,000 in fees were  unpaid and past due (over 60 days old).  A

                                   20
<PAGE>
continued  refusal by MetroPlus to make payments  under the  MetroPlus  Contract
would also have a material  adverse  impact on the  financial  condition  of the
Company.

In a related  matter,  on May 7,  1997,  VertiHealth  filed a suit  against  the
Company in the United States  District Court for the District of New Jersey.  In
this suit,  VertiHealth  seeks  damages in the amount of  $533,831,  such amount
being the amount that the Company  allegedly  withheld  from  payment  under the
VertiHealth  Contract in connection with its dispute with HHC and MetroPlus over
services rendered under the MetroPlus Contract. This case is in its early stages
and the  Company  cannot  assess  at this  time the  likelihood  of  success  by
VertiHealth  or whether the Company  will seek damages or  indemnification  from
VertiHealth in connection with services rendered to the Company.

In an unrelated matter, the Company filed suite on June 28, 1996 in the Superior
Court of New Jersey against Saint Barnabas Medical Center ("Saint Barnabas"),  a
former client of the Company. The suit alleges that Saint Barnabas failed to pay
certain fees and bonuses due to the Company in the amount of $727,493  that were
payable under the terms of a now expired service and equipment agreement between
the Company and Saint  Barnabas  (the "Saint  Barnabas  Contract").  The Company
seeks  payment of such amount,  together  with certain  related  damages.  Saint
Barnabas  has filed a  counterclaim  seeking  an  unspecified  amount of damages
alleged to have resulted from the Company's  alleged failure to properly perform
certain  services  under its  agreement.  The Company has recently added a third
party  claim  against  Medical  Technology  Data,  Inc.  ("MDT") an  independent
supplier of outsourced information systems and services to Saint Barnabas during
the term of the Saint Barnabas  Contract,  seeking  contribution from MDT to the
extent that the  Company is found to be  responsible  for any claims  against it
made by Saint  Barnabas.  Discovery  is  underway in this  lawsuit;  the Company
intends to vigorously press its claims for payment.

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

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

ITEM 5:  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER 
         MATTERS

The Company is authorized to issue: (i) 30,000,000 shares of Common Stock, $0.01
par value per share, of which 6,367,000  shares were issued and 6,351,000 shares
were  outstanding as of June 20, 1997; and (ii)  10,000,000  shares of Preferred
Stock,  $0.01  par  value  per  share,  of  which  1,500,000  shares  of a class
designated as "Series A Convertible  Preferred  Stock" and 1,000,000 shares of a
class  designated  as "Series B  Convertible  Preferred  Stock"  were issued and
outstanding as of June 20, 1997.

The Common Stock of the Company is listed on the NASDAQ  National  Market System
under the symbol USRV.  There is no public market for the Company's  Series A or

                                        21
<PAGE>
Series B Convertible  Preferred  Stock,  which is convertible by holders thereof
into Common Stock on a share for share basis (subject to adjustment).

On June 20,  1997,  the  Company's  Common Stock was held by  approximately  400
holders of record,  the Company's Series A Convertible  Preferred Stock was held
by three  holders of record,  and the Company's  Series B Convertible  Preferred
Stock was held by two holders of record.

The  following  table  sets  forth  actual  high and low  sales  prices  for the
Company's  Common  Stock as reported on NASDAQ  national  market  system for the
periods indicated.


                                               Closing Sales Prices
                                               -------------------- 
                                             High                   Low
                                             -----                  ------
          Year Ended March 31, 1996
                   1st Quarter              $4.375                  $3.000
                   2nd Quarter               4.500                   3.250
                   3rd Quarter               5.750                   3.125
                   4th Quarter               4.875                   3.625

          Year Ended March 31, 1997
                   1st Quarter               5.516                   3.875
                   2nd Quarter               5.000                   2.875
                   3rd Quarter               4.250                   2.313
                   4th Quarter               5.000                   2.250

          Year Ended March 31, 1998
                   1st Quarter (1)           3.125                   1.750

(1)  Through June 20, 1997

RECENT SALES OF  UNREGISTERED  SECURITIES  As of January 10,  1997, the Company
issued  54,546 shares of the Common Stock of the Company ("UPA Stock") to United
Physician  Associates  ("UPA") in  connection  with the  execution of a Services
Agreement between the Company and UPA dated of even date ("UPA Agreement").  The
UPA Stock  (i) is  unregistered,  (ii) was  issued  in  connection  with the UPA
Agreement,  under which the Company is to provide  certain  business  management
services to UPA, and without additional  consideration,  and (iii) is subject to
certain  forfeiture  provisions  set  forth in the UPA  Agreement.  The  Company
believes  that the  issuance  of the UPA  Stock  was  exempt  from  registration
pursuant to Section 4(2) of the Securities Act of 1933.

ITEM 6:  SELECTED FINANCIAL DATA (In thousands, except per share data)

The following  selected  financial data for the five years ending March 31, 1997
have been derived from the financial statements,  as retroactively  restated for
the  change  in  revenue  recognition  described  in Note 8 to the  consolidated

                                   22
<PAGE>
financial statements of the Company,  which have been audited by Wiss & Company,
LLP,  independent  auditors,  except for the  financial  statements  for Applied
Computer  Technology for Patient Care (ACT/PC)  prior to its  acquisition by the
Company on August 31, 1993. The ACT/PC  acquisition  was accounted for using the
pooling of interest  method.  The financial  statements for ACT/PC through March
31, 1993 were audited by Ernst & Young, Madison, Wisconsin.

<TABLE>
<CAPTION>   
                                                       OPERATION STATEMENT DATA (1)
   
   
                                                       FOR THE YEAR ENDED MARCH 31,
   
<S>                                      <C>              <C>        <C>             <C>               <C>                    
                                          1997             1996           1995            1994           1993
                                          -------         -------       -------         -------        -------  
   
   Revenue                                $22,009         $16,245       $15,953         $21,262         $24,142
   
   Net Income (Loss)                       (3,039)         (3,906)       (8,052) (2)     (1,192)          2,900
   
   Net Income (Loss) per
   share of common stock                   ($.59)          ($.66)        ($1.34)          ($.21)          $.56
   
   Adjusted Weighted
   Average Shares
   Outstanding                              6,308           6,282         6,023           5,813            5,193
   
</TABLE>
(1) In thousands except per share data
(2) Includes $6.8 million of pre-tax expenses associated with 1995 restructuring

The  Company  has never paid dividends on its Common  Stock.  The Company's  
payment of cash dividends in the future will be at the discretion of the
Company's Board of Directors  and will  depend,  among other  things,  on the  
Company's  future earnings, operations,  capital requirements and financial 
condition.  Management presently  anticipates  that no cash dividends will be 
declared on the Company's Common Stock in the foreseeable future.

<TABLE>
<CAPTION>   
                               BALANCE SHEET DATA (1)
   
   
                                                    FOR THE YEAR ENDED MARCH 31,
   
<S>                                    <C>            <C>             <C>              <C>               <C>        
                                         1997            1996            1995             1994             1993
                                        -------         -------         -------          -------          ------- 
   
   Total Assets                         $20,739         $19,053         $16,906          $21,878          $22,778
   
   Working Capital                        9,512           9,447           7,151           11,358           11,171
     
   Long-Term Liabilities                    369           1,172           1,770              976               62
      
   Redeemable Preferred Stock                 0           6,110               0                0                0
   

(1)  In thousands
</TABLE>  

                                      23
<PAGE>


ITEM 7:  MANAGEMENT'S DISCUSSION OF FINANCIAL RESULTS

General

During Fiscal 1997, the Company focused on securing and  implementing  contracts
to provide  accounts  receivable  business and  management  information  systems
services to  physicians,  physician  networks,  managed care  organizations  and
hospitals.   The  implementation  of  business  management  services  contracts,
obtained  during Fiscal 1996,  provided $5.7 million of Fiscal 1997  incremental
service fee revenues, resulting in a 37.0% increase over the service fee revenue
amounts  reported  in  Fiscal  1996.  The  remainder  of the  revenue  increase,
approximately  $88,000,  resulted  from  increases  in  software  license  fees,
interest and other income, partially offset by a decrease in revenues from sales
of  equipment.  Revenue  increases in excess of increases in cost  resulted in a
$2.15 million  decrease in the loss before income taxes.  The net loss decreased
by  approximately  $867,000.  During  Fiscal  1996 the  Company  used all of its
available carry forward tax credits. As a result,  Fiscal 1997 losses before and
after income tax effect are identical.

Total  Shareholder  Equity,  as reflected in the financial  statements  included
herein,  was $15.2 million on March 31, 1997 and $7.5 million on March 31, 1996.
The Fiscal 1996 year end balance  includes the effect of the Company's change in
revenue  recognition to include work in process  ($794,000).  Total  Shareholder
Equity  increased  $7.6 million  during  Fiscal 1997.  Elements of this increase
included  an  increase  of $6.1  million  associated  with the  deletion  of the
mandatory  redemption  feature of the Company's  Series A Convertible  Preferred
Stock,  an increase of $4.0  million  resulting  from the sale of the  Company's
Series B Convertible  Preferred  Stock and an increase of $.1 million  resulting
from the issuance of common stock.  These  increases were partially  offset by a
net decrease of $2.6 million  resulting  from the Company's  Fiscal 1997 loss of
$3.0 million reduced by the $.4 million loan impairment charge.

