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                                      FORM 10-K
                                     UNITED STATES
                           SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549
(Mark One) 

     /x/  Annual report pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934 for the fiscal year ended March 31, 1998.

     / /  Transition report pursuant to Section 13 or 15(d) of the
          Securities Exchange Act of 1934 for the transition period from
                             to                    .
          ------------------     ------------------

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
     of incorporation or organization)                      Identification No.)

                     220 DAVIDSON AVENUE, SOMERSET, NEW JERSEY 08873
                       (Address and telephone number of the of the
                         registrant's principal executive office)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (732) 764-9898

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK,
                                                          $.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 definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K.   [    ]

     At June 19, 1998, the aggregate market value of the voting stock of the 
registrant held by non-affiliates was approximately $8.4 million.

     At June 19, 1998, the registrant had 6,355,683 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

     None.

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                               CROSS REFERENCE SHEET
                                        AND
                                 TABLE OF CONTENTS


                                                                  PAGE NUMBER
                                                                  OR REFERENCE


PART I
     Item 1 -- Business. . . . . . . . . . . . . . . . . . . . . . . . .  1
     Item 2 -- Properties. . . . . . . . . . . . . . . . . . . . . . . . 13
     Item 3 -- Legal Proceedings . . . . . . . . . . . . . . . . . . . . 13
     Item 4 -- Submission of Matters to a Vote of Security Holders . . . 13

PART II
     Item 5 -- Market for the Company's Common Equity and Related
          Stockholder Matters. . . . . . . . . . . . . . . . . . . . . . 14
     Item 6 -- Selected Financial Data . . . . . . . . . . . . . . . . . 15
     Item 7 -- Management's Discussion of Financial Results. . . . . . . 16
     Item 8 -- Financial Statements and Schedules. . . . . . . . . . . . 19
     Item 9 -- Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure  . . . . . . . . . . . . . 19

PART III
     Item 10 -- Directors and Executive Officers of the Company. . . . . 20
     Item 11 -- Executive Compensation . . . . . . . . . . . . . . . . . 23
     Item 12 -- Security Ownership of Certain Beneficial Owners and
          Management . . . . . . . . . . . . . . . . . . . . . . . . . . 27
     Item 13 -- Certain Relationships and Related Transactions . . . . . 28

PART IV
     Item 14 - Exhibits, Financial Statement Schedules and Reports
          on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . 29

<PAGE>


                                        PART I

                                  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 major northern New Jersey 
physician faculty practice plan and its service center in Denver, Colorado, 
where the Company manages 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.

KEY DEVELOPMENTS IN FISCAL 1998

     Key developments during Fiscal 1998 include:

     (a)  RETURN TO PROFITABILITY   For Fiscal 1998, net income was $728,000 as
          compared to a net loss of $3,039,000 for the prior fiscal year.  See
          "Item 7-- Management's Discussion of Financial Results" for a more
          complete discussion of the financial performance of the Company for
          Fiscal 1998.

<PAGE>

     (b)  RESOLUTION OF ALL ISSUES WITH METROPLUS  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, was the Company's only HMO client.  During Fiscal
          1998, the Company filed suit to enjoin MetroPlus from terminating its
          contract in violation of its terms and for payment under the contract.
          In November, 1997, this lawsuit, together with a related lawsuit by a
          subcontractor  of the Company, was completely resolved.  MetroPlus
          agreed to pay the Company  all sums due under the contract and the
          parties agreed to a termination of the contract between them as of
          February 28, 1998.  Since the date of settlement, all litigation
          relating to the MetroPlus dispute has been dismissed, the Company has
          completed all tasks for MetroPlus under its contract and made all
          necessary payments under its subcontracts, and MetroPlus has made all
          necessary payments to the Company.  During Fiscal 1998, MetroPlus
          accounted for 19.4% of the Company's revenues.

INDUSTRY OVERVIEW 

     The United States Healthcare Financing Administration ("HCFA") estimated 
healthcare expenditures in the United States for 1996 at $1 trillion, 
representing 14% of the Gross Domestic Product ("GDP"), an increase from $700 
billion, or 12% of GDP, in 1990.  In 1996, expenditures for hospital care 
totaled $359 billion and expenditures for physician services were $202 
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 the American Hospital Association, between 1980 and 
1996, the number of hospital admissions declined by 14% while the number of 
hospital outpatient visits increased from 263 million to 505 million.  

     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. 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 

                                       - 2 -

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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 362,000 hospital 
based physicians 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 300,000 primary care physicians 
practicing in the United States.

     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 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 convert 
their accounts receivables to cash. Management believes that the trend 
towards more outpatient activity 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 into managing other areas of the business office, such as 
registration and billing and accounts receivable management for inpatients.

                                       - 3 -

<PAGE>

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.  

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 United 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 broad scale 
proposals by the Clinton Administration to reduce the rate of increase in 
Federally sponsored healthcare insurance programs were not passed during the 
1996

                                       - 4 -


<PAGE>

legislative year, certain legislative changes were made during the 1997 
legislative year and additional legislation appears likely.  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.  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 provides billing, accounts receivable management, 
information systems, and other business management services to approximately 
3,400 physicians.  The Company's Fiscal 1998 revenues associated with these 
services were $12.1 million.  These services are provided by Company 
personnel working at business service centers located in central and southern 
New Jersey, suburban Chicago, Illinois and Denver, Colorado.  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 and expertise in critical areas, such as the use of 
management information systems, billing, accounts receivable and practice 
management, 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.

                                       - 5 -

<PAGE>

     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 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 Fiscal 1998 
revenues attributed to hospital and ambulatory billing and accounts 
receivable management were $7.5 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 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, 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 1998, the Company's development and management of the CBO 
activities of the physician networks represented approximately 25.2% ($7.0 
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

                                       - 6 -

<PAGE>


of the "old accounts receivable".  The Company believes that these 
implementation services will be an increasingly important part of its 
revenues.

     Company management expects that its strategic alliance with IDX Systems 
Corporation ("IDX") will be beneficial to the Company in the physician 
network market.  It is the understanding of Company management that IDX 
software is favored by many 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 1998, billing and 
accounts receivable services provided to hospital based physicians 
represented 12.7% ($3.5 million) of the Company's revenues.

     The Company also provides outsourced billing and accounts receivable 
management services to hospitals.  This service represented 27.0% ($7.5 
million) of the Company's Fiscal 1998 revenues.  Outsourced billing and 
accounts receivable 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, 
Infinity and Infinity X.  During Fiscal 1998, these activities including 
related equipment sales and licenses, represented approximately $4.0 million 
of the Company's revenues.

     Following the Company's dispute with MetroPlus, it has discontinued 
pursuing business from HMOs and other prepaid health programs.  In Fiscal 
1998, revenues from the Company's contract with MetroPlus were $5.4 million, 
19.4% of total 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 

                                       - 7 -


<PAGE>

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 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 systems, known as Infinity and 
Infinity X, or practice management systems developed by others.

     The Company's "Infinity" 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, a goal of the 
Company is to become an "expert user" of certain IDX practice management 
systems.  IDX offers several comprehensive practice management systems.  IDX 
systems are installed in nearly 1,000 locations. 

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

                                       - 8 -

<PAGE>

     OPMS/Alliant 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. OPMS/Alliant 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. System 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 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.

     Infinity and Infinity X are not currently year 2000 compliant.  
Management has estimated that the costs associated with making them year 2000 
compliant are approximately $350,000.  OPMS/Alliant is also not year 2000 
compliant.  The Company has no present plans for making OPMS/Alliant year 
2000 compliant.  It is currently considering alternatives for OPMS/Alliant 
which will be year 2000 compliant.

FISCAL 1998 FINANCIAL INFORMATION

     During Fiscal 1998, business management services provided to hospitals, 
physicians and managed care organizations represented approximately 84.8% 
($23.4 million) of revenues.  Approximately $10.5 million of these revenues 
were derived from physicians; $7.5 million were attributed to the Company's 
hospital client base and $5.4 million related to the Company's managed care 
client.

     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.  During Fiscal 1998, the Company had seven 
major physician group clients.

     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 1998, the Company had five major hospital clients.

     During Fiscal 1998, revenues associated with remote computing services 
represented approximately 6.4% ($1.8 million) of the Company's revenues.  The 
Company has two major hospital remote computing service clients with 
contracts through July 31, 1998 and June 30, 1999, respectively.  Remote 
computing services to these two clients represented substantially all of the 
Company's Fiscal 1998 remote computing service revenue.

     Approximately 2.2% ($0.6 million) of the Company's Fiscal 1998 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.

                                       - 9 -


<PAGE>

     The remaining 6.5% of revenues ($1.8 million) in Fiscal 1998 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 19.4% of the 
Company's total Fiscal 1998 revenues.  The contract with MetroPlus has been 
terminated as of February 28, 1998.  As a result, there will be no revenue 
from MetroPlus in Fiscal 1999.  The University of Medicine and Dentistry of 
New Jersey ("UMD"), represented 9.4% of Fiscal 1998 revenues and University 
Physician Associates, the faculty practice plan associated with UMD, located 
in Newark, New Jersey, represented 9.6% of Fiscal 1998 revenues.  Other 
clients, the Hospital for Special Surgery, located in New York City, and the 
Mount Sinai Medical Practice Group, Elmhurst, New York, represented 7.0% and 
6.4%, respectively, of the Company's 1998 revenues.  No other single customer 
represented more than 5.0% of 1998 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 internal sales efforts that build 
on the Company's strategic business alliances to create a network of regional 
client service centers from which high quality, cost effective, business 
management services can be 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

                                       - 10 -

<PAGE>

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 southern and 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 
practices 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. National Data Corporation, a company headquartered in 
Atlanta, Georgia, 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, 
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 primarily competes with the "in-house alternative" 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

                                       - 11 -


<PAGE>

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, National Data Corporation 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 has historically stressed 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 organization, 
most of the activities associated with the hospital contract management 
business and parts of the physician business management business services 
business.  In June, 1998, the Company leased an additional 5,725 square feet 
of office space at its main facility to accommodate new client business.  
Approximately 57% of the Company's employees are located at the Somerset 
facility.  The remaining 43% 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 15, 1998, the Company employed 381 persons.