<TABLE>
<CAPTION>
                   
                                    LIQUIDITY AND CAPITAL RESOURCES
                   
<S>                                              <C>               <C>                                  
                                                     1997                1996
                                                  -----------       -----------  
                   Current Assets                 $14,721,000       $13,739,000
                                      
                   Current Liabilities              5,209,000         4,262,000
                   
                   Working Capital                  9,512,000         9,477,000
                                      
                   Working Capital Ratio to 1          2.8              3.2
</TABLE>                   

For the year ended March 31,  1997,  the  Company's  Working  Capital  increased
$35,000 and Cash and Cash Equivalents increased $1,517,000.  Working Capital was
provided by $3,965,000  of net proceeds from the sale of the Company's  Series B
Convertible  Preferred  Stock.  The  major  uses  of  Working  Capital  included
approximately  $1,500,000  used to  fund  operating  losses,  net  purchases  of
property,  equipment  and software of  $1,065,000,  a net reduction of long-term
liabilities  of $803,000 and a $600,000  security  deposit on the  Company's new
office  space.  The net  increase  in Cash and Cash  Equivalents  of  $1,517,000

                                   24
<PAGE>
consisted of the $35,000  increase in Working  Capital  described above together
with  $2,302,000 of net income tax refunds  received and a $947,000  increase in
current  liabilities,  partially  offset by a  $1,768,000  increase  in accounts
receivable  billed and unbilled.  The increase in accounts  receivable  includes
approximately  $800,000 relating to new business,  $300,000 relating to disputed
charges due from a former  client,  and $340,000 due from another  former client
that was collected in May 1997.

Management  expects that available cash and cash flow will be sufficient to meet
the Company's operating and capital requirements during Fiscal 1998. The Company
does not expect to be profitable for the year ending March 31, 1998.

RESULTS OF  OPERATIONS  The  following  table sets for the  dollar  amounts  and
percentage of total revenues  represented by various components of the Company's
statement of operations (in thousands):

<TABLE>
<S>                                   <C>            <C>               <C>           <C>           <C>         <C>        
                                                       Percent of                     Percent of                 Percent of
                                         1997           Revenues          1996         Revenues        1995       Revenues
                                       -------         ----------      --------       ----------     --------     ----------

Revenues:

     Service fees                       $21,001           95.4%         $15,325          94.3%       $14,565         91.3%

     Sales of equipment                     169             .8             306            1.9            358          2.2

     Software license fees                  470            2.1             409            2.5            420          2.6

     Minimum guarantee and
        contract termination
        revenue                               -              -               -            -              453          2.8

     Interest and other                     369            1.7             205            1.3            157          1.1
                                        -------          -----          ------          -----         ------        ----- 
     Total revenues                      22,009          100.0          16,245          100.0         15,953        100.0
                                        -------          -----          -------         -----         ------        -----       
Expenses:

     Cost of services                    15,232           69.2          11,116           68.4         10,477         65.7

     Cost of equipment sales                 96             .4             166            1.0            238          1.5

     Research and development             1,872            8.5           2,466           15.2          3,180         20.0

     Selling, general and
        administrative                    7,246           32.9           8,159           50.2          6,844         42.9

     Interest                               166             .8             114            0.7             54          0.3

     Restructuring charges                    -              -            (590)          -3.6          6,800         42.6

     Loan Impairment Charge                 436            2.0
                                        -------          -----          ------          -----         ------        -----     
         Total expenses                  25,048          113.8          21,431          131.9         27,593        173.0
                                        -------          -----          ------          -----         -------       -----  
Loss before income taxes                 (3,039)         -13.8          (5,186)         -31.9        (11,640)       -73.0

Income tax benefit                          -             -              1,280           -7.9          3,588        -22.5
                                         -------         ------         ------          ------        -------       ------          
Net loss                                 (3,039)         -13.8%         (3,906)         -24.0%        (8,052)       -50.5%
                                         =======         ======         ======          ======        =======       ======  
</TABLE>

                                         25
<PAGE>


Fiscal 1997 Compared to Fiscal 1996

REVENUE  During 1997,  total revenues  increased  approximately  $5.8 million or
35.5%  over 1996  levels  to $22.0  million.  Service  fees,  which  represented
approximately 95% of the Company's 1997 revenues, increased $5.7 million (37.4%)
to $21.0  million.  This  increase  resulted  from $4.1  million  of  additional
revenues   associated  with  the  Company's  contract  to  provide  third  party
administrative  services to MetroPlus (see Item 3: Legal Proceedings),  together
with increases in service fee revenue associated with physicians of $1.0 million
and hospital accounts of $.6 million

Other revenues,  including sales of equipment,  software licenses,  and interest
and other increased $88,000 or 9.6%.

EXPENSES  Fiscal 1997 total expenses  increased $3.6 million or 16.9%. Excluding
the  restructuring  gain recorded in Fiscal 1996 and the loan impairment  charge
recorded in Fiscal 1997,  expense  increases  totaled $2.6 million or 11.8%. The
increase  in Cost of  Services  of $4.1  million  was  directly  related  to the
addition of new business.  This  increase was  partially  offset by decreases of
$594,000 (24.1%) in research and  development,  and $913,000 (11.2%) in selling,
general  and  administrative  expense.  Decreases  in research  and  development
expense related to the phase-out of the clinical  information  systems business.
The  decrease  in selling  general  and  administrative  expense  related to the
restructuring  of the  Company's  sales  and  marketing  organization  and lower
corporate costs.

During  Fiscal 1997,  the Company  booked a $436,000 loan  impairment  charge to
reflect the amount by which the value of 252,557 shares of the Company's  common
stock held as security  for a loan made in  connection  with an  acquisition  in
1991, was less than the  outstanding  principal  balance on such loan. If and to
the extent that the closing stock price at the end of any subsequent  quarter is
greater than $3.125, there will be a reversal of this charge.

NET LOSS  The Company's $3.0million net loss was $867,000 less than the net loss
reported  for 1996.  The  Company's  1997 loss  before  income  tax  benefit  of
approximately  $3.0  million was $2.15  million  less than the $5.2 million loss
before income tax reported in Fiscal 1996.

The decline in the Company's  loss before income tax was primarily the result of
the net contribution margin associated with new business.

Fiscal 1996 Compared to Fiscal 1995

REVENUE  During 1996,  total revenues increased  approximately  $300,000 or 1.8%
over 1995 levels to $16.2 million. Service Fees, which represented approximately
94% of the  Company's  1996  revenues,  increased  5.2% to $15.3  million.  This
increase was  primarily  due to the 1996 revenue  associated  with the Company's
October  1995  contract  to  provide  third  party  administrative  services  to
MetroPlus (see Item 3: Legal  Proceedings) and increases in revenues  associated
with physician business management contracts in Florida and New Jersey.

                                   26
<PAGE>

Other  revenues,  including  sales  of  equipment,  software  licenses,  minimum
guarantee  contracts and contract  termination fees decreased 41.9% to $715,000.
Most of these decreases were anticipated and part of the Company's restructuring
efforts to move from a provider  of  clinical  information  systems  and turnkey
software products to a provider of contract business management  services.  (See
the  Company's  1994  Annual  Report  on Form 10K,  Item  1-Business-Significant
Customers).

EXPENSES  Fiscal 1996 total expenses  decreased  $6.2  million or  22.3%.  Total
expenses,   net  of  the  1995  restructuring   charge  and  the  1996  gain  on
restructuring,  increased  $1.2  million or 5.8%.  Increases in Cost of Services
were  primarily  the  result of  startup  costs  associated  with the  Company's
southern Florida  processing center that has subsequently  been closed.  Cost of
Equipment Sales decreased $72,000 or 30.3% and Research and Development Expenses
decreased  $714,000 or 22.5%.  Both of these decreases were primarily related to
the phase-out of the clinical information systems business.

Selling,  General and  Administrative  Expenses increased $1.3 million or 19.2%.
Major  components of this  increase  related to increases in sales and marketing
expenses of  $687,000,  $315,000  for the  development  of a physician  business
management  unit, a $434,000  increase in the  amortization  of a stock  signing
bonus  associated  with the  recruitment  of the  Chairman/CEO,  increase in the
provision  for losses on accounts  receivable of $168,000,  and increased  legal
fees of $85,000.  These increases were offset by a decrease in the  amortization
of software  technology  of $419,000  resulting  from the  write-off  of certain
capitalized technology costs as part of the 1995 restructuring charge.

NET LOSS  The Company's  1996 net loss of $3.9  million was  approximately  $4.2
million less than the net loss  reported for 1995.  This decline was primarily a
result of the $7.4 million difference between the 1996 restructuring  credit and
the 1995 restructuring charges, net of the related tax benefits.

ITEM 8:  FINANCIAL STATEMENTS AND SCHEDULES

See INDEX TO FINANCIAL STATEMENTS and SCHEDULES on page F-1 of this report.

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND 
         FINANCIAL DISCLOSURE

None.

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  information  required  by this item  will be  included  under the  captions
"Election of  Directors"  and "Section 16 Filings" in the  Company's  definitive
Proxy  Statement,  to be filed  pursuant to  Regulation  14A for the 1996 Annual
Meeting of Shareholder, and is incorporated herein by reference.

                                     27
<PAGE>

ITEM 11: EXECUTIVE COMPENSATION

The information  required by this item will be included in the section  entitled
"Executive  Compensation" in the Company's  definitive  Proxy  Statement,  to be
filed   pursuant  to  the   Regulation  14A  for  the  1997  Annual  Meeting  of
Shareholders, and is hereby incorporated herein by reference.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT

Information under the caption "Voting  Securities and Principal Holders Thereof"
will be  included  in the  Company's  definitive  Proxy  Statement  to be  filed
pursuant to Regulation 14A for the 1997 Annual Meeting of  Shareholders,  and is
hereby incorporated herein by reference

ITEM 13: CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

Information under the caption "Certain  Relationships and Related  Transactions"
will be  included  in the  Company's  definitive  Proxy  Statement  to be  filed
pursuant to Regulation 14A for the 1997 Annual Meeting of  Shareholders,  and is
hereby incorporated herein by reference.

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Financial Statements:  Financial Statements filed as part of this report
       are listed on  Page F-1.

(a)(2) Financial Statements Schedules:  Financial statement schedules filed as 
       part of this report are listed in the Index on page F-1.  All other
       schedules are omitted as inapplicable or because the required information
       is included in the financial statements  or notes thereto.

(a)(3) Exhibits:  The exhibits  required by Item 601 of Regulation S-K and filed
       herewith  are listed in the  Exhibit  Index that  follows  the  Financial
       Statements and immediately precedes the exhibits filed.

                      The Company,  upon  request of a  registered  shareholder,
                      will provide the exhibits that are listed in this Item 14.
                      Written  requests for such exhibits  should be directed to
                      Stockholder  Relations,  US  Servis,  Inc.,  220  Davidson
                      Avenue, Somerset, New Jersey 08873.

(b)    Reports  on Form 8-K:  No report on Form 8K was filed  during the final 
       quarter  of the year ended  March 31, 1997.


                                      28
<PAGE>


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act, of 1934,  the registrant has duly caused this report to be signed on behalf
of the undersigned, thereunto duly authorized.


Dated:   June 26, 1997            US SERVIS, INC.

                              By:      /s/ Graham O. King
                                      -----------------------------------------
                                        Graham O. King, Chief Executive Officer


Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S>                                   <C>                                    <C>                 
/s/ Graham O. King                      Chairman of the Board                  June 26, 1997
------------------                      Chief Executive Officer
Graham O. King

/s/ James A. Pesce                      President and Director                 June 26, 1997
------------------
James A. Pesce

/s/ S. M. Caravetta                     Director                               June 26, 1997
-------------------
S. M. Caravetta 

/s/ Michael B. Loscalzo                 Principal Accounting Officer           June 26, 1997
-----------------------                 and Chief Financial Officer
Michael B. Loscalzo

/s/ Stanford J. Goldblatt               Director                               June 26, 1997
-------------------------
Stanford J. Goldblatt

/s/ Robert E. King                      Director                               June 26, 1997
-------------------
Robert E. King

/s/ Robert C. Bowers                    Director                               June 26, 1997
--------------------
Robert C. Bowers

/s/ Frederick R. Blume                  Director                               June 26, 1997
----------------------
Frederick R. Blume

/s/ James E. Cowie                      Director                               June 26, 1997
------------------
James E. Cowie
</TABLE>

                                   

<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




<TABLE> 
<S>                                                                                                         <C>     




Independent Auditors' Reports                                                                                    F-2

Financial Statements:

     Consolidated Balance Sheets at March 31, 1997 and 1996                                                      F-3

     Consolidated Statements of Operations for the Years Ended
        March 31, 1997, 1996 and 1995                                                                            F-4

     Consolidated Statements of Changes in Shareholders' Equity for the Years
        Ended March 31, 1997, 1996 and 1995                                                                      F-5

     Consolidated Statements of Cash Flows for the Years Ended
        March 31, 1997, 1996 and 1995                                                                         F-6 to F-7

     Notes to Consolidated Financial Statements                                                              F-8 to F-20

Schedules:

     VI - Valuation accounts                                                                                     F-21




</TABLE>

All other  schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.


                                 F-1




                                       
<PAGE>

                            INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Shareholders of
US Servis, Inc.


We  have  audited  the  consolidated  balance  sheets  of US  Servis,  Inc.  and
subsidiaries  as of  March  31,  1997 and  1996,  and the  related  consolidated
statements of  operations,  changes in  shareholders'  equity and cash flows for
each of the three years in the period  ended  March 31,  1997.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our  opinion,  based on our audits,  the  consolidated  financial  statements
referred to above present fairly,  in all material  respects,  the  consolidated
financial  position of US Servis,  Inc. and  subsidiaries  at March 31, 1997 and
1996, and the  consolidated  results of their operations and cash flows for each
of the three  years in the period  ended  March 31,  1997,  in  conformity  with
generally accepted accounting principles.

As discussed in Note 8 to the  accompanying  financial  statements for the years
ended March 31, 1996 and 1995 have been  retroactively  restated for the effects
of a change in income recognition.




                              /s/Wiss & Company, LLP
                                WISS & COMPANY, LLP

Livingston, New Jersey
June 6, 1997
                                      F-2

<PAGE>
<TABLE>
<CAPTION>
                                   US SERVIS, INC. AND SUBSIDIARIES

                                      CONSOLIDATED BALANCE SHEET
<S>                                                                                      <C>               <C>
                                                                                                   March 31,
                                                                                        ------------------------------
                                      ASSETS                                                  1997              1996
                                                                                          -----------      -----------              
CURRENT ASSETS:
     Cash and equivalents                                                               $   8,063,000     $  6,546,000
     Certificate of deposit                                                                   300,000          300,000
     Accounts receivable:
        Billed, less allowance for doubtful accounts
            of $464,000 and $458,000                                                        4,092,000        2,558,000
        Unbilled                                                                            1,387,000        1,153,000
     Current maturities of notes receivable                                                     -              190,000
     Prepaid and refundable income taxes                                                       41,000        2,343,000
     Deferred income taxes                                                                      -               62,000
     Prepaid expenses and other current assets                                                838,000          587,000
                                                                                          -----------      -----------     
          Total Current Assets                                                             14,721,000       13,739,000
                                                                                          -----------      -----------
PROPERTY AND EQUIPMENT                                                                      1,763,000        1,529,000
                                                                                          -----------      -----------
OTHER ASSETS:
    Software technology, purchased and developed, less
         accumulated amortization of $421,000 and $292,000                                    322,000          319,000
    Goodwill, less accumulated amortization of
         $481,000 and $323,000                                                              3,164,000        3,262,000
     Other                                                                                    769,000          204,000
                                                                                          -----------      -----------
          Total Other Assets                                                                4,255,000        3,785,000
                                                                                          -----------      -----------
                                                                                        $  20,739,000     $ 19,053,000
                                                                                          ===========      ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDER EQUITY

CURRENT LIABILITIES:
     Accounts payable                                                                   $   1,414,000     $    634,000
     Accrued payroll and benefits                                                           1,015,000          724,000
     Current portion of accrued restructuring charges                                         696,000          963,000
     Accrued expenses for use of trade name                                                    62,000          254,000
     Other accrued expenses                                                                   995,000          805,000
     Current portion of capital lease obligation                                              263,000          230,000
     Deferred income                                                                          439,000          242,000
     Other current liabilities                                                                325,000          410,000
                                                                                          -----------      ----------- 
           Total Current Liabilities                                                        5,209,000        4,262,000
                                                                                          -----------      -----------

LONG-TERM LIABILITIES
     Accrued restructuring charges - net of current portion                                   369,000          905,000
     Long-term capital lease obligation - net of current portion                                 -             267,000
                                                                                          -----------      -----------    
          Total Long-term Liabilities                                                         369,000        1,172,000
                                                                                          -----------      -----------        
COMMITMENTS AND CONTINGENCIES

REDEEMABLE PREFERRED STOCK
     Convertible redeemable  preferred stock $0.01 par value;  10,000,000 shares
        authorized; 1,500,000 shares issued
        and outstanding (liquidation preference $6,228,000)                                     -           6,110,000
                                                                                          -----------     -----------
SHAREHOLDERS' EQUITY
      Convertible preferred stock $0.01 par value; 10,000,000 shares authorized;
         2,500,000 shares issued (liquidation
        preference $10,903,000)                                                                25,000             -
     Common stock $0.01 par value; 30,000,000 shares
         authorized; 6,367,000 and 6,312,000 shares issued                                     64,000           63,000
     Capital in excess of par value                                                        24,865,000       14,864,000
     Retained earnings (deficit)                                                           (8,805,000)      (5,994,000)
     Subscription receivable                                                                 (140,000)        (140,000)
     Note receivable - related party                                                         (789,000)      (1,225,000)
                                                                                          -----------      ----------- 
                                                                                           15,220,000        7,568,000
    Less: Treasury stock at cost, 15,700 shares                                               (59,000)         (59,000)
                                                                                          -----------      -----------
           Total Shareholders' Equity                                                      15,161,000        7,509,000
                                                                                          -----------      -----------
                                                                                        $  20,739,000     $ 19,053,000
                                                                                          ===========      =========== 
See accompanying notes to consolidated financial statements



</TABLE>
                                   F-3
<PAGE>
<TABLE>
<CAPTION>
                                   US SERVIS, INC. AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                Year Ended March 31,
                                                      -------------------------------------------------    
                                                         1997              1996              1995
                                                      -----------      -----------        -------------   
<S>                                                  <C>              <C>                <C>
REVENUES:
     Service fees                                    $21,001,000      $15,325,000        $14,565,000
     Sales of equipment                                  169,000          306,000            358,000
     Software licence fees                               470,000          409,000            420,000
     Minimum guarantee and contract
         termination revenue                                -                -               453,000
     Interest and other                                  369,000          205,000            157,000
                                                     -----------      -----------        -----------
                                                      22,009,000       16,245,000         15,953,000
                                                     -----------      -----------        -----------
EXPENSES:
     Cost of services                                 15,232,000       11,116,000         10,477,000
     Cost of equipment sales                              96,000          166,000            238,000
     Research and development                          1,872,000        2,466,000          3,180,000
     Selling, general and administrative               7,246,000        8,159,000          6,844,000
     Interest                                            166,000          114,000             54,000
     Restructuring charges (gains)                          -            (590,000)         6,800,000
     Loan impairment charge                              436,000            -                 -
                                                     -----------      -----------        ----------- 
                                                      25,048,000       21,431,000         27,593,000
                                                     -----------      -----------        -----------

LOSS BEFORE INCOME TAXES                              (3,039,000)      (5,186,000)       (11,640,000)

FEDERAL AND STATE
  INCOME TAX BENEFIT                                        -           1,280,000          3,588,000
                                                     -----------      -----------        ----------- 
NET LOSS                                            $ (3,039,000)    $ (3,906,000)      $ (8,052,000)
                                                     -----------      -----------        -----------

NET LOSS PER SHARE                                  $      (0.59)    $      (0.66)      $      (1.34)
                                                     -----------      -----------        -----------
WEIGHTED AVERAGE NUMBER OF SHARES
     AND EQUIVALENTS OUTSTANDING                       6,308,000        6,282,000          6,023,000
                                                     ============     ============       ============



See accompanying notes to consolidated financial statements


                                     F-4

</TABLE>                          
<PAGE>
                             US SERVIS, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                            Captial in
                                                    Preferred Stock       Common Stock       Excess of
                                                  Shares    Par Value   Shares    Par Value   Par Value
<S>                                             <C>        <C>        <C>        <C>        <C>  