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

                                       - 12 -

<PAGE>


                                 ITEM 2 -- PROPERTIES

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

     The Somerset facility contains approximately 36,000 square feet and is 
occupied under a lease that expires December 31, 2003.  The Elmhurst, 
Illinois facility serves as the primary location for the Company's 
hospital-based physician activities.  It includes approximately 13,000 square 
feet and is occupied under leases that expire September 30, 1998 and July 31, 
1999.

     The following table sets forth the minimum future lease payments on 
Somerset, New Jersey and Elmhurst, Illinois facilities as of March 31, 1998:

<TABLE>
<CAPTION>
                   Year Ending March 31,    Minimum Lease Payments
                   --------------------     ----------------------
                   <S>                      <C>
                          1999                    $752,000
                          2000                     647,000
                          2001                     601,000
                          2002                     602,000
                          2003                     610,000
                          2004                     457,000
                                                 ---------
                         Total                   3,669,000

</TABLE>

     Net rental expenses for office space were $787,000 in Fiscal 1998.

                             ITEM 3 -- LEGAL PROCEEDINGS

     The Company filed suit 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 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 has been completed in 
this lawsuit and the Company expects this case to come to trial in Fiscal 
1999.  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 1998.


                                       - 13 - 

<PAGE>


                                       PART II

   ITEM 5 -- MARKET FOR THE COMPANY'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 6,371,383 shares were issued and 
6,355,683 shares were outstanding as of June 19, 1998; 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", all of which were issued and outstanding as of June 19, 1998.

     The Common Stock is listed on the NASDAQ National Market System under 
the symbol USRV.  There is no public market for the Company's Series A or 
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 19, 1998, the 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 seven holders of record.  

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

<TABLE>
<CAPTION>
                                     Closing Sales Prices
                                     --------------------
                                       High         Low
                                       ----         ---
   <S>                                <C>          <C>
   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                   3.125        1.500
        2nd Quarter                   2.000        0.938
        3rd Quarter                   2.875        1.063
        4th Quarter                   2.188        1.375

   Year Ended March 31, 1999
   -------------------------
        1st Quarter (1)               2.250        1.250
</TABLE>

(1)  Through June 19, 1998


                                       - 14 - 

<PAGE>


     The Company has never paid dividends on the 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 Common Stock in the foreseeable future.

                          ITEM 6 -- SELECTED FINANCIAL DATA 

                    (Amounts in thousands, except per share data)

     The following selected financial data for the five years ending March 
31, 1998 have been derived from the financial statements which have been 
audited by Wiss & Company, LLP, independent auditors.  The following 
information should be read in conjunction with the Financial Statements of 
the Company, and the related notes thereto, and "Item 7 -- Management's 
Discussion of Financial Results" included in this Report.

<TABLE>
<CAPTION>

                                        OPERATION STATEMENT DATA (1)
                                        FOR THE YEAR ENDED MARCH 31,


                               1998         1997         1996         1995          1994
                              ------       ------       ------       ------        ------
<S>                           <C>          <C>          <C>          <C>           <C>
 Revenue                      $27,607      $22,009      $16,245      $15,953       $21,262
 Net Income (Loss)                728       (3,039)      (3,906)      (8,052) (2)   (1,192)
 Net Income (Loss)
 per share of common stock      ($.03)       ($.59)       ($.66)      ($1.34)        ($.21)
 Adjusted Weighted
 Average Shares
 Outstanding                    6,351        6,308        6,282        6,023         5,813
</TABLE>

(1) In thousands except per share data
(2) Includes $6.8 million of pre-tax expenses associated with 1995 restructuring


<TABLE>
<CAPTION>
                                        BALANCE SHEET DATA (1)
                                     FOR THE YEAR ENDED MARCH 31,

                               1998        1997        1996        1995        1994
<S>                            <C>         <C>         <C>         <C>         <C>
Total Assets                   $19,864     $20,739     $19,053     $16,906     $21,878
Working Capital                 10,505       9,512       9,447       7,151      11,358
Long-Term Liabilities              196         369       1,172       1,770         976
Redeemable Preferred Stock           0           0       6,110           0           0
</TABLE>

(1) In thousands


                                       - 15 - 

<PAGE>



                ITEM 7 -- MANAGEMENT'S DISCUSSION OF FINANCIAL RESULTS

GENERAL

     For the year ended March 31, 1998, the Company reported net income of 
$728,000.  This represents the first time since the year ended March 31, 1993 
that the Company's net income has been positive for the year.  This 
improvement was primarily the result of net contribution margin associated 
with new business and the $1.3 million reduction in selling, general and 
administrative expenses. However, as a result of the settlement of the 
litigation with MetroPlus, the MetroPlus contract was terminated February 28, 
1998 and the Company will derive no revenue from MetroPlus for Fiscal 1999.  
In 1998, the Company's MetroPlus contract represented $5.4 million or 19.4% 
of total revenue.

LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>

                            LIQUIDITY AND CAPITAL RESOURCES
                                              1998             1997
                                              ----             ----
<S>                                       <C>               <C>
           Current Assets                 $13,883,000       $14,721,000
           Current Liabilities              3,378,000         5,209,000
           Working Capital                 10,505,000         9,512,000
           Working Capital Ratio to 1             4.1               2.8

</TABLE>

     For the year ended March 31, 1998, the Company's Working Capital 
increased $993,000.  The major components of this increase were net income of 
$728,000 and the loan impairment charge of $394,000, which were partially 
offset by the reduction in long-term accrued restructuring charges of 
$173,000.

     For the year ended March 31, 1998, the Company's Cash and Cash 
Equivalents decreased $3,211,000.  The major components of this decrease were 
increases in net accounts receivable of $1,853,000 (billed) and $770,000 
(unbilled), decreases in Accounts Payable, Accrued Payroll and Benefits, and 
the current portion of Accrued Restructuring Charges of $666,000, $177,000 
and $407,000, respectively, and a net decrease of $291,000 resulting from the 
net change in all other current assets and liabilities except Cash and Cash 
Equivalents. Partially, offsetting these items was the $993,000 increase in 
Working Capital described above.  All of the increase in accounts receivable 
billed and unbilled related to increases at University Physician Associates 
and other new clients acquired during Fiscal 1998.  A majority of the 
decrease in Accounts Payable resulted from the payment and/or settlement of 
the amount due to MetroPlus subcontractors at March 31, 1997.

     Management expects that available cash and cash flow will be sufficient 
to meet the Company's operating and capital requirements during Fiscal 1999.

YEAR 2000 COMPLIANCE 

     The principal information systems used by the Company to support its 
business management services are Infinity and Infinity X and OPMS/Alliant. 
Infinity and Infinity X are not currently year 2000 compliant.  Management 
has estimated that the costs associated with making them year 2000



                                       - 16 - 

<PAGE>


compliant are approximately $350,000.  This work is presently under way. 
OPMS/Alliant is not year 2000 compliant.  Rather than make OPMS/Alliant Year 
2000 compliant, the Company is currently examining alternatives for 
OPMS/Alliant.  Although the Company believes that year 2000 compliance will 
not have a material adverse effect, the Company is uncertain as to the extent 
its customers and suppliers may be affected by year 2000 issues.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>

                                        Percent of                Percent of                Percent of
                              1998       Revenues       1997       Revenues       1996       Revenues
<S>                           <C>       <C>             <C>       <C>             <C>       <C>
Revenues:
     Service fees             $26,645     96.5%        $21,001      95.4%         $15,325       94.3%
     Software license fees        676      2.5             470       2.1              409        2.5
     Sales of equipment            33      0.1             169        .8              306        1.9
     Interest and other           253      0.9             369       1.7              205        1.3
                              -------    -----         -------     -----         --------      -----                              
     Total revenues            27,607    100.0          22,009     100.0           16,245      100.0
                              -------    -----         -------     -----         --------      -----                              
                              -------    -----         -------     -----         --------      -----                              
Expenses:
     Cost of services          18,947     68.6          15,232      69.2           11,116       68.4
     Cost of equipment sales       11       -               96        .4              166        1.0
     Research and development   1,478      5.4           1,872       8.5            2,466       15.2
     Selling, general and
       administrative           5,885     21.3           7,246      32.9            8,159       50.2
     Interest                      99      0.4             166        .8              114        0.7
     Restructuring charges        -         -              -          -              (590)      -3.6
     Loan Impairment Charge       394      1.4             436       2.0
                              -------    -----         -------     -----         --------      -----                              
     Total expenses            26,814     97.1          25,048     113.8           21,431      131.9
                              -------    -----         -------     -----         --------      -----                              
                              -------    -----         -------     -----         --------      -----                              
Loss before income taxes          793      2.9          (3,039)    -13.8           (5,186)     -31.9
Income tax (tax ) benefit         (65)    -0.3             -          -             1,280        7.9
                              -------    -----         -------     -----         --------      -----                              
Net income (loss)                 728      2.6%         (3,039)    -13.8%          (3,906)     -24.0%
                              -------    -----         -------     -----         --------      -----                              
                              -------    -----         -------     -----         --------      -----                              
</TABLE>


FISCAL 1998 COMPARED TO FISCAL 1997

     REVENUE.  During 1998, total revenues increased approximately $5.6 
million or 25.4% over 1997 levels to $27.6 million.  In 1998, the Company's 
MetroPlus contract represented $5.4 million or 19.4% of total revenues.  As 
part of the litigation settlement with MetroPlus, the contract was terminated 
February 28, 1998.  Service fees, which represented over 96% of the Company's 
1998 revenues, increased $5.6 million (26.9%) to $26.6 million.  This 
increase resulted from $3.8 million


                                       - 17 - 

<PAGE>


of additional services associated with physicians (including $2.5 million 
from University Physician Associates ("UPA"), $1.4 million of additional 
service fee revenue from hospital accounts, $0.7 million of increased revenue 
associated with the Company's contract to provide third party and 
administrative services to MetroPlus and a decrease of $0.3 million in 
service fees associated with discontinued products.

     Other revenues, including software licenses, sales of equipment, and 
interest and other decreased $46,000 or 4.6%.