BALANCE, MARCH 31, 1994, AS REPORTED                 -      $   -      5,882,000 $  59,000   $13,618,000                           
       Cummulative effect for change of
          income recognition                         -          -         -           -           -                  
                                                  ------   ---------  ----------  --------   -----------                
BALANCE, MARCH 31, 1994, AS RESTATED                 -          -      5,882,000    59,000    13,618,000             

YEAR ENDED MARCH 31, 1995:
       Purchase of 15,700 shares for
              treasury                               -          -                                                                 
       Shares issued for officer
              compensation                           -          -        300,000     3,000     1,047,000               
       Shares issued in accordance with
              amended plan of merger                 -          -         75,000     1,000        (1,000)                     
                                                  ------   --------   ----------   -------    ----------      
       Net loss                                                                                                               
BALANCE, MARCH 31, 1995                              -          -      6,257,000    63,000    14,664,000      
YEAR ENDED MARCH 31, 1996:
       Amortization of officer stock
              compensation                           -          -          -           -           -                             
       Shares issued in accordance with
              amended plan of merger                 -          -         55,000       -         200,000                          
       Accretion equal to accrued dividends
              on redeemable preferred stock                                                                                 
       Net loss                                                                                                                   
                                                 ------   --------   ----------   -------    ----------      
BALANCE, MARCH 31, 1996                              -          -      6,312,000    63,000    14,864,000                         
YEAR ENDED MARCH 31, 1997:
       Shares issued under contractual
          obligation                                   -           -      55,000     1,000       149,000                          
       Reclassification of Series A preferred
          stock as a result of the elimination
          of the redemption provision          1,500,000     15,000        -          -        5,891,000
       Shares issued for cash, net of costs    1,000,000     10,000        -          -        3,961,000            
       Reversal of accreted dividends              -           -           -          -            -                       
       Fair market adjustment of collateral        -           -           -          -            -                             
       Net loss                                    -           -           -          -            -                             
                                             -----------   --------  ----------   --------  ------------   
BALANCE, MARCH 31, 1997                        2,500,000   $ 25,000   6,367,000   $ 64,000  $ 24,865,000                          
                                             ===========   ========  ==========   ========  ============ 
</TABLE>
                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                          US SERVIS, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


                                   (CONTINUED)
                                                                   Retained                        Note
                                                   Unearned        Earnings       Subscription    Receivable      Treasury
                                                 Compensation      (Deficit)       Receivable    Related Party      Stock
<S>                                             <C>                <C>        <C>                <C>             <C>      

BALANCE, MARCH 31, 1994, AS REPORTED                 -         $   5,398,000     $ (140,000)      $  (1,225,000)   $  -    
       Cummulative effect for change of
          income recognition                         -               794,000           -                -             -      
                                                -------------    -----------       ---------      -------------   ---------
BALANCE, MARCH 31, 1994, AS RESTATED                 -             6,192,000       (140,000)         (1,225,000)      -

YEAR ENDED MARCH 31, 1995:
       Purchase of 15,700 shares for
              treasury                               -                  -             -                  -           (59,000)     
       Shares issued for officer
              compensation                         (742,000)            -              -                 -               -
       Shares issued in accordance with
              amended plan of merger                 -                 -               -                 -               -
       Net loss                                                   (8,052,000)          -                 -                       
                                                -------------    -----------       ---------      -------------   ---------
BALANCE, MARCH 31, 1995                            (742,000)      (1,860,000)      (140,000)        (1,225,000)     (59,000)
YEAR ENDED MARCH 31, 1996:
       Amortization of officer stock
              compensation                          742,000               -            -                 -               -    
       Shares issued in accordance with
              amended plan of merger                 -                    -            -                -                -
       Accretion equal to accrued dividends-
              on redeemable preferred stock          -              (228,000)          -                -                -          
       Net loss                                                   (3,906,000)          -                -                -          
                                                -------------    -----------       ---------      -------------   ---------
BALANCE, MARCH 31, 1996                              -            (5,994,000)      (140,000)    -   (1,225,000)     (59,000)    
YEAR ENDED MARCH 31, 1997:
       Shares issued under contractual
          obligation                                 -                -                 -              -                 -
       Reclassification of Series A preferred
          stock as a result of the elimination
          of the redemption provision                -                -                -               -                 - 
       Shares issued for cash, net of costs          -                -                 -              -                 -
       Reversal of accreted dividends                -              228,000             -              436,000           -
       Fair market adjustment of collateral          -                 -                -                -               -
       Net loss                                      -           (3,039,000)            -                -               -      
                                               -------------    -----------         ----------    -------------    ---------
BALANCE, MARCH 31, 1997                      $       -         $ (8,805,000)       $ (140,000)    $   (789,000)    $(59,000)       
                                             ===============   =============       ===========   ==============   ==========   
</TABLE>
                                         F-5a
<PAGE>
<TABLE>
<CAPTION>
                        US SERVIS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                     Year Ended March 31,
                                                         ---------------------------------------------------------------------------
                                                                    1997                     1996                     1995
<S>                                                      <C>                      <C>                      <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                              $     (3,039,000)        $    (3,906,000)         $    (8,052,000)
    Adjustments to reconcile net loss to net cash
       flows from operating activities:
         Write-off of assets in restructuring                         -                       -                   2,898,000
         Depreciation and amortization of
           property and equipment                                  639,000                 521,000                  462,000
         Amortization of software technology                       189,000                 129,000                  548,000
         Amortization of goodwill                                   98,000                 130,000                   94,000
         Amortization of costs of issuing preferred
           stock                                                    30,000                  12,000                    -
         Other                                                         -                   (11,000)                 (13,000)
         Provision for losses on accounts receivable                96,000                 320,000                  152,000
         Deferred income taxes                                      62,000               1,024,000               (1,755,000)
         Compensation earned under employment
           agreement                                                   -                   742,000                  308,000
         Fair value adjustment of colateral held for
             note receivable from related party                    436,000                    -                        -
         Changes in operating assets and liabilities:
            Accounts receivable, billed                         (1,630,000)                (11,000)               2,056,000
            Accounts receivable, unbilled                         (234,000)                  -                        -
            Notes receivable                                       190,000                 277,000                1,451,000
            Prepaid and refundable income taxes                  2,302,000                (343,000)              (1,247,000)
            Prepaid expenses and other current
               assets                                             (251,000)                 (6,000)                (247,000)
            Other assets                                          (415,000)                   -                       6,000
            Accounts payable                                       780,000                 104,000                  173,000
            Accrued payroll and benefits                           291,000                 157,000                   44,000
            Accrued restructuring charges                         (803,000)             (1,566,000)               3,434,000
            Other accrued expenses                                 190,000                 207,000                  179,000
            Acrrued expenses for use of trade name                (192,000)                   -                        -
            Deferred income                                        197,000                (409,000)                  (5,000)
            Other current liabilities                              (85,000)                239,000                   44,000
               Net cash flows from operating                    -----------            ------------              ----------       
                  activities                                    (1,149,000)             (2,390,000)                 530,000
                                                                -----------            ------------              ----------     
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                            (898,000)               (346,000)                (769,000)
    Proceeds from sale of equipment                                 25,000                    -                      82,000
    Purchase of certificate of deposit                                -                   (300,000)                       -
    Increase in goodwill                                              -                       -                     (34,000)
    Increase in software technology                               (192,000)               (158,000)                 (50,000)
               Net cash flows from investing                    -----------            ------------              ----------     
                  activities                                    (1,065,000)               (804,000)                (771,000)
                                                                -----------            ------------              ----------     
                                     F-6
<PAGE>
                        US SERVIS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                   Year Ended March 31,
                                                        ---------------------------------------------------------------------------
                                                                    1997                     1996                     1995

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuances of preferred stock, less
       related expenses                                   $      3,965,000        $      5,872,000     $               -
    Payments of long-term debt                                        -                       -                     (62,000)
    Purchase of common stock for treasury                             -                       -                     (59,000)
    Principal payment on capital lease obligation                 (234,000)               (253,000)                    -
                                                                -----------            ------------              ----------     
               Net cash flows from financing activities          3,731,000               5,619,000                 (121,000)
                                                                -----------            ------------              ----------     
 NET CHANGE IN CASH AND EQUIVALENTS                              1,517,000               2,425,000                 (362,000)

 CASH AND EQUIVALENTS, BEGINNING OF YEAR                         6,546,000               4,121,000                4,483,000
                                                                -----------            ------------              ----------     
 CASH AND EQUIVALENTS, END OF YEAR                        $      8,063,000         $     6,546,000      $         4,121,000
                                                                ===========            ============              ==========     

 SUPPLEMENTAL INFORMATION:
    Interest paid                                         $        166,000         $       114,000      $              4,000

    Income taxes refunded                                 $      2,399,000         $     1,952,000      $             14,000

    Issuance of common stock for compensation             $          -     $                  -         $          1,050,000

    Noncash financing activity:
       Reclassification of Series A preferred stock
         as a result of the elimination of the
         redemption provision                               $    5,906,000  $                  -         $             -

    Value assigned to goodwill relating to shares of
       common stock for prior year business
       acquisition                                          $         -            $       200,000      $              -

    Accretion (reversal) of dividends on preferred
       stock                                                $      (228,000)       $       228,000      $              -

    Stock issued to customer under contractual
       agreement                                            $       150,000        $           -        $              -



</TABLE>
                                        F-7
<PAGE>



                          US SERVIS, INC. AND SUBSIDIARIES


                            NOTES TO FINANCIAL STATEMENTS




                                                       
Note 1 -        Business and Summary of Significant Accounting Policies:

                Basis of Presentation - The  consolidated  financial  statements
                include all the accounts of US Servis, Inc. and its wholly-owned
                subsidiaries  (collectively,  the  "Company").  All  significant
                intercompany transactions have been eliminated.