     EXPENSES.  Fiscal 1998 total expenses increased $1.8 million or 7.1%.  
The increase in Cost of Services of $3.7 million was directly related to the 
addition of new business.  This increase was partially offset by decreases 
from Fiscal 1997 of $394,000 or 21.0% in research and development, and 
$1,361,000 or 18.8% in selling, general and administrative expense and other 
net decreases of $194,000 or 27.8%.  Decreases in research and development 
expense related to the phase-out of the clinical information systems business 
and a decision not to continue making enhancements to the Company's 
proprietary hospital billing and accounts receivable system.  The decrease in 
selling general and administrative expense related to the restructuring of 
the Company's sales and marketing organization and lower corporate overhead 
costs.

     During Fiscal 1998, the Company recorded a $394,000 loan impairment 
charge to reflect the amount by which the value of 252,557 shares of Common 
Stock held as security for a loan made in connection with an acquisition in 
1991, declined between March 31, 1997 and March 31, 1998.  If and to the 
extent that the closing stock price at the end of any subsequent quarter is 
greater than $1.562, there will be a reversal of this charge and charges made 
in the prior fiscal year.

     NET INCOME.  The Company's $728,000 net income in Fiscal 1998 was 
compared to the net loss reported for Fiscal 1997 of $3.0 million.  This 
improvement was primarily the result of the net contribution margin 
associated with new business and the $1.3 million reduction in selling, 
general and administrative expenses.

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 (37.3%) 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, 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



                                       - 18 - 

<PAGE>


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 recorded a $436,000 loan impairment 
charge to reflect the amount by which the value of 252,557 shares of 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 $3.0 million 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.

                     ITEM 8 -- FINANCIAL STATEMENTS AND SCHEDULES

     Information required by this Item is set forth at the pages indicated in 
Item 14(a) below.

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

     None.



                                       - 19 - 

<PAGE>


              ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The table and summary below sets forth certain information with respect 
to the directors and executive officers of the Company.  Executive officers 
of the Company, for purposes of Section 16 of the Securities Exchange Act of 
1934, are marked with an asterisk.  A Board of Directors consisting of eight 
individuals was elected at the August 20, 1997 Annual Meeting to serve until 
the next annual meeting or until successors are elected and qualified.  Mr. 
Cowie has been nominated and elected by the holders of a majority of the 
Series A Convertible Preferred Shares ("Series A Shares") pursuant to the 
terms of the Certificate of Designation for the Series A Shares.  The 
Certificate of Designation authorizing the Series B Convertible Preferred 
Shares ("Series B Shares") provides that so long as (i) at least 200,000 
Series B Shares are outstanding and Frontenac VI Limited Partnership 
("Frontenac VI") owns not less than a majority of such shares and (ii) the 
holders of the Series A Shares are not eligible to elect a director pursuant 
to the Certificate of Designation authorizing the Series A Shares, the 
holders of the Series B Shares shall have the right to elect one director of 
the Company.  The remaining directors are elected by a plurality of the votes 
cast in any election.

<TABLE>
<CAPTION>

                  Name                  Age            Position
                 ------                -----          ----------
             <S>                        <C>            <C>
             Graham O. King*            58             Chairman of the Board and
                                                       Chief Executive Officer

             James A. Pesce*            55             President and Director

             Derek A. Pickell           37             Vice President, Business
                                                       Development

             Robert E. Van Metre*       57             Secretary, Treasurer and Vice
                                                       President, Accounting and
                                                       Finance

             S. M. Caravetta            72             Vice Chairman of the Board

             Frederick R. Blume         56             Director

             Robert C. Bowers           52             Director

             James E. Cowie             43             Director

             Stanford J. Goldblatt      59             Director

             Robert E. King             62             Director

</TABLE>

     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


                                       - 20 - 

<PAGE>


director for ADAC Laboratories, Inc. and Optika Imaging, Inc.  Mr. King and 
Mr. Robert E. King, another director of the Company, are brothers.

     JAMES A. PESCE has served as the President of the Company and been a 
director of the Company since 1982.  Mr. Pesce has 32 years of experience in 
the healthcare information systems industry.  Currently, Mr. Pesce is 
responsible for all of the Company's hospital operations, development, data 
center and customer support activities.  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.

     DEREK A. PICKELL has served as Vice President, Business Development 
since joining the US Servis Management Team in March 1995.  Mr. Pickell has 
15 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, a  provider of electronic data interchange to the 
healthcare industry.  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, a healthcare 
information services company.

     ROBERT E. VAN METRE has served as Secretary and Vice President, 
Accounting and Finance since 1995 and Treasurer since August, 1997.  Mr. Van 
Metre has over 22 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.

     S. M. CARAVETTA was the Chairman of the Board of Directors and Chief 
Executive Officer of the Company 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 is co-founder and manager of CB Health Ventures, a 
medically-focused venture capital fund.  Prior to forming CB Health Ventures, 
he was the founder and managing partner of Capital Health Venture Partners, 
also a medically-focused VC fund.  Mr. Blume is an adjunct Professor at the 
Boston College Carroll School of Management.

     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).


                                       - 21 - 

<PAGE>


     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 Winston & Strawn, counsel to 
the Company, since August 1997. Prior to joining Winston & Strawn, Mr. 
Goldblatt had been a partner with the law firm of Hopkins & Sutter since 1979.

     ROBERT E. KING has been a director of the Company since April 20, 1995. 
Since 1994, he has been Chairman of Salt Creek Ventures, a private equity 
firm. From 1983 through 1994, Mr. King was Chairman and Chief Executive 
Officer of The Newtrend Group, a software company and computer services 
company.  He was President and Chief Executive Officer of DELTAK, inc., a 
video publisher, from 1971 to 1982.  He is also a Director of DeVry, Inc., 
COLLEGIS, Inc., American Floral Services, Inc., and Premier Systems 
Integrators, Inc.  Mr. King and Mr. Graham O. King are brothers.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the 
Company's directors,  executive officers and persons who own beneficially 
more than ten percent of a registered class of the Company's equity 
securities to file with the Securities and Exchange Commission ("SEC") 
initial reports of ownership and reports of changes in ownership of such 
securities of the Company.  Directors, executive officers and greater than 
ten percent stockholders are required by SEC regulations to furnish the 
Company with copies of all Section 16(a) reports they file.

     To the Company's knowledge, based solely on a review of the copies of 
such reports furnished to the Company and representations that no other 
reports were required, except as set forth in the following sentence, all 
Section 16(a) filing requirements applicable to its directors,  executive 
officers and greater than ten percent beneficial owners were complied with 
during Fiscal 1998.



                                       - 22 - 

<PAGE>


                           ITEM 11 -- EXECUTIVE COMPENSATION

     The following table summarizes the annual and long-term compensation of 
certain of the Company's executive officers for Fiscal 1998, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                          Long-Term
                                                                             Comp.
                                                                            Options
                                                                           (Shares)
                                                                          ----------
                                          Annual Compensation             Securities
                                          -------------------             Underlying         All Other
       Name/Position             Year         Salary       Bonus (1)        Options (2)           Comp.
       -------------             ----         ------       --------       ----------         ---------
<S>                              <C>          <C>          <C>            <C>                <C>
       Graham O. King            1998          $265,738     $ 28,495          --             $ 7,307 (4)
         Chairman and CEO (3)    1997           239,000      120,000          --               7,307 (4)
                                 1996           239,000      105,000          --               3,756 (4)

       James A. Pesce            1998           195,318       17,723       125,000           $ 2,613 (5)
         President               1997           189,000       50,000        17,000            10,798 (5)
                                 1996           189,000       30,000          --              10,798 (5)

       Michael B. Loscalzo       1998            66,635        8,899          --              14,808 (7)
         Treasurer and Vice      1997           175,000       50,000        35,000              --
         President (6)           1996           175,000       37,500        10,000              --

       Robert E. Van Metre       1998           145,654       12,000       100,000              --
         Secretary, Treasurer    1997           130,000       40,000          --                --
         and Vice President,     1996           100,000       22,500        50,000              --
         Accounting and
         Finance (8)

</TABLE>

(1) Includes amounts paid in subsequent  fiscal year applicable to previous 
fiscal year.

(2) On July 23, 1997, the Board of Directors of the Company completed a 
restructuring of the management compensation program of the Company in order 
to retain key employees and to provide appropriate employee incentives.  As 
part of the compensation adjustment, all outstanding options for present 
employees were repriced to the then current market price ($1.3125) and 
certain senior level management and other key employees were granted 
additional options, not in excess of normal grants.  To induce the Board of 
Directors of the Company to approve the restructuring plan, Mr. King 
voluntarily agreed to cancel options to purchase 200,000 shares of the 
Company's Common Stock under his non-qualified option agreement.  On October 
30, 1997, to correct an alleged technical difficulty in the July 23, 1997 
repricing of stock options, all present employee options issued under the 
1986 and 1993 plans were canceled and reissued under the 1993 plan with no 
changes in any provisions.  On July 23, 1997, Messrs. King, Pesce and Van 
Metre had options for 800,000, 150,000 and 50,000 shares, respectively, 
repriced at $1.3125 and on October 30, 1997, the options issued to Messrs. 
Pesce and Van Metre were canceled and reissued at $1.3125 for the same number 
of shares.

(3) See "-- Discussion of 1998 Executive Officer Compensation and Employment
Contracts."

(4) Represents the premium on term life and disability insurance maintained for
Mr. King by the Company.

(5) $9,600 represents an automobile allowance for 1997 and 1996, with the
balance representing premiums on term life insurance maintained by the 
Company. The Company has agreed that if Mr. Pesce dies while employed by the
Company, the Company shall pay to his irrevocably designated beneficiary
$100,000 per annum for a period of ten (10) years thereafter, payable in equal
monthly installments, commencing on the first day of the month following 
death.  The Company maintains a term life policy in the face amount of 
$500,000 on the life of Mr. Pesce, which the Company believes when 
considering tax effects will be sufficient to cover this plan.

(6) Mr. Loscalzo joined the Company in 1995 and resigned in August 1997.  From
1993 to 1995, Mr. Loscalzo  was a Senior Vice  President of Cain Brothers &
Company, a New York based health care investment banking firm. Mr. Loscalzo
was a co-founder


                                       - 23 - 

<PAGE>


and, from 1988 to 1992,  Managing Director of The Hunter Group, a health care 
workout firm.  Between 1988 and 1991, he served as either CEO or CFO for 
workout clients in Seattle, Washington; St. Paul, Minnesota; Miami, Florida; 
and San Francisco, California.  Prior to the formation of The Hunter Group,  
Mr. Loscalzo served as Senior Vice President of Finance for a Philadelphia 
teaching hospital. From 1978 to 1985, he was a manager in Arthur Andersen & 
Co.'s  Philadelphia  health care audit practice.

(7) Represents payment for accrued vacation.

(8) Mr. Van Metre was elected Treasurer following the departure of Mr. 
Loscalzo.


DISCUSSION OF 1998 EXECUTIVE OFFICER COMPENSATION AND EMPLOYMENT CONTRACTS

     Mr. Graham O. King joined the Company as Chief Executive Officer on 
October 12, 1994. He became Chairman of the Board of Directors effective 
October 28, 1994.  Mr. King is a party to an employment agreement with the 
Company that has been extended through March 31, 1999.  Unless  either party  
elects not to extend the agreement, it automatically extends for one year 
terms thereafter. Under the agreement, Mr. King's salary can be increased at 
the discretion of the Board of Directors.  Effective October 1, 1997, Mr. 
King's salary was increased to $288,000 per year and his right to receive a 
bonus was eliminated for the remainder of Fiscal 1998.  The agreement 
provides  for one year severance unless there is termination for cause or a 
voluntary resignation without good reason as defined in his employment 
agreement.  Mr. King was issued 300,000 shares of Common Stock in lieu of a 
cash signing bonus.  Mr. King has agreed with the Company not to sell more 
than 33,333 of these shares plus any shortfall from previous fiscal quarters 
in any fiscal quarter during Mr. King's employment. Mr. King was granted 
stock options to acquire 1,000,000  shares of Common Stock at the market 
price ($3.50/share) on the date of the commencement of his employment.  
However, on June 23, 1997, Mr. King agreed to exchange this option for stock 
options to acquire 800,000 shares of Common Stock having an exercise price of 
$1.3125 per share.  Of these options, 400,000  are currently vested, 133,333 
vest on each of July 23, 1998 and July 23, 1998 and the entire 800,000 is 
vested on July 23, 2000.  Alternatively, these stock options vest whenever 
the stock has traded at or above $5.00 on at least 30 of the 40 prior  
business days, or upon a change of control.  Consummation of the Merger will 
immediately vest this option.  These options contain  anti-dilution 
provisions authorizing adjustments under certain circumstances.  Mr. King's 
shares, including those underlying options, are subject to a registration 
rights agreement.  The Company has also agreed to reimburse Mr. King for the 
cost of a term life insurance policy for $1,000,000 on Mr. King's life for 
his benefit.

     On June 14, 1995, the Company agreed to loan Mr. Graham King $157,800 in 
order to allow Mr. King to pay the income taxes due in  connection with a 
portion of the restricted stock he received.  The terms of the note 
evidencing the loan provide that the loan is interest-free until 120 days 
after the Company registers Mr. King's restricted stock for sale, that the 
loan bears interest at a rate equal to the rate of return achieved by the 
Company on its cash reserves plus 1% after such date,  and that the Company 
may demand repayment at any time after the note begins to accrue  interest.  
As of March 31, 1998, the balance of this loan was $40,000.

     Mr. Pesce entered into an employment agreement with the Company 
effective August 1, 1993 which was amended October 9, 1996.  Mr. Pesce's 
employment agreement currently provides for a month to month term and an 
annual salary of $189,000 plus a bonus, if earned, up to $40,000.  The 
employment agreement also provides for a severance payment of sixteen (16) 
months salary upon termination. The Company has agreed that if Mr. Pesce dies 
while  employed by the Company, the Company shall pay to his irrevocably 
designated beneficiary $100,000 per annum for a period


                                       - 24 - 

<PAGE>


of ten (10) years thereafter, payable in equal monthly installments, 
commencing on the first day of the month following  death. The Company 
maintains a term life policy in the face  amount of $500,000 on the life of 
Mr. Pesce, which the Company believes when considering tax effects will be 
sufficient to cover this plan.

     All officers hold office until their successors are duly elected or 
appointed and qualified, or until their earlier resignation or removal. 

                             OPTION GRANTS IN FISCAL 1998

     The following table sets forth certain information with respect to 
options granted in Fiscal 1998 to each named executive officer of the 
Company. 

<TABLE>
<CAPTION>

                                                                                          POTENTIAL REALIZABLE
                                                                                            VALUE AT ASSUMED
                                                                                         ANNUAL RATES OF STOCK
                                                  INDIVIDUAL GRANTS                      PRICE APPRECIATION FOR
                                                                                             OPTION TERM (3)
                                                  -----------------                      ----------------------
                                             Percent of
                                            Total Options
                                               Granted
                               Options      to Employees     Exercise or    Expiration
                              Granted (1)   in Fiscal Year     Base Price      Date (2)        5%($)       10%($)
 Name
 -----                        ----------   --------------    -----------    -----------      -----       ------
<S>                          <C>            <C>              <C>            <C>            <C>          <C>
 Graham O. King (4)  . . . .       --           --                --             --             --          --
 James A. Pesce  . . . . .     125,000        21.8%            $1.3125        7/23/07       $103,178     $261,473
 Michael B. Loscalzo.  .  .       --           --                --             --             --          --
 Robert E. Van Metre . . .     100,000        17.4              1.3125        7/23/07         82,542      209,179
</TABLE>

(1) On July 23, 1997, the Board of Directors of the Company completed a 
restructuring of the management compensation program of the Company in order 
to retain key employees and to provide appropriate employee incentives.  As 
part of the compensation adjustment, all outstanding options for present 
employees were repriced to the then current market price ($1.3125) and 
certain senior level management and other key employees were granted 
additional options, not in excess of normal grants.  To induce the Board of 
Directors of the Company to approve the restructuring plan, Mr. King 
voluntarily agreed to cancel options to purchase 200,000 shares of the 
Company's Common Stock under his non-qualified option agreement.  On October 
30, 1997, to correct an alleged technical difficulty in the July 23, 1997 
repricing of stock options, all present employee options issued under the 
1986 and 1993 plans were canceled and reissued under the 1993 plan with no 
changes in any provisions.  On July 23, 1997, Messrs. King, Pesce and Van 
Metre had options for 800,000, 150,000 and 50,000 shares, respectively, 
repriced at $1.3125 and on October 30, 1997, the options issued to Messrs. 
Pesce and Van Metre were canceled and reissued at $1.3125 for the same number 
of shares.

(2) Options vest as determined at the time of the grant and expire after ten 
years from the date of grant. Vesting is contingent on continuing employment 
with the Company.

(3) Amounts reported in these columns represent amounts that may be realized 
upon exercise of the options immediately prior to the  expiration of their 
term assuming the specified compounded rates of appreciation (5% and 10%) of 
the Common Stock over the term of the options.  These numbers are calculated 
based on rules promulgated by the Securities and Exchange Commission and do 
not reflect the Company's estimate of future stock price increases.  Actual 
gains, if any, on stock option exercises and Common Stock  holdings are 
dependent on the timing of such exercise and the future performance of the 
Common Stock. There can be no assurance that the rates of appreciation 
assumed in this table can be achieved or that the amounts  reflected will be 
received by the individuals.

(4) Issued pursuant to an employment agreement entered into between Mr. King 
and the Company.  See "-- Discussion of 1998 Executive Officer Compensation 
and Employment Contracts."


                                       - 25 -

<PAGE>

                      AGGREGATED OPTION EXERCISES IN FISCAL 1998
                          AND FISCAL YEAR-END OPTION VALUES

     The following table sets forth certain information with respect to options
exercised by the named executive officers in Fiscal 1998 and the number of
options held by each of the named executive officers as of March 31, 1998:


<TABLE>
<CAPTION>
                                                                                                   Value of
                                                                                                  Unexercised
                                                                          Number of              in-the-Money
                                                                    Unexercised Options       Options at Fiscal
                                  Shares                               at Fiscal 1998           1998 Year-End
                                 Acquired                                Year-End (#)                ($)(1)   
                                    on                               ------------------        ---------------
                                 Exercise     Value Realized             Exercisable/            Exercisable/
 Name                               (#)            ($)                    Unexercisable          Unexercisable
 ----                           ----------    --------------         ------------------        ---------------
 <S>                            <C>           <C>                      <C>                     <C>
 Graham O. King  . . . . . .        --              --                 400,000/400,000         $100,000/100,000
 James A. Pesce  . . . . . .        --              --                 136,400/138,600           34,100/ 34,650
 Michael B. Loscalzo . . . .        --              --                        --                      --     
 Robert E. Van Metre.  . . .        --              --                  33,333/116,667            8,333/ 29,167
</TABLE>

(1) The value of options reflects the increase in market value of the  
Company's Common  Stock from the date of grant through March 31, 1998 (when 
the closing price of the Common Stock was $1.5625 per share).  The table 
includes both options that are vested and options that are not vested. Value 
actually realized by the executive officers will depend on the value of the 
Common Stock at the time of exercise.



                                       - 26 - 

<PAGE>


                               ITEM 12 -- SECURITY OWNERSHIP 
                      OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information, as provided by the holders 
to the Company, concerning beneficial ownership of Common Stock as of June 
19, 1998, by (i) all persons known by the Company to be the beneficial owners 
of five percent or more of the issued and outstanding Common Stock, (ii) 
each of the directors and named executive officers and (iii) the directors 
and executive officers of the Company as a group. Except as noted, all 
addresses are 220 Davidson Avenue, 2nd Floor, Somerset, New Jersey 08873.