                Nature of the Business - The Company is a provider of outsourced
                business  and  information  management  services to  physicians,
                physician  networks,   hospitals  and  ambulatory  care  centers
                associated  with  Intergrated  Delivery  Systems  The  Company's
                principal  focus is providing  billing and accounts  receivement
                management services.  The Company,  through strategic alliances,
                has expanded its product  offerings  to include  outsourcing  of
                business  management services to a managed care organization and
                the  implementation of electronic  medical records systems.  The
                Company  has  also  historically  been a  provider  of  clinical
                information  systems  products  to  hospitals.  The  Company  is
                phasing out of this activity. (See Note 2)

                Revenue Recognition - Revenues are recognized under services and
                equipment agreements as follows:

                      Fees for the Company's  services are primarily  based on a
                      percentage of net collections on clients' patient accounts
                      and revenue is recognized as such services are  performed.
                      Accounts receivable,  billed,  represents amounts invoiced
                      to clients. Accounts receivable, unbilled, represents fees
                      recognized for services rendered, but not yet invoiced and
                      is based upon the Company's  estimate of fees that will be
                      invoiced when collections on clients' patient accounts are
                      received.

                      Revenues  from other service  agreements  and hardware and
                      software  sales  are  recognized  when  the  services  are
                      rendered or the hardware and  software are  installed  and
                      accepted.   If  the  agreement  provides  for  installment
                      payments on the hardware or software, the present value of
                      the amount to be received is recognized as revenue.

                Estimates  and  Uncertainties  - The  preparation  of  financial
                statements  in conformity  with  generally  accepted  accounting
                principles requires management to make estimates and assumptions
                that affect the reported  amounts of assets and  liabilities and
                disclosure of contingent  assets and  liabilities at the date of
                the financial  statements  and the reported  amounts of revenues
                and expenses during the reporting  period.  Actual  results,  as
                determined at a later date, could differ from those estimates.

                                          F-8
<PAGE>


                Financial  Instruments - Financial  instruments include cash and
                equivalents,   accounts  receivable,   other  assets,   accounts
                payable,  accrued  expenses and capital lease  obligations.  The
                amounts reported for financial  instruments are considered to be
                reasonable  approximations of their fair values.  The fair value
                estimates  presented  herein  were  based on market  information
                available to management. The use of different market assumptions
                and/or estimation  methodologies could have a material effect on
                the estimated fair value amounts.

                Concentration of Credit Risks - The Company's accounts and notes
                receivable are principally from hospitals located throughout the
                U.S. (see Note 12 as to the major customers).

                The Company  maintains  its cash  balances in several  financial
                institutions  which in some instances exceed  federally  insured
                limits

                Cash Equivalents - The Company  considers all highly liquid debt
                instruments  with an original  maturity of three months or less,
                when purchased, to be cash equivalents.

                Property and  Equipment - Property and  equipment  are stated at
                cost.   Depreciation   expense  generally  is  provided  by  the
                straight-line  method over the estimated lives of the assets,  3
                to 7 years for computer  equipment,  5 to 8 years for  furniture
                and  fixtures,  and 7 to 10 years or the lease term, if shorter,
                for leasehold improvements.

                Software  Technology - Costs  associated with the development of
                software  are expensed as  incurred.  The  expenses  amounted to
                $1,872,000, $2,466,000, and $3,180,000 for the years ended March
                31,  1997,  1996  and  1995,  respectively.  Purchased  software
                technology  is stated at cost,  and is  amortized  over a 3 to 7
                year period using the straight-line method.

                Goodwill  -  Goodwill  consists  of the  excess of cost over net
                assets of acquired  businesses  and is being  amortized  over 40
                years on the straight-line method.

                Income Taxes - Deferred  taxes have been  provided for temporary
                differences  in reporting  certain  transactions  for  financial
                accounting and tax reporting purposes.

                Net Loss Per Share - Net loss per share is based on the weighted
                average  number of common  shares  and  equivalents  outstanding
                during each year.  The loss was adjusted by accretions  equal to
                accrued dividends on the Company's preferred stock in the amount
                of  $675,000,  $228,000,  and $-0- for the years ended March 31,
                1997,  1996 and 1995,  respectively.  Warrants  and  options are
                included,  using the treasury stock method, when exercise prices
                are less than the average market  prices.  No effect is given to
                common share equivalents when there is a net loss.

                                            F-9
<PAGE>
                Stock Option  Compensations  - In October  1995,  the  Financial
                Accounting   Standards  Board  issued   Statement  of  Financial
                Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
                Compensation".  This standard measures  compensation  associated
                with stock  options  based on a specific  fair value  definition
                but,  allows  companies  to  continue  to  measure  compensation
                associated  with  employee  stock options based on the intrinsic
                value  approach.  The Company has elected to continue to use the
                criteria  set  forth  in  APB  No.  25 to  measure  compensation
                associated   with  the  issuance  of  employee   stock  options.
                Accordingly,  the Company has not  recognized  any  compensation
                associated  with the issuance of employee  stock options  during
                the years ended March 31, 1997 and 1996. Had  compensation  cost
                been determined pursuant to SFAS No. 123, pro forma net loss for
                the years ended March 31, 1997 and 1996 would have  increased by
                approximately $163,000 and $258,000, respectively.

                Defined  Contribution  Profit  Sharing  Plan - The Company has a
                defined contribution 401(k) plan covering  substantially all its
                employees.  Employees  who have one year of service are eligible
                to receive  matching  contributions  from the  Company.  Company
                contributions  are based on a percentage  of  employees'  annual
                deferrals   and  are  charged   against   income  as   incurred.
                Contributions were approximately $92,000, $71,000 and $52,000 in
                fiscal 1997, 1996 and 1995, respectively.

                Reclassification  - Certain  amounts  in prior  years  have been
                reclassified for comparability.

Note 2 -        Restructuring Charges (Gains):

                During  1995,  the Company  recorded a  restructuring  charge of
                $6,800,000 for costs  associated with  termination of employment
                of the former  Chairman of the Board,  downsizing of operations,
                consolidating   facilities,   discontinuance  of  the  Company's
                in-patient  point-of-care  systems and  refocusing  on financial
                management services.

                During   1996,   the   Company   substantially   completed   its
                restructuring  program  and the  final  costs  varied  from  the
                original  estimates for certain  items.  As a result the Company
                recorded a net credit of  $590,000  to reduce its  restructuring
                accrual.   During   1997,   the   estimate   of  the   Company's
                restructuring  was  reevaluated  at which time no charge or gain
                was required.

                                      F-10
<PAGE>
<TABLE>

<S>                                                                                         <C>               <C>         
                The  individual  components  of the 1996 credit and the 1995 
                restructuring  charge are  summarized as follows:

                                                                                                Year Ended March 31,
                                                                                               1996                1995

                  Writedown of capitalized software costs                               $        -              $2,127,000
                  Writedown of inventory and equipment                                           -                 714,000
                  Provision for doubtful accounts receivable on discontinued
                       products                                                                  -                 200,000
                  Consolidations and close down of facilities                                 (920,000)          1,189,000
                  Legal, consulting and related reserves                                      (125,000)            300,000
                  Termination costs related to the former Chairman                            (223,000)          1,394,000
                  Severance payments to employees                                              678,000             876,000
                                                                                            ----------         -----------

                                                                                             $(590,000)         $6,800,000
</TABLE>
                At  March  31,  1997,   the   non-current   portion  of  accrued
                restructuring charges matures as follows:

                                 Year Ending March 31,

                                       1999                  $  177,000
                                       2000                      66,000
                                       2001                      10,000
                                       2002                      10,000
                                       2003 and thereafter      106,000
                                                              ----------
                                                             $  369,000

Note 3 -        Acquisitions - Purchases:

                Management-Data  Services,  Inc. ("MDS") - On March 9, 1993, the
                Company acquired through merger Vanco Business Management,  Inc.
                ("VBM") The purchase  price  consisted of 180,000  shares of the
                Company's   restricted  common  stock  (valued  at  $2,059,000),
                $1,000,000 in cash plus closing costs of approximately $115,000.

                The  acquisition  was  reported  using  the  purchase  method of
                accounting  and,  accordingly,   the  purchase  price  has  been
                allocated  to the assets  acquired and the  liabilities  assumed
                based on the estimated  fair values at the date of  acquisition.
                The $2,488,000  excess of purchase price over the estimated fair
                values of the net assets acquired was recorded as goodwill.

                                       F-11
<PAGE>



                In April 1994, the Company amended the plan of merger. Under the
                amendment, the Company issued an additional 25,000 shares of its
                common  stock to the former  owner of VBM.  The Company was also
                required to issue 240,000  additional shares of its common stock
                based upon its market  value at March 31,  1995 and  revenues of
                MDS and 55,000 common  shares based on revenues  attained by MDS
                in the fiscal year ended March 31, 1996.

                In  connection  with the  amended  plan of merger,  the  Company
                issued 190,000 shares of its common stock in 1994, 75,000 shares
                in May 1995 and 55, 000 shares in 1996.  The value of the shares
                issued in May 1995 is reflected in shareholders' equity at March
                31, 1995.

                AISCorp.  - On June 14,  1991,  the Company  acquired  through a
                subsidiary  substantially  all of the assets  subject to certain
                liabilities  of  AISCorp.  for 108,000  shares of the  Company's
                restricted common stock valued at $1,500,000. The acquisition is
                reported   using  the   purchase   method  of   accounting   and
                accordingly,   the  purchase   price,   closing  costs  and  net
                liabilities   assumed,   have  been   attributed   to   software
                technology.

                As a  result  of the  Company's  guarantee  of the  price of its
                common stock in the  acquisition  of AISCorp.,  the Company,  in
                December  1993,  issued  221,000  shares of its common stock and
                loaned  $1,225,000 to the former owner.  The loan bears interest
                at  5.1%,  and  was  collateralized  by  328,000  shares  of the
                Company's common stock.  Principal and interest are payable only
                from the  proceeds of the sale of the  collateral.  Accordingly,
                the  loan  is  reported  as  a   reduction   of  the   Company's
                shareholders' equity. Any unsold common stock at the due date of
                the loan will revert to the Company in exchange for cancellation
                of the then remaining loan balance and accrued interest. On June
                26,  1996,  the Company  entered into an agreement to change the
                due date of the loan to the  earlier  of  December  13,  2000 or
                ninety days after the price of the Company's stock reaches a per
                share price of $8.50 for five consecutive trading days. Also the
                Company  agreed to reduce the  collateral for the loan by 75,000
                shares and an additional  50,000 shares when the per share price
                of the Company's Common Stock reaches certain price levels.