<TABLE>
<CAPTION>
                                   NO. OF SHARES        PERCENTAGE OF
 NAME OF BENEFICIAL OWNER (1)     BENEFICIALLY OWNED       OWNERSHIP
 <S>                             <C>                    <C>
 S.M. Caravetta (2)                   1,064,028               16.7%

 Frederick R. Blume (3)                 200,821                3.2
 c/o American Healthcare Fund
 122 S. Michigan Ave.
 Chicago, IL 60603

 Graham O. King (4)                     600,000                8.9

 James A. Pesce (5)                     226,400                3.5

 Robert E. Van Metre (6)                 35,333                (11)

 Stanford J. Goldblatt                    --                    --

 Robert E. King (7)                     297,500                4.5

 Robert C. Bowers (8)                    30,000                (11)

 James E. Cowie (9)                   2,557,500               28.7
 c/o Frontenac VI Limited
 Partnership
 135 S. LaSalle Street
 Chicago, IL  60603

 Stephen G. Sullivan (10)               403,116                6.3
 22 Heath Drive
 Bridgewater, NJ  08807

 All Executive Officers and           5,011,582               50.7
 Directors as a Group (9 persons)
</TABLE>

(1) The Company believes that David Vanco, 4 South Piermont Drive, North 
Barrington, IL 60010, owns in excess of 5% (but less than 8%) of the 
outstanding shares of the Common Stock, however, the Company has been unable 
to verify the exact holdings of Mr. Vanco either by filings with the SEC or 
from Mr. Vanco directly.

(2) Includes 116,000 shares of Common Stock owned by the children of Mr. 
Caravetta.  Mr. Caravetta disclaims beneficial ownership of such shares. 
Includes 198,028 shares of Common Stock owned by trusts, of which the 
children of Mr. Caravetta are the beneficiaries and Mr. Stephen J. Feinberg 
and the wife of Mr. Caravetta are trustees.  Mr. Caravetta disclaims 
beneficial ownership of such shares.  Mr. Caravetta may be deemed to be the 
promoter or founder of the Company as such term is defined under the federal 
securities laws.


                                       - 27 - 

<PAGE>


(3) Includes  45,000 shares  issuable upon exercise  of  vested  stock  
options and 125,000  shares  issuable  upon conversion of Series B 
Convertible Preferred Shares. Mr. Blume's "Percentage of Ownership"  is  
calculated assuming  that the  125,000  shares of common  stock issuable upon 
conversion of the Series B Convertible Preferred Stock are issued and 
outstanding.  Does not include options to purchase 20,000 shares which might 
be issued upon exercise of stock options which have not yet vested.

(4) Includes 400,000 shares  issuable  upon  exercise  of vested  stock  
options. Does not include  400,000  shares issuable upon exercise of stock 
options which are not currently  exercisable.  (See  "Discussion  of 1996 
Executive Officer Compensation and Employment Agreements.")

(5) Includes 136,400 shares issuable upon exercise of vested stock options. 
Does not include 138,600 shares which might be issued upon exercise of a 
stock option which has not yet vested.  

(6) Includes 33,333 shares issuable upon exercise of vested stock options. 
Does not include 116,667  shares  which might be issued upon  exercise of a 
stock option which has not yet vested.

(7) Includes 20,500 shares owned by Mr. King's wife and 73,000 shares held in 
trust for the benefit of Mr. King's children.  Mr. King disclaims beneficial 
ownership of all such shares.  Also includes 18,000 shares issued, and 49,000 
shares issuable upon exercise of warrants,  and 125,000 shares  issuable upon 
conversion of Series A Convertible Preferred Shares, all held in trust for 
the benefit of Mr. King's children.  Mr. King disclaims beneficial ownership 
of all such shares. Mr. King's "Percentage of Ownership" is calculated 
assuming that the 174,000  shares of Common Stock issuable  upon  exercise  
of  the  warrants and conversion of the Series A Convertible Preferred Stock 
are issued and outstanding.

(8) Includes  30,000 shares issuable upon exercise of vested stock options.  
Does not include 20,000 shares which might be issued upon exercise of a stock 
option which has not yet vested.  

(9) Shares owned by Frontenac VI Limited Partnership.  Mr. Cowie disclaims 
beneficial  ownership of such shares.  Includes 490,000 shares issuable upon 
exercise of warrants, 1,250,000 shares  issuable upon  conversion of Series A 
Convertible  Preferred Shares and 817,500 shares issuable upon conversion of 
Series B Convertible Preferred Shares. Mr. Cowie's "Percentage of Ownership" 
is calculated assuming that the 2,557.500  shares of Common Stock issuable 
upon exercise of the warrant, conversion of the Series A Convertible 
Preferred Stock and conversion of the Series B  Convertible Preferred Stock 
are  issued and outstanding.

(10) Includes 75,000 shares issuable upon exercise of vested stock options, 
and 559 shares held by Mr. Sullivan's wife.

(11) Amount represents less than 1%.

              ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company has agreed to provide for medical insurance coverage for the 
remainder of Mr. Caravetta's and his wife's life (at her expense following 
his death).

     Mr. Goldblatt, a director of the Company, is a partner in the law firm 
of Winston & Strawn, which has provided, and continues to provide, legal 
services to the Company.  Mr. Goldblatt is also a member of the healthcare 
advisory committee of Frontenac Company, a Delaware general partnership that 
is the general partner of Frontenac VI. Frontenac VI holds equity 
representing approximately 28.7% of the Company.  In addition, Mr. Goldblatt 
is a trustee of a trust established  for the benefit of members of Mr. 
Goldblatt's family, which trust is a limited partner in Frontenac VI. Winston 
& Strawn provides legal services to Frontenac VI, Frontenac Company and  
Robert E. King on a regular basis, although  it has not  provided  legal 
services to  Frontenac VI, Frontenac  Company or Mr. King with regard to any 
transactions with the Company.

     Mr. Cowie, a director of the Company, is a general partner of Frontenac 
Company, which is the general partner of Frontenac VI.

     The Company maintains a directors and officers liability insurance 
policy covering all directors of the Company.


                                       - 28 - 

<PAGE>


                                       PART IV

      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, 1998.



                                       -29-

<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 29, 1998                     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.

/s/ Graham O. King          Chairman of the Board            June 29, 1998
-----------------------
 Graham O. King

/s/ James A. Pesce         President and Director           June 29, 1998
-----------------------
 James A. Pesce

/s/ S. M. Caravetta         Director                         June 29, 1998
-----------------------
 S. M. Caravetta

/s/ Robert E. Van Metre     Principal Accounting Officer     June 29, 1998
-----------------------
 Robert E. Van Metre

/s/ Stanford J. Goldblatt   Director                         June 29, 1998
-------------------------
 Stanford J. Goldblatt

/s/ Robert E. King          Director                         June 29, 1998
-----------------------
 Robert E. King

/s/ Robert C. Bowers        Director                         June 29, 1998
-----------------------
 Robert C. Bowers

/s/ Frederick R. Blume     Director                         June 29, 1998
-----------------------
 Frederick R. Blume

/s/ James E. Cowie         Director                         June 29, 1998
-----------------------
 James E. Cowie



                                     -30-
<PAGE>

<TABLE>
<CAPTION>

                                            

                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS






<S>                                                                                  <C>
         Independent Auditors' Report                                                 F-2

         Financial Statements:

              Consolidated Balance Sheets at March 31, 1998 and 1997                  F-3

              Consolidated Statements of Operations for the Years Ended
                   March 31, 1998, 1997, and 1996                                     F-4

              Consolidated Statements of Changes in Shareholders' Equity for the
                   Years Ended March 31, 1998, 1997, and 1996                         F-5

              Consolidated Statements of Cash Flows for the Years Ended
                   March 31, 1998, 1997, and 1996                                  F-6 to F-7

              Notes to Consolidated Financial Statements                          F-8 to F-19

         Schedules:

              VI - Valuation accounts                                                 F-20


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

                                              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, 1998 and 1997, 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, 1998.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, 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, 1998 and
1997, and the consolidated results of their operations and cash flows for each
of the three years in the period ended March 31, 1998, in conformity with
generally accepted accounting principles.




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



Livingston, New Jersey
June 2, 1998

                                       F-2

<PAGE>

<TABLE>
<CAPTION>
                            US SERVIS, INC. AND SUBSIDIARIES
                                            
                               CONSOLIDATED BALANCE SHEETS
                                                                          March 31,
                                                                 -------------------------
                                     ASSETS                         1998            1997
                                                                 ----------     ----------
<S>                                                              <C>            <C>
 CURRENT ASSETS:
   Cash and equivalents                                          $4,852,000     $8,063,000
   Certificate of deposit                                           382,000        300,000
   Accounts receivable:
     Billed,  less allowance for doubtful accounts of
      $690,000 and $464,000                                       5,985,000      4,092,000
     Unbilled                                                     2,157,000      1,387,000
   Prepaid and refundable income taxes                               14,000         41,000
   Prepaid expenses and other current assets                        493,000        838,000
                                                                 ----------     ----------
     Total Current Assets                                        13,883,000     14,721,000
                                                                 ----------     ----------
 PROPERTY AND EQUIPMENT                                           1,764,000      1,763,000
                                                                 ----------     ----------
 OTHER ASSETS:
   Software technology, purchased and developed, less
    accumulated amortization of $699,000 and $481,000               288,000        322,000
   Goodwill, less accumulated amortization of $485,000
    and $387,000                                                  3,066,000      3,164,000
   Accounts receivable                                              170,000            -
   Other                                                            693,000        769,000
                                                                 ----------     ----------
     Total Other Assets                                           4,217,000      4,255,000
                                                                 ----------     ----------
                                                                $19,864,000    $20,739,000
                                                                 ----------     ----------
                                                                 ----------     ----------
                          LIABILITIES AND SHAREHOLDERS' EQUITY
 CURRENT LIABILITIES:
   Accounts payable                                                $748,000     $1,414,000
   Accrued payroll and benefits                                     838,000      1,015,000
   Current portion of accrued restructuring charges                 289,000        696,000
   Accrued expenses for use of trade name                            62,000         62,000
   Other accrued expenses                                           977,000        995,000
   Capital lease obligation                                             -          263,000
   Deferred income                                                  179,000        439,000
   Other current liabilities                                        285,000        325,000
                                                                 ----------     ----------
     Total Current Liabilities                                    3,378,000      5,209,000
                                                                 ----------     ----------
 LONG-TERM LIABILITIES -
   Accrued restructuring charges - net of current portion           196,000        369,000
                                                                 ----------     ----------
 COMMITMENTS AND CONTINGENCIES
 SHAREHOLDERS' EQUITY:
   Convertible preferred stock $0.01 par value; 10,000,000
    shares authorized; 2,500,000 shares issued (liquidation
    preference $11,802,000)                                          25,000         25,000
   Common stock $.01 par value; 30,000,000 shares authorized;
       6,372,000 and 6,367,000 shares issued                         64,000         64,000
   Capital in excess of par value                                24,872,000     24,865,000
   Retained earnings (deficit)                                   (8,077,000)    (8,805,000)
   Subscription receivable                                         (140,000)      (140,000)
   Note receivable - related party                                 (395,000)      (789,000)
                                                                 ----------     ----------
                                                                 16,349,000     15,220,000
   Less: Treasury stock at cost, 15,700 shares                      (59,000)       (59,000)
                                                                 ----------     ----------
     Total Shareholders' Equity                                  16,290,000     15,161,000
                                                                 ----------     ----------
                                                                $19,864,000    $20,739,000
                                                                 ----------     ----------
                                                                 ----------     ----------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>

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

                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    

                                                                           Year Ended March 31,
                                                                -----------------------------------------
                                                                    1998           1997           1996
                                                                -----------    -----------    -----------
<S>                                                             <C>            <C>            <C>
 REVENUES:
   Service fees                                                 $26,645,000    $21,001,000    $15,325,000
   Software license fees                                            676,000        470,000        409,000
   Sales of equipment                                                33,000        169,000        306,000
   Interest and other                                               253,000        369,000        205,000
                                                                -----------    -----------    -----------
                                                                 27,607,000     22,009,000     16,245,000
                                                                -----------    -----------    -----------
 EXPENSES:
   Cost of services                                              18,947,000     15,232,000     11,116,000
   Cost of equipment sales                                           11,000         96,000        166,000
   Research and development                                       1,478,000      1,872,000      2,466,000
   Selling, general and administrative                            5,885,000      7,246,000      8,159,000
   Interest                                                          99,000        166,000        114,000
   Restructuring gains                                                  -              -         (590,000)
   Loan impairment charge                                           394,000        436,000            -
                                                                -----------    -----------    -----------
                                                                 26,814,000     25,048,000     21,431,000
                                                                -----------    -----------    -----------
 INCOME (LOSS) BEFORE INCOME TAXES                                  793,000     (3,039,000)    (5,186,000)

 FEDERAL AND STATE INCOME (TAX) BENEFIT                             (65,000)           -        1,280,000
                                                                -----------    -----------    -----------
 NET INCOME (LOSS)                                                 $728,000    $(3,039,000)   $(3,906,000)
                                                                -----------    -----------    -----------
                                                                -----------    -----------    -----------
 BASIC AND DILUTED LOSS PER COMMON SHARE                             $(0.03)        $(0.59)        $(0.66)
                                                                -----------    -----------    -----------
                                                                -----------    -----------    -----------

</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>

<TABLE>
<CAPTION>

                                          US SERVIS, INC. AND SUBSIDIARIES
                                                           
                               CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


                                                                                                  
                                                        Preferred Stock               Common Stock           Capital in
                                                     ---------------------         ---------------------      Excess of
                                                     Shares      Par Value         Shares      Par Value      Par Value
                                                   ---------    -----------      ---------     ----------    -----------
<S>                                                <C>          <C>              <C>           <C>           <C>
 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

 YEAR ENDED MARCH 31, 1998:
   Issuance of common stock upon
     exercise of options                                 -              -            5,000            -            7,000
   Fair value adjustment of collateral                   -              -              -              -              -
   Net income                                            -              -              -              -              -
                                                   ---------    -----------      ---------     ----------    -----------
 BALANCE, MARCH 31, 1998                           2,500,000     $   25,000      6,372,000    $    64,000    $24,872,000
                                                   ---------    -----------      ---------     ----------    -----------
                                                   ---------    -----------      ---------     ----------    -----------

                                      F-5
<PAGE>

                                                                  Retained                        Note
                                                    Unearned      Earnings     Subscription   Receivable-      Treasury
                                                  Compensation   (Deficit)      Receivable   Related Party      Stock
                                                  ------------  ------------   ------------  -------------    ----------

 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            -              -              -
   Fair market adjustment of collateral                  -              -              -          436,000            -
   Net loss                                              -       (3,039,000)           -              -              -
                                                  ------------  ------------   ------------  -------------    ----------
 BALANCE, MARCH 31, 1997                                 -       (8,805,000)      (140,000)      (789,000)       (59,000)

 YEAR ENDED MARCH 31, 1998:
   Issuance of common stock upon
     exercise of options                                 -              -              -              -              -
   Fair value adjustment of collateral                   -              -              -          394,000            -
   Net income                                            -          728,000            -              -              -
                                                  ------------  ------------   ------------  -------------    ----------
 BALANCE, MARCH 31, 1998                          $      -       (8,077,000)     $(140,000)   $  (395,000)      $(59,000)
                                                  ------------  ------------   ------------  -------------    ----------
                                                  ------------  ------------   ------------  -------------    ----------

</TABLE>

See accompanying notes to consolidated financial statements.

                                                               F-5A

<PAGE>

<TABLE>
<CAPTION>


                                     US SERVIS, INC. AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    
                                                                            Year Ended March 31,
                                                                   ---------------------------------------
                                                                     1998          1997           1996
                                                                   --------    -----------    ------------
<S>                                                                <C>         <C>            <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                               $728,000    $(3,039,000)   $(3,906,000)
   Adjustments to reconcile net income (loss) to net
     cash flows from operating activities:
       Depreciation and amortization of
         property and equipment                                     640,000        639,000        521,000
       Amortization of software technology                          218,000        189,000        129,000
       Amortization of goodwill                                      98,000         98,000        130,000
       Amortization of costs of issuing preferred
         stock                                                          -           30,000         12,000
       Other                                                            -              -          (11,000)
       Provision for losses on accounts receivable                  226,000         96,000        320,000
       Deferred income taxes                                            -           62,000      1,024,000
       Compensation earned under employment
         agreement                                                      -              -          742,000
       Fair value adjustment of collateral held for
         note receivable from related party                         394,000        436,000            -
       Changes in operating assets and liabilities:
         Accounts receivable, billed                             (2,119,000)    (1,630,000)       (11,000)
         Accounts receivable, unbilled                             (770,000)      (234,000)           -
         Notes receivable                                               -          190,000        277,000
         Prepaid and refundable income taxes                         27,000      2,302,000       (343,000)
         Prepaid expenses and other current
           assets                                                   345,000       (251,000)        (6,000)
         Other assets and long-term
           accounts receivable                                      (94,000)      (415,000)           -
         Accounts payable                                          (666,000)       780,000        104,000
         Accrued payroll and benefits                              (177,000)       291,000        157,000
         Accrued restructuring charges                             (580,000)      (803,000)    (1,566,000)
         Other accrued expenses                                     (18,000)       190,000        207,000
         Accrued expenses for use of trade name                         -         (192,000)           -
         Deferred income                                           (260,000)       197,000       (409,000)
         Other current liabilities                                  (40,000)       (85,000)       239,000
                                                                 -----------    -----------    -----------
           Net cash flows from operating
             activities                                          (2,048,000)    (1,149,000)    (2,390,000)
                                                                 -----------    -----------    -----------

 CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                              (646,000)      (898,000)      (346,000)
   Proceeds from sale of equipment                                    5,000         25,000            -
   Purchase of certificate of deposit                               (82,000)           -         (300,000)
   Purchase of software technology                                 (184,000)      (192,000)      (158,000)
                                                                 -----------    -----------    -----------
    Net cash flows from investing
      activities                                                   (907,000)    (1,065,000)      (804,000)
                                                                 -----------    -----------    -----------
</TABLE>

See accompanying notes to consolidated financial statements.

                                                               F-6

<PAGE>

<TABLE>
<CAPTION>


                                     US SERVIS, INC. AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    
                                                                            Year Ended March 31,
                                                                   ---------------------------------------
                                                                     1998          1997           1996
                                                                   --------    -----------    ------------
<S>                                                                <C>         <C>            <C>
 CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuances of preferred stock, less
     related expenses                                              $   -       $ 3,965,000     $5,872,000
   Issuance of common stock upon exercise
     of warrants                                                      7,000
   Principal payment on capital lease obligation                   (263,000)      (234,000)      (253,000)
                                                                 ----------     ----------     ----------
      Net cash flows from financing activities                     (256,000)     3,731,000      5,619,000
                                                                 ----------     ----------     ----------

 NET CHANGE IN CASH AND EQUIVALENTS                              (3,211,000)     1,517,000      2,425,000

 CASH AND EQUIVALENTS, BEGINNING OF YEAR                          8,063,000      6,546,000      4,121,000
                                                                 ----------     ----------     ----------
 CASH AND EQUIVALENTS, END OF YEAR                               $4,852,000     $8,063,000     $6,546,000
                                                                 ----------     ----------     ----------
                                                                 ----------     ----------     ----------

 SUPPLEMENTAL CASH FLOW INFORMATION:
   Interest paid                                                    $36,000       $166,000       $114,000
                                                                 ----------     ----------     ----------
                                                                 ----------     ----------     ----------

   Income taxes (paid) refunded                                    $(31,000)    $2,399,000     $1,952,000
                                                                 ----------     ----------     ----------
                                                                 ----------     ----------     ----------
   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
     redeemable preferred stock                                  $    -        $  (228,000)    $  228,000
                                                                 ----------     ----------     ----------
                                                                 ----------     ----------     ----------
   Stock issued to customer under contractual
      agreement                                                  $    -        $   150,000     $    -
                                                                 ----------     ----------     ----------
                                                                 ----------     ----------     ----------
</TABLE>

See accompanying notes to consolidated financial statements.

                                                               F-7

<PAGE>


                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -  BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     BASIS OF PRESENTATION - The consolidated financial statements include all
     of 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 integrated delivery
     systems. The Company's principal focus is providing billing and accounts
     receivement management services.  The Company, through a strategic
     alliance, has expanded its product offerings to include the implementation
     of electronic medical records systems.  The Company has also historically
     been a provider of certain third party administrative services to a managed
     care organization and of clinical information systems products to
     hospitals.  The Company is phasing out of these activities.  (See Notes 2
     and 9).