Note 4   -       Point-of-Care Clinical Information Systems:

                On November 14, 1991, Clinical Dimensions,  Inc.  (Clinical),  a
                subsidiary  of the Company,  modified an  agreement  (the Baxter
                Agreement) with Baxter Healthcare Corporation ("Baxter").  Under
                the Modified Baxter Agreement, Baxter had the exclusive right to
                distribute Med-Take throughout the United States and Canada. The
                Company was to receive minimum Med-Take revenues until March 31,
                1995.

                                       F-12
<PAGE>
                In December 1993, the Company ended the existing  agreement with
                Baxter and signed a termination  agreement  whereby  Baxter will
                continue to serve as the exclusive  distributor  of the Clinical
                product only to hospitals serviced by HCA Information  Services,
                Inc. The termination agreement was effective through December of
                1995.  Baxter  paid  the  Company   $2,000,000  to  satisfy  its
                obligation  which is included in minimum  guarantee and contract
                termination revenue in the statement of operations for 1994.

Note 5  -       Property and Equipment:

                Property and equipment consist of:

                                                           March 31,
                                                    1997                 1996
                Property and equipment           $4,053,000           $3,486,000
                Leasehold improvements              313,000              409,000
                                                -----------         ------------
                                                  4,366,000            3,895,000
                Less: Accumulated depreciation
                  and amortization                2,603,000            2,366,000
                                                -----------          -----------
                                                 $1,763,000           $1,529,000
                                                 ==========           ==========

                Depreciation and amortization expense was $639,000, $521,000 and
                $462,000  for the years  ended  March 31,  1997,  1996 and 1995,
                respectively,   and  are   included  in  selling,   general  and
                administrative expenses.


Note 6   -      Capital Lease Obligation:

                During  September  1995, the  Company  leased  three  IBM  AS400
                computers  for  three  years  with  semi-annual   principal  and
                interest   payments  of   $150,000   at  an  interest   rate  of
                approximately 15% per annum.  Future principal payments include
                $267,000 in fiscal 1998.

Note 7   -      Income Taxes:

<TABLE>
<CAPTION>
                A summary of current and deferred income taxes included in the statements of operation is as follows:
                                                                                   Year Ended March 31,
<S>                                                         <C>                   <C>                      <C>     
                                                                    1997                   1996                   1995
                                                              ----------------       ---------------            ---------
                Current:
                   Federal                                   $          -                $(2,349,000)         $(1,704,000)
                   State and local                                      -                     45,000             (129,000)
                                                            ------------------        --------------           ----------
                                                                        -                 (2,304,000)          (1,833,000)
                                                            ------------------          ------------           ----------
                Deferred:
                   Federal                                              -                  1,024,000           (1,606,000)
                   State and local                                      -                     -                  (149,000)
                                                            ------------------    ------------------        -------------
                                                                        -                  1,024,000           (1,755,000)
                                                            ------------------          ------------         ------------

                Provision for income taxes                   $          -                $(1,280,000)         $(3,588,000)
                                                             =================           ===========          ===========
</TABLE>
                                   F-13
<PAGE>



                The total income taxes are different  than the amounts  computed
                by applying the U.S.  statutory  federal income tax rate of 34%.
                The differences are summarized as follows:

<TABLE>
<S>                                                                    <C>                 <C>                 <C>         
                                                                                       Year Ended March 31,
                                                                             1997                1996                1995

                Income taxes at statutory rate                           $(1,033,000)        $(1,763,000)        $(3,958,000)
                Effect of losses without a current year tax
                   benefit                                                 1,185,000             237,000             592,000
                Alternative minimum tax                                       -                  156,000             115,000
                State and local taxes, net of federal benefit
                                                                            (210,000)             30,000            (189,000)
                Write off and amortization of nondeductible
                   technology costs and goodwill, net of
                   realization of deferred tax liability
                                                                              33,000              44,000            (114,000)
                Nondeductible business expenses and other
                                                                              25,000              16,000             (34,000)
                                                                        ------------      --------------      --------------

                Provision for income taxes                          $         -              $(1,280,000)        $(3,588,000)
                                                                    ================         ===========         ===========



                The  significant  components  of the  Company's net deferred tax
                assets are summarized below:

                                                                                         March 31,
                                                                   -------------------------------------------------------
                                                                         1997               1996               1995
                                                                    --------------     --------------     ---------

                    Accrued restructuring charges                      $   406,000         $   747,000         $1,384,000
                    Inventories                                             -                   -                 274,000
                    Allowance for doubtful accounts                        185,000             190,000             76,000
                    Equity based compensation                               -                   -                 155,000
                    Accrued vacation and other                             123,000             177,000             86,000
                    Depreciation                                           134,000              -                  -
                    Writedown of stockholder note receivable
                                                                           174,000              -                  -
                    Unbilled revenue                                      (555,000)           (461,000)          (461,000)
                    Alternative minimum tax credit                          -                  271,000            115,000
                    Net operating loss tax carryforwards
                                                                         3,684,000           2,814,000          2,571,000
                                                                       -----------         -----------        -----------
                                                                         4,151,000           3,738,000          4,200,000
                    Valuation allowance                                  4,151,000           3,676,000          3,114,000
                                                                       -----------         -----------        -----------

                                                                  $         -             $     62,000         $1,086,000
                                                                  ================        ============         ==========

</TABLE>
                                  F-14     
<PAGE>




                A valuation  allowance  is provided  when it is more likely than
                not that some  portion  of the  deferred  tax asset  will not be
                realized.  The  Company  has  determined  that a full  valuation
                allowance is appropriate  at March 31, 1997 and 1996,  except to
                the extent of refundable income taxes.

                At March 31,  1997,  AISCorp.  and US Servis,  Inc.  ("USS") had
                Federal  net  operating  loss   carryforwards  of  approximately
                $8,085,000 and $740,000,  respectively which expire beginning in
                fiscal  2001.  Of these  losses,  $5,292,000  is  limited by the
                provisions of Section 382 of the Internal  Revenue Code due to a
                more than 50% change in ownership.  Following such a change, the
                utilization of tax loss carryforwards is limited to the value of
                the acquired  Company on the date of such change,  multiplied by
                the Federal long-term tax exempt rate (the "annual limitation").
                To the extent amounts  available under the annual limitation are
                not used,  they may be carried  forward for the  remainder of 15
                years from the date the losses were  originally  incurred.  As a
                result of the change in ownership,  use of net operating  losses
                will be limited to approximately  $225,000 per year for AISCorp.
                and $320,000 for USS, subject to certain additional limitations.


Note 8  -       Change in Revenue Recognition Method and Restatement:

                The accompanying  financial statements for the years ended March
                31,  1996 and 1995  have  been  retroactively  restated  for the
                effects of a change in income  recognition.  The Company changed
                its method of  accounting  for income  recognition  for business
                management   services,   whereby,   revenue  is   recognized  on
                collections in process as the services are  performed.  In prior
                years,   revenue  was   recognized   based  solely  on  the  net
                collections by the third party  customers.  The Company believes
                the new method of revenue  recognition more accurately  reflects
                the  earnings  process  and is the method  used  throughout  the
                industry.

                The effect of the change was a restatement to increase  retained
                earnings  as of April 1, 1994 for  $794,000.  The  statement  of
                operations for fiscal 1996 and 1995 were not materially effected
                by the restatement.

                                      F-15
<PAGE>



Note 9  -       Commitments and Contingencies:

                Leases - The annual minimum rental  commitments  under the terms
                of the Company's operating leases that have initial or remaining
                lease  terms in  excess  of one year at  March  31,  1997 are as
                follows:


                        Year Ending March 31,
                             1998                                    $  859,000
                             1999                                       729,000
                             2000                                       610,000
                             2001                                       601,000
                             2002                                       602,000
                             Thereafter                               1,067,000
                                                                     ----------
                        Total future minimum lease payments          $4,468,000

                Net rental  expenses for office space amounted to $877,000, 
                $671,000 and $776,000 for the years ended March 31, 1997, 1996 
                and 1995, respectively.

                Employment  Agreements - The Company has an employment agreement
                with an officer  through March 31, 1999.  Under this  agreement,
                minimum  compensation per annum aggregates $239,000 for the year
                ending March 31, 1998.

                In the event of the death of one other  officer  during the term
                of employment,  the Company will be required to pay $100,000 per
                annum for a period of ten years.

                Royalties and Other Fees - In February 1995 the Company  entered
                into a ten  year  agreement  with a  provider  of  managed  care
                services  ("licensor") which grants the Company exclusive rights
                to market, license, install and support managed care software to
                certain end users. The Company is required to pay the licensor a
                $5,000 per month fee to cover software  maintenance and customer
                support  services over the life of the agreement and is required
                to pay  the  licensor  royalties  for  software  licenses  sold.
                Beginning in 1998, in order to retain exclusivity the Company is
                also  obligated  to  make  minimum  payments  totaling  $195,000
                annually.

                Commitment   and   Contingent   Liabilities  -  The  Company  is
                contingently liable for approximately $883,000 payable over nine
                years for the continued use of certain trade names.

                The  Company  is subject to  certain  lawsuits  with  particular
                customers which arose in the course of business.  In the opinion
                of management,  adequate  provision has been made for any losses
                which may occur in connection with these lawsuits.

                                      F-16
<PAGE>



Note 10  -      Convertible Preferred Stock:

                On  September  30,  1996 the  Company  issued  through a private
                placement  1,000,000  shares of Series B  Convertible  Preferred
                Stock,  par  value  $0.01 per  share,  for a  purchase  price of
                $4,000,000.   Concurrent   to  the  issuance  of  the  Series  B
                Convertible  Preferred Stock, the Series A Convertible Preferred
                stockholders  agreed to eliminate the redemption  provision that
                was  incorporated  into the provisions of the Series A Preferred
                Stock.