     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>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     FINANCIAL INSTRUMENTS - Financial instruments include cash and equivalents,
     certificates of deposit, 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 receivable are
     principally from hospitals and physician networks located throughout the
     U.S. (see Note 9 as to its 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 $1,478,000, $1,872,000, and
     $2,466,000 for the years ended March 31, 1998, 1997 and 1996, 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 an
     acquired business and is being amortized over 40 years on the straight-line
     method.

     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 adopted SFAS
     128 for the year ended March 31, 1998.  SFAS 128 replaces the presentation
     of primary and fully diluted earnings per share.  Basic earnings per share
     is calculated based on the weighted average number of common

                                         F-9

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     shares outstanding during the period and excludes all dilution.  Diluted 
     earnings per share is calculated by using the weighted average number of 
     common shares outstanding, while also giving effect to all dilutive 
     potential common shares that were outstanding during the period.  Prior 
     period amounts have been restated to conform to the requirements of SFAS 
     128.

     Net income (loss) is adjusted by accretions equal to accrued dividends on
     the Company's preferred stock.

     STOCK-BASED COMPENSATION  - The Company has elected to follow Accounting 
     Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO 
     EMPLOYEES (APB 25) and related interpretations in accounting for its 
     employee stock options. Under APB 25, because the exercise price of 
     employee stock options equals the market price of the underlying stock 
     on the date of grant, no compensation expense is recorded. The Company 
     has adopted the disclosure-only provisions of Statement of Financial 
     Accounting Standards No. 123 (SFAS 123), ACCOUNTING FOR STOCK-BASED 
     COMPENSATION.

     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 $113,000, $92,000 and $71,000
     in fiscal 1998, 1997 and 1996, 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 1998 and 1997, the estimate of the Company's
     restructuring was reevaluated, and no additional charge or credit was
     required.

                                         F-10

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The individual components of the 1996 credit are summarized as follows:

<TABLE>
<CAPTION>
            <S>                                                 <C>
            Consolidation and close down of facilities          $ (920,000)
            Legal, consulting and related reserves                (125,000)
            Termination costs related to the former Chairman      (223,000)
            Severance payments to employees                        678,000
                                                                -----------
                                                                $ (590,000)
                                                                -----------
</TABLE>

     At March 31, 1998, the non-current portion of accrued restructuring 
     charges matures as follows:

<TABLE>
<CAPTION>
         Year Ending March 31,
         ---------------------
         <S>                                                   <C>
               2000                                             $  66,000
               2001                                                10,000
               2002                                                10,000
               2003                                                10,000
               2004 and thereafter                                100,000
                                                                ---------
                                                                $ 196,000
                                                                ---------
</TABLE>

NOTE 3 -  NOTE RECEIVABLE- RELATED PARTY:


     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.  The Company also 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.
     
                                         F-11

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4  - PROPERTY AND EQUIPMENT:

     Property and equipment consist of:
<TABLE>
<CAPTION>
                                                     March 31,
                                              ----------------------
                                                  1998        1997
                                              ----------  ----------
   <S>                                        <C>         <C>
     Property and equipment                   $4,644,000  $4,053,000
     Leasehold improvements                      363,000     313,000
                                              ----------  ----------
                                               5,007,000   4,366,000
     Less: Accumulated depreciation
       and amortization                        3,243,000   2,603,000
                                              ----------  ----------
                                              $1,764,000  $1,763,000
                                              ----------  ----------
</TABLE>

     Depreciation and amortization expense was $640,000, $639,000 and $521,000
     for the years ended March 31, 1998, 1997, and 1996, respectively, and are
     included in selling, general and administrative expenses.


NOTE 5   -     INCOME TAXES:


     A summary of current and deferred income taxes included in the statements
     of operation is as follows:

<TABLE>
<CAPTION>
                                                     Year Ended March 31,
                                            ---------------------------------------
                                               1998       1997             1996
                                            --------    ---------      ------------
     <S>                                    <C>        <C>             <C>
      Current:
        Federal                             $ 35,000    $    -         $(2,349,000)
        State and local                       30,000         -              45,000
                                            --------    ---------      ------------
                                              65,000         -          (2,304,000)
                                            --------    ---------      ------------
      Deferred:
        Federal                                 -            -           1,024,000
        State and local                         -            -              -
                                            --------    ---------      ------------
                                                -            -           1,024,000
                                            --------    ---------      ------------
      Provision for income taxes            $ 65,000    $    -         $(1,280,000)
                                            --------    ---------      ------------
</TABLE>
                                         F-12

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     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>
<CAPTION>
                                                              Year Ended March 31,
                                                      ---------------------------------------
                                                        1998           1997           1996
                                                      --------    -----------    ------------
   <S>                                                <C>         <C>            <C>
     Income taxes at statutory rate                   $246,000    $(1,033,000)   $(1,763,000)
     Effect of losses without a current 
        year tax benefit                                  -         1,185,000        237,000
     Alternative minimum tax                              -             -            156,000
     State and local taxes, net of 
        federal benefit                                 (1,000)      (210,000)        30,000
     Write off and amortization of nondeductible
        technology costs and goodwill, net of
        realization of deferred tax liability           39,000         33,000         44,000
     Nondeductible business expenses and other          20,000         25,000         16,000

     Utilization of prior net operating losses        (304,000)          -              -

     Results of prior year tax 
        examination and minimum taxes                   65,000           -              -
                                                      --------    -----------    ------------
     Provision for income taxes                        $65,000       $   -       $(1,280,000)
                                                      --------     ----------    ------------


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

                                                              Year Ended March 31,
                                                      ---------------------------------------
                                                        1998           1997           1996
                                                      --------    -----------    ------------
       Accrued restructuring charges                  $194,000       $406,000       $747,000
       Allowance for doubtful account                  276,000        185,000        190,000
       Accrued vacation and other                      116,000        123,000        177,000
       Depreciation                                     64,000        134,000          -
       Writedown of stockholder note receivable        332,000        174,000          -
       Unbilled revenue                               (863,000)      (555,000)      (461,000)
       Alternative minimum tax credit                     -              -           271,000
       Net operating loss tax carryforwards          2,618,000      3,684,000      2,814,000
                                                    -----------    ----------      ---------
                                                     2,737,000      4,151,000      3,738,000
       Valuation allowance                           2,737,000      4,151,000      3,676,000
                                                    -----------    ----------      ---------
                                                    $    -         $    -            $62,000
                                                    -----------    ----------      ---------
</TABLE>
                                         F-13

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     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, 1998
     and 1997, except to the extent of refundable income taxes.

     At March 31, 1998, 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 6  - 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, 1998 are as follows:

<TABLE>
<CAPTION>
                    Year Ending March 31,
                    ---------------------
                     <S>                             <C>
                            1999                      $  928,000
                            2000                         795,000
                            2001                         687,000
                            2002                         618,000
                            2003                         611,000
                            2004 and thereafter          457,000
                                                      ----------
            Total future minimum lease payments       $4,096,000
                                                      ----------
</TABLE>

     Net rental expenses for office space amounted to $787,000, $877,000 and
     $671,000 for the years ended March 31, 1998, 1997, and 1996, respectively.

     EMPLOYMENT AGREEMENTS - The Company has an employment agreement with an
     officer through March 31, 1999.  Under this agreement, minimum compensation
     payable is $239,000 for 1999.

                                         F-14

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     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.

     CONTINGENCIES - 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 a certain lawsuit with a customer 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 this
     lawsuit.

     As part of the acquisition of a subsidiary, the Company has guaranteed up
     to $661,000 of certain bank debt of the former president of the subsidiary.

NOTE 7  - 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 with 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.

     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.

                                         F-15

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 -  SHAREHOLDERS' EQUITY:

     OPTIONS - The Company has an incentive stock option plan (the "1986 Plan")
     pursuant to which 10,000 options remain outstanding at March 31, 1998.
     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, as amended in 1994, the Board of Directors and the Company's
     shareholders approved an incentive stock option plan (the "1993 Plan") to
     grant 1,400,000 shares of the Company's common stock.  The terms of the
     1993 Plan are principally the same as those of the 1986 Plan.

          Outstanding options at March 31, 1998 are as follows:

<TABLE>
<CAPTION>

                                               Shares        Exercise Price         Expiration
                                              Issuable         Per Share                Date
                                              --------       --------------        --------------
    <S>                                       <C>            <C>                   <C>
     Non Qualified Options Issued to
       Chairman of the Board of
       Directors in October 1994 (1)            800,000         $1.3125              October 2004
     
     Nonemployee director in October
       1994, options for 55,000
       shares vested and options for
       10,000 shares vest  in fiscal             65,000         $3.00-$5.00           October 1999
       1999.
     
     Nonemployee directors in January                            
       1995, options for 60,000
       shares vested and 20,000
       shares vesting annually                  100,000           $3.50                January 2005
       through January 2000
     
     Non-Qualified Options issued to
       former President and Chief
       Operating Officer of AISCorp.
       in June 1991 (2)                          75,000           $4.00                 June 2001
                                              ---------
                                              1,040,000
                                                                  $1.3125 -            September 1998 -
     Incentive options                        1,161,000           $4.00                 July 2007
                                              ---------
                                              2,201,000
                                              ---------
</TABLE>
          
     (1)  400,000 options vested October 1995, the remaining 400,000 options 
          vest, 133,333 on July 23, 1998 and July 23, 1999 and 133,334 on 
          July 23, 2000 or 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.

     (2)  All options are exercisable.

                                         F-16

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     Options under the Incentive Stock Option Plans are summarized as follows:

<TABLE>
<CAPTION>
                                                            Year Ended March 31,
                                               ----------------------------------------
                                                1998             1997             1996
                                               ------           ------           ------
           <S>                              <C>                <C>              <C>
           Options outstanding at
              beginning of year                898,000        1,136,000          989,000
           Options granted                     574,000          285,000          405,000
           Options expired                    (306,000)        (423,000)        (243,000)
           Options exercised                    (5,000)           -                -
           Options transferred                    -            (100,000)         (15,000)
                                          ---------------    -----------      -----------
           Options outstanding at
              end of year                    1,161,000          898,000        1,136,000
                                          ---------------    -----------      -----------
           Option price per share         $1.3125 - $4.00    $3.00-$5.00      $3.00-$7.00
                                          ---------------    -----------      -----------
           Options exercisable:
              Number of shares                 322,883          387,000          185,000
                                          ---------------    -----------      -----------
</TABLE>

     At March 31, 1998, options to purchase 429,000 shares were available for 
     grant.