                On October  12,  1995,  the  Company  issued,  through a private
                placement,   (i)  1,500,000   shares  of  Series  A  Convertible
                Preferred  Stock,  par value $0.01 per share,  (ii)  warrants to
                purchase up to 390,000  shares of the Company's  common stock at
                an  exercise  price of $0.10 per share,  and (iii)  warrants  to
                purchase up to 198,000  shares of the Company's  common stock at
                an exercise price of $3.50 per share, for an aggregate  purchase
                price of $6,000,000.

                As of March 31,  1997,  the  carrying  value of the  Convertible
                Preferred  Stock has been  reduced by  $123,000  of  unamortized
                stock issue costs.  Dividends on the Convertible Preferred Stock
                accrue at a rate equal to 8% per annum, compounded quarterly. If
                not  earlier  paid,   preferred  dividends  are  payable  on  i)
                conversion or ii) dissolution of the Company.

                At any time, the preferred stock is convertible at the option of
                the  holders  into an equal  number of common  shares  and under
                certain circumstances the Company may require conversion. In the
                event  of  the  Company's   liquidation,   the  holders  of  the
                Convertible  Preferred  Stock  are  entitled  to $4.00 per share
                (aggregating   $10,000,000)  plus  all  accumulated  and  unpaid
                dividends.

Note 11 -       Shareholders' Equity:

                Options - The Company has an  incentive  stock  option plan (the
                "1986 Plan") pursuant to which 600,000 shares of common stock of
                the Company have been  reserved  for  issuance to key  employees
                upon exercise of options.  Options granted  pursuant to the Plan
                are  nontransferable  by the optionees  during their  lifetimes,
                expire if not  exercised  within  ten years from the date of the
                grant,  and, under certain  circumstances set forth in the Plan,
                may be exercised  within three months  following  termination of
                employment.  Options are granted to key  employees as determined
                by the Board of Directors at not less than the fair market value
                of the  shares  underlying  the option on the date the option is
                granted.

                In 1993,  the Board of Directors and the Company's  shareholders
                approved an  incentive  stock  option plan ( the "1993 Plan") to
                grant 500,000 shares of the Company's common stock. The terms of
                the  1993  Plan  are  principally  the same as those of the 1986
                Plan.

                                         F-17
<PAGE>

                In 1994,  the Board of Directors and the Company's  shareholders
                approved an amendment to the Company's 1993 Plan  increasing the
                number of shares  reserved for issuance  from 500,000  shares to
                1,400,000 shares.

                In  addition,   the  Board  of  Directors   and  the   Company's
                shareholders  approved a stock  option plan (the "1994 Plan") to
                grant  350,000   shares  of  the   Company's   common  stock  to
                non-employee  directors.  All  new  nonemployee  directors  will
                automatically  be  eligible  for a grant of options to  purchase
                50,000  shares of common  stock of the  Company at the then fair
                market value of the shares  underlying the option on the day the
                option is granted.  All current  directors  received  additional
                options to purchase  40,000  shares.  The options vest at 10,000
                shares per year commencing one year from the date of grant,  are
                nontransferable by the optionees during their lifetimes,  expire
                if not exercised within ten years from the date of grant and may
                be exercised within one year following termination of service as
                an eligible director.

                Outstanding options at March 31, 1997 are as follows:
<TABLE>
<S>                                                                <C>            <C>                 <C> 
                                                                      Shares       Exercise Price       Expiration
                                                                     Issuable        Per Share             Date
                  Non Qualified Options Issued to Chairman
                    of the Board of Directors in October
                    1994 (1)                                         1,000,000        $3.50            October 2004
                  Nonemployee director in October 1994,
                    options  for 45,000  shares  vested and 
                    options  for 10,000  shares vest in 
                    fiscal 1998 and 1999.
                                                                        65,000    $3.00-$5.00          October 1999
                  Nonemployee directors in January 1995,                         `
                    options for 40,000 shares vested and
                    20,000 shares vesting annually through
                    January 2000                                       100,000         3.50            January 2005
                  Former President and Chief Operating
                    Officer of AISCorp. in June 1991 (2)
                                                                        75,000         4.00            June 2001
                                                                   -----------
                                                                     1,240,000
                  Incentive options                                    898,000    $3.00-$5.00          December 1997 -
                                                                    ----------
                                                                                                       February 2007
                                                                     2,138,000

                (1) 400,000 shares vested  October 1995,  the remaining  600,000
                    vest when the  Company's  stock has  closed at $5.00 or more
                    per share on at least 30 of the last 40  business  days,  or
                    upon a change in control, or on October 12, 2002.

                (2) All options are exercisable.

</TABLE>
                                   F-18
<PAGE>



                Options under the Incentive Stock Option Plans are summarized as
                follows:
<TABLE>
<S>                                                                  <C>                 <C>                  <C>     
                                                                                       Year Ended March 31,
                                                                           1997                1996                1995
                Options outstanding at
                  beginning of year                                       1,136,000             989,000             321,000
                Options granted                                             285,000             405,000             894,000
                Options expired                                            (423,000)           (243,000)           (226,000)
                Options exercised                                            -                   -                   -
                Options transferred                                        (100,000)            (15,000)             -
                                                                         -----------        -----------     ----------

                Options outstanding at end of year                          898,000           1,136,000             989,000
                                                                         ==========           =========          ==========
                Option price per share
                                                                       $3.00-$5.00         $3.00-$7.00         $3.00-$7.00
                                                                       ===========         ===========         ===========
                Options exercisable:
                  Number of shares                                                                                  268,000
                                                                            387,000             185,000
                                                                            =======          ==========
</TABLE>


                At March 31,  1997,  options  to  purchase  851,000  shares  are
                available for grant.

Note 11  -      Major Customers:

                Revenues from  customers in excess of 10% of total revenues were
                as follows:
<TABLE>
<S>                                                                                <C>           <C>            <C>            
                                    Customer                                                 Year Ended March 31,
                            ------------------------                                   --------------------------
                                                                                      1997          1996          1995
                                                                                    --------      --------      ------


                University of Medicine & Dentistry, Newark, NJ                         11.6%         15.7%         15.5%

                MetroPlus Health Plan                                                  21.2           3.6            -

                Mount Sinai Practice Group, Elmhurst, NY                                7.4           9.2          11.7
</TABLE>
                On February  14, 1997,  MetroPlus  Health  Plan,  the  Company's
                largest customer,  delivered a letter to the Company  purporting
                to be a notice of  default  under  the  MetroPlus  contract  and
                giving  the  Company  90 days  to cure  all  alleged  events  of
                default.  This  deadline  was  subsequently  extended to May 30,
                1997. The Company  vigorously denies that it is in default under
                the MetroPlus contract.  On May 22, 1997, the Company filed suit
                against  MetroPlus  Health  Plan  and the New  York  Health  and
                Hospitals   Corporation   seeking  an   injunction   prohibiting
                MetroPlus  Health Plan from  terminating the MetroPlus  contract
                and seeking  damages.  On May 30, 1997, the Supreme Court of the
                State of New  York,  County  of New  York,  issued  a  temporary
                restraining  order  prohibiting  MetroPlus from  terminating the
                MetroPlus  contract  and setting a hearing on the  issuance of a
                temporary injunction for
                                           
                                          F-19
<PAGE>


                July 2,  1997.  In the event that  the Court were to  refuse to 
                issue a temporary injunction and  MetroPlus were to immediately
                terminate the  MetroPlus  contract,  such  events  would  have a
                material  adverse  effect on  the  financial  condition of  the 
                Company.


Note 12  -      New Accounting Standard:

                Earnings per Share - Statement of Financial Accounting Standards
                (SFAS No. 128) "Earnings per Share" was issued in February 1997,
                and is effective  for  financial  statements  issued for periods
                ending after December 31, 1997.  SFAS 128 requires that earnings
                per  share be  presented  more in line with  earnings  per share
                standards of other countries.  The Company expects to adopt SFAS
                128 for the year  ending  March 31,  1998.  The  adoption is not
                expected to have a material  effect on the  Company's  financial
                Statements.


                                     F-20
<PAGE>


------------------------------------------------------------------------------
                                                Schedule VI
------------------------------------------------------------------------------
                                           US SERVIS, INC. AND SUBSIDIARIES

                                            NOTES TO FINANCIAL STATEMENTS




                                                       
                                               VALUATION ACCOUNTS







<TABLE>
<CAPTION>

-------------------------------------------------- ------------------ ------------------- ------------------ -------------------
                    COLUMN A                               COLUMN B           COLUMN C            COLUMN D           COLUMN E
-------------------------------------------------- ------------------ ------------------- ------------------ -------------------
<S>                                                <C>                <C>                 <C>                <C>   
                                                                          Additions
                                                      Balance at           Charged                               Balance at
                                                     Beginning of          to Costs                                End of
                   Description                          Period           and Expenses        Deductions            Period

March 31, 1997 -
    Allowance for doubtful accounts                        $458,000          $  96,000           $  90,000           $464,000
                                                           ========          =========           =========           ========

March 31, 1996 -
    Allowance for doubtful accounts                        $206,000           $320,000           $  68,000           $458,000
                                                           ========           ========           =========           ========

March 31, 1995 -
    Allowance for doubtful accounts                        $554,000           $152,000            $500,000           $206,000
                                                           ========           ========            ========           ========




                                        F-21
</TABLE>
<PAGE>
<TABLE>
<S>                                                                                                                      <C>    

                                                       EXHIBITS INDEX

     Exhibit No.                                        Description                                                        Page
        3(1)        By-Laws. (I)                                                                                             *
        3(2)        Amended and Restated Certificate of Incorporation of the Registrant. (XVII)                              *
        3(3)        Certificate of Designation Relating to the Series A Convertible Preferred Stock of the Registrant.
                    (XVII)                                                                                                   *
        3(4)        Certificate of Designation Relating to the Series B Convertible Preferred Stock With a Par Value of
                    $.01 Per Share of US Servis, Inc. (XIX)                                                                  *
        3(5)        Amendment to Certificate of Designation Relating to the Series A Convertible Preferred Stock With a
                    Par Value of $.01 Per Share of US Servis, Inc. (XIX)                                                     *
        4(1)        Form of warrant to purchase in the aggregate up to 390,000 shares of the Registrant's Common Stock
                    at an exercise price of $0.10 per share, such warrants issued October 12, 1995. (XV)
                                                                                                                             *
        4(2)        Form of warrant to purchase in the aggregate up to 198,000 shares of the Registrant's Common Stock
                    at an exercise price of $3.50 per share, such warrants issued October 12, 1995. (XV)
                                                                                                                             *
        10(1)       Lease date March 31, 1986, between Skyline Associates, Inc. And Digital Equipment Corporation
                    relating to the premises located at 414 Eagle Rock Avenue, West Orange, New Jersey. (I)
                                                                                                                             *
        10(2)       1986 Stock Option Agreement. (I)                                                                         *
        10(3)       Service Agreement between the Registrant and Digital Equipment Corporation. (I)                          *
        10(4)       Non-qualified Stock Option Agreement between the Registrant and S.M. Caravetta, dated February 10,
                    1990 and expiring February, 1995. (III)                                                                  *
        10(5)       License Agreement between the Registrant and North County Computer Services, Inc. (III)                  *
        10(6)       Distribution/Sales Representation Agreement by and between Baxter Healthcare Corporation and
                    MedTake Corp., dated as of October 1, 1990. (IV)                                                         *
        10(7)       Letter Agreement by and among MedTake Corp., the Registrant, Salvatore M. Caravetta and Baxter
                    Healthcare Corporation,  dated as of October 1, 1990. (IV) *
        10(8)       Guaranty  of  the  Registrant  in  favor  of  Baxter   Healthcare
                    Corporation, dated as of October 1, 1990.   (IV)                                                         *
        10(9)       Complimentary Marketing Agreement between International Business Machines Corporation and the
                    Registrant. (V)                                                                                          *
       10(10)       Service Agreements between Digital Equipment Corporation and the Registrant. (V)                         *
       10(11)       Asset Purchase Agreement and Plan of Reorganization by and among Administrative Information Systems
                    Corporation, the Registrant and Receivables Management Corp., dated as of June 14, 1991. (VI)
                                                                                                                             *
       10(12)       Registration Rights Agreement by and between the Registrant and Administrative Information Systems,
                    Inc. (Misnamed in said document as "Administrative Information Services Corporation"), dated June
                    14, 1991. (VI)                                                                                           *
       10(13)       Employment Agreement among Receivables Management Corp. (Renamed AISCorp.), the Registrant and
                    Stephen G. Sullivan, dated as of June 14, 1991. (VI)                                                     *
       10(14)       Option Registration Rights Agreement by and Between the Registrant and Stephen G. Sullivan, dated
                    June 14, 1991. (IV)                                                                                      *
       10(15)       Employment Contract between the Registrant and S.M. Caravetta. (VII)                                     *
       10(16)       Employment Contract between the Registrant and James A. Pesce. (VII)                                     *
       10(17)       Agreement and Plan of Merger with Exhibits by and among the Registrant, Vanco Business Management,
                    Inc. and David K. Vanco, dated as of December 31, 1992. (VIII)                                           *
       10(18)       Employment Agreement, dated as of January 1, 1993, between Management-Data Service, Inc., the
                    Registrant and David K. Vanco. (VIII)                                                                    *
       10(19)       Registration Rights Agreement between David K. Vanco and the Registrant, dated as of December 31,
                    1992. (VIII)                                                                                             *
       10(20)       Guaranty dated March 5, 1993, given by the Registrant to Harris Bank Roselle relating to loans to
                    David K. Vanco. (VIII)                                                                                   *
       10(21)       Letter agreement between David K. Vanco and the Registrant, dated March 5, 1993, relating to the
                    guaranty of notes, from David K. Vanco to Harris Bank Roselle. (VIII)                                    *
       10(22)       Agreement of Merger with ACT/PC, dated September 15, 1993, amended November 12, 1993. (X)
                                                                                                                             *
       10(23)       Term Loan Agreement, dated as of December 13, 1993, between Stephen G. Sullivan and Registrant. (X)
                                                                                                                             *
       10(24)       Guarantee Modification Agreement, dated as of December 13, 1993, between Stephen G. Sullivan and
                    the Registrant. (X)                                                                                      *
       10(25)       Escrow Agreement, dated as of December 13, 1993, between Stephen G. Sullivan, Registrant and Crummy
                    Del Deo Dolan Griffinger & Vecchione. (X)                                                                *
       10(26)       Termination Agreement relating to the Baxter Distribution/Sales Representation Agreement, dated
                    December 17, 1993. (X)                                                                                   *
       10(27)       Amendment to Agreement and Plan of Merger between the Registrant and Management-Data Services,
                    Inc., dated April 8, 1994. (XI)                                                                          *
       10(28)       Amendment to Employment Agreement between David K. Vanco and the Registrant, dated April 8, 1994.
                    (XI)                                                                                                     *
       10(29)       Employment Agreement, dated as of October 12, 1994, between the Registrant and Graham O. King. (XII)
                                                                                                                             *
       10(30)       Option Agreement, dated as of October 12, 1994, between the Registrant and Graham O. King. (XII)
                                                                                                                             *
       10(31)       Registration Agreement, dated as of October 12, 1994, between the Registrant and Graham O. King.
                    (XII)                                                                                                    *
       10(32)       Stockholder Agreement, dated as of October 12, 1994, between the Registrant and Graham O. King.
                    (XII)                                                                                                    *
       10(33)       S.M. Caravetta Termination Agreement between S.M. Caravetta and the Registrant, dated as of October
                    12, 1994, as amended. (XIII)                                                                             *
       10(34)       Letter of Intent, dated June 26, 1995, between the Registrant and Frontenac VI Limited Partnership.
                    (XIV)                                                                                                    *
       10(35)       Registrant's Amended 1993 Stock Option Plan. (XIV)                                                       *
       10(36)       Registrant's Amended 1994 Stock Option Plan for Non-Employee Directors. (XIV)                            *
       10(37)       Series A Convertible Preferred Stock and Warrant Purchase Agreement, dated July 18, 1995, by and
                    among the Registrant, a trust established for the benefit of descendants of Robert E. King,
                    Frontenac VI Limited Partnership and Morgan Holland Fund II, L.P. (XV)                                   *
       10(38)       Promissory Note of Graham O. King, dated June 14, 1995, payable to the Company. (XVI)                    *
       10(39)       First and Second Amendments to Series A Convertible Preferred Stock and Warrant Purchase Agreements
                    dated July 31, 1995 and October 10, 1995, respectively. (XVII)                                           *
       10(40)       Registration Agreement, dated October 12, 1995, by and among the Registrant, a trust established
                    for the benefit of the descendants of Robert E. King, Frontenac VI Limited Partnership and Morgan
                    Holland Fund II, L.P. (XV)                                                                               *
       10(41)       Agreement for Administrative Services, dated December 21, 1995, between New York Health and
                    Hospitals Corporation and the Registrant. (XVIII)                                                        *
       10(42)       Series B Convertible Preferred Stock Purchase Agreement among US Servis, Inc., and the Purchasers
                    named on Schedule 1 thereto, dated as of September 30, 1996. (XIX)                                       *
       10(43)       First Amendment to Registration Rights Agreement among US Servis, Inc. and the Purchasers signatory
                    thereto, dated September 30, 1996. (XIX)                                                                 *
       10(44)       Agreement for Services, dated December 31, 1996, between University Physician Associates and the
                    Registrant. (XX)                                                                                         *


                                                NOTES TO EXHIBIT INDEX

      Note No.                                          Description
         (I)        Incorporated  by reference  from the Form S-18  Registration
                    Statement of the Registrant, dated June 10, 1986.
        (II)        Incorporated by reference from Amendment No. 1, dated September 6, 1986, to the Form
                    S-18 Registration Statement of the Registration.
        (III)       Incorporated by reference from the Registrant's  Form 10-K, dated
                    June 18, 1990. (IV) Incorporated by reference from the Registrant's Form
                    8-K, dated October 1, 1990.
         (V)        Incorporated by reference from the Registrant's Form S-3, Registration No. 33-39062,
                    dated April 11, 1991.
        (VI)        Incorporated  by reference from the  Registrant's  Form 8-K, dated
                    June 18, 1991.  (VII)  Incorporated  by reference from the  Registrant's
                    Form 10-K, dated June 28, 1991.
       (VIII)       Incorporated by reference from the  Registrant's  Form 8-K, dated
                    March 9, 1993.
        (IX)        Incorporated by reference from the Registrant's Form
                    8-K, dated September 15, 1993.
         (X)        Incorporated  by reference from the  Registrant's  Form 8-K, dated
                    December 28, 1993. 
        (XI)        Incorporated by reference from the Registrant's
                    Form 8-K, dated April 15, 1994. 
        (XII)       Incorporated by reference from the
                    Registrant's Form 8-K, dated November 1, 1994.
       (XIII)       Incorporated by reference from the Registrant's  Form 10-Q, dated
                    November 11, 1994. 
        (XIV)       Incorporated by reference from the Registrant's
                    Form 10-K, dated June 26, 1995.
        (XV)        Incorporated by reference from the
                    Registrant's  Form 10-K/A,  dated July 24, 1995. 
        (XVI)       Incorporated by
                    reference from the Registrant's Form 10-Q, dated August 10, 1995.
       (XVII)       Incorporated by reference from the Registrant's  Form 10-Q, dated
                    November  10,  1995.  
       (XVIII)      Incorporated   by  reference   from  the
                    Registrant's Form 10-Q, dated August 13, 1996.
        (XIX)       Incorporated by reference from the  Registrant's  Form 8-K, dated
                    September 30, 1996. 
         (XX)       Incorporated by reference from the Registrant's
                    Form 10-Q, dated February 12, 1997 as amended June 17, 1997.


</TABLE>