     On July 23, 1997, the Board of Directors completed a restructuring of the
     management compensation program of the Company in order to retain key
     employees and to provide appropriate employee incentives.  As part of the
     compensation adjustment, all outstanding options for present employees were
     repriced to the then current market price ($1.3125) and certain senior
     level management and other key employees were granted additional options,
     not in excess of normal grants.  To induce the Board of Directors to
     approve the restructuring plan, the Chairman of the Board of Directors
     voluntarily agreed to cancel options to purchase 200,000 shares of Common
     Stock under his non-qualified option agreement.

     On October 30, 1997, to correct an alleged technical difficulty in the July
     23, 1997 repricing of stock options, all present employee options issued
     under the 1986 and 1993 plans were canceled and reissued under the 1993
     plan with no changes in any provisions.

NOTE 9  - MAJOR CUSTOMERS:

     Revenues from customers in excess of 10% of total revenues were as follows:

<TABLE>
<CAPTION>

                                                              Year Ended March 31,
                                                              ---------------------
                     Customer                                 1998    1997     1996
                     --------                                 ----    ----     ----
     <S>                                                     <C>     <C>      <C>
     University of Medicine & Dentistry, Newark, NJ           9.4%   11.6%    15.7%
     MetroPlus Health Plan                                   19.4    21.2      3.6
</TABLE>

                                         F-17

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     During fiscal 1997, the Company experienced material difficulties at its
     largest client, MetroPlus, a public Health Maintenance Organization ("HMO")
     serving the New York City Medicaid population, which was the Company's only
     HMO.  During fiscal 1998, the Company filed suit to enjoin MetroPlus from
     terminating its contract in violation of its terms and for payment under
     the contract.  In November 1997, this lawsuit, together with a related
     lawsuit by a subcontractor of the Company, was completely resolved.
     MetroPlus agreed to pay the Company all sums due under the contract and the
     parties agreed to a termination of the contract as of February 28, 1998.
     Since the date of settlement, all litigation relating to the MetroPlus
     dispute has been dismissed, the Company has completed all tasks for
     MetroPlus under its contract and made all necessary payments under its
     subcontracts, and MetroPlus has made all necessary payments to the Company.


NOTE 10 - STOCK BASED COMPENSATION:

     As required by SFAS 123, the Company has determined the pro forma
     information as if the Company had accounted for stock options granted under
     the fair value method of SFAS 123.  The Black Scholes option pricing model
     was used with the following weighted-average assumptions;  risk-free rate
     of 5%; expected common stock market price volatility factor of 1.03, .56
     and .56 in March 31, 1998, 1997 and 1996, respectively; and an expected
     life of the options of five years.  The fair value of options granted
     ranged from $1.325 to $5.00.  The pro forma effect on net loss and net 
     loss per share would have been as follows:

<TABLE>
<CAPTION>

                                   1998        1997          1996
                                --------    -----------  -------------
          <S>                   <C>         <C>           <C>
           Net income (loss):
             As reported        $728,000    $(3,039,000)  $(3,906,000)
             Pro forma          $325,000    $(3,202,000)  $(4,164,000)
           Basic and diluted
              per share:
             As reported          $(0.03)        $(0.59)       $(0.66)
             Pro forma            $(0.09)        $(0.61)       $(0.70)
</TABLE>


                                         F-18

<PAGE>
                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11  -     SUPPLEMENTAL DISCLOSURE OF LOSS PER SHARE:

<TABLE>
<CAPTION>

                                            1998          1997           1996
                                         ---------    -----------     ----------
           <S>                          <C>          <C>              <C>
              Net income (loss):         $ 728,000    $ (3,039,000)  $(3,906,000)
              Less dividends              (898,000)     (675,000)      (228,000)
                                         ---------    -----------     ----------
              Net loss available
                to common stockholders   $(170,000)   $(3,714,000)   $(4,134,000)
                                         ---------    -----------     ----------
              Weighted average
                shares outstanding       6,351,000      6,308,000      6,282,000
                                         ---------    -----------     ----------
              Basic and diluted
                loss per share              $(0.03)        $(0.59)        $(0.66)
                                         ---------    -----------     ----------
</TABLE>

NOTE 12  -     NEW ACCOUNTING STANDARD:

     DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION  -
     Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosure
     about Segments of an Enterprise and Related Information", was issued in
     July 1997, and is effective for periods beginning after December 15, 1997.
     SFAS 131 introduces a new model for segment reporting, called the
     "management approach."  The management approach is based on the way the
     chief operating decision maker organizes segments and are based on product
     and services, geography, legal structure, management structure - any manner
     in which management desegregates a company.  The management approach
     replaces the notion of industry and geographic segments in current
     Financial Accounting Standards Board standards.  The Company intends to
     adopt SFAS 131 in its fiscal 1999 financial statements.

     ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
     INTERNAL USE  -  In March 1998, the American Institute of Certified Public
     Accountants issued Statement of Position 98-1 (SOP 98-1), "ACCOUNTING FOR
     THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE",
     which is effective for years beginning after December 15, 1998.  SOP 98-1
     requires certain costs related to the creation and acquisition of software
     be capitalized.  The Company intends to adopt SOP 98-1 in its fiscal 2000
     financial statements.  The Company does not expect the adoption of SOP 98-1
     to have a material effect on the Company's financial statements.

                                         F-19

<PAGE>
                                                                     SCHEDULE VI

                          US SERVIS, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 VALUATION ACCOUNTS

<TABLE>
<CAPTION>



---------------------------------------------------------------------------------------------------------
                COLUMN A                 COLUMN B         COLUMN C           COLUMN D           COLUMN E
---------------------------------------------------------------------------------------------------------
                                                         Additions
                                       Balance at         Charged                              Balance at
                                       Beginning of        to Costs                               End of
         Description                     Period         and Expenses       Deductions            Period
         -----------                   ------------     ------------       -----------         ----------
<S>                                    <C>               <C>                <C>                <C>
March 31, 1998 -
     Allowance for doubtful accounts     $464,000         $226,000           $  -               $690,000
                                       ------------     ------------       -----------         ----------
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
                                       ------------     ------------       -----------         ----------
</TABLE>

                                                           F-20


<PAGE>

                                    EXHIBITS INDEX

<TABLE>
<CAPTION>



EXHIBIT NO.    DESCRIPTION 
----------     ----------- 
<S>            <C>  


 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)         1986 Stock Option Agreement. (I)                      

 10(2)         Service Agreement between the Registrant and
               Digital Equipment Corporation. (I)                    

 10(3)         Non-qualified Stock Option Agreement between
               the Registrant and S.M. Caravetta, dated
               February 10, 1990 and expiring February,
               1995. (III)                                           

 10(4)         Distribution/Sales Representation Agreement
               by and between Baxter Healthcare Corporation
               and MedTake Corp., dated as of October 1,
               1990.(IV)                                             

 10(5)         Letter Agreement by and among MedTake Corp.,
               the Registrant, Salvatore M. Caravetta and
               Baxter Healthcare Corporation, dated as of
               October 1, 1990. (IV)                                 

 10(6)         Guaranty of the Registrant in favor of
               Baxter Healthcare Corporation, dated as of
               October 1, 1990. (IV)                                 

 10(7)         Complimentary Marketing Agreement between
               International Business Machines Corporation
               and the Registrant. (V)                               

<PAGE>

 10(8)         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(9)         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(10)        Employment Agreement among Receivables
               Management Corp. (renamed AISCorp.), the
               Registrant and Stephen G. Sullivan, dated as
               of June 14, 1991. (VI)                                

 10(11)        Option Registration Rights Agreement by and
               between the Registrant and Stephen G.
               Sullivan, dated June 14, 1991. (IV)                   

 10(12)        Employment Contract between the Registrant
               and S.M. Caravetta. (VII)                             

 10(13)        Employment Contract between the Registrant
               and James A. Pesce. (VII)                             

 10(14)        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(15)        Employment Agreement, dated as of January 1,
               1993, between Management-Data Service, Inc.,
               the Registrant and David K. Vanco. (VIII)             

 10(16)        Registration Rights Agreement between David K.
               Vanco and the Registrant, dated as of
               December 31, 1992. (VIII)                             

 10(17)        Guaranty dated March 5, 1993, given by the
               Registrant to Harris Bank Roselle relating to
               loans to David K. Vanco. (VIII)                       

 10(18)        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(19)        Agreement of Merger with ACT/PC, dated
               August 31, 1993. (IX)                                 

 10(20)        Term Loan Agreement, dated as of December 13,
               1993, between Stephen G. Sullivan and
               Registrant. (X)                                       

 10(21)        Guarantee Modification Agreement, dated as of 
               December 31, 1993, between Stephen G. Sullivan
               and the Registrant. (X)                               

 10(22)        Escrow Agreement, dated as of December 13, 1993,
               between Stephen G. Sullivan, Registrant and
               Crummy Del Deo Griffinger & Vecchione. (X)            

<PAGE>

 10(23)        Termination Agreement relating to the Baxter
               Distribution/Sales Representation Agreement, dated
               December 17, 1993. (X)                                

 10(24)        Amendment to Agreement and Plan of Merger between
               the Registrant and Management-Data Services, Inc.,
               dated April 8, 1994. (XI)                             

 10(25)        Amendment to Employment Agreement between David K.
               Vanco and the Registrant, dated April 8, 1994. (XI)   

 10(26)        Employment Agreement, dated as of October 12, 1994,
               betwen the Registrant and Graham O. King. (XIII)      

 10(27)        Option Agreement, dated as of October 12, 1994,
               between the Registrant and Graham O. King. (XII)      

 10(28)        Registration Agreement, dated as of October 12, 1994,
               between the Registrant and Graham O. King. (XII)      

 10(29)        Stockholder Agreement, dated as October 12, 1994,
               between the Registrant and Graham O. King. (XII)      

 10(30)        S.M. Caravetta Termination Agreement between S.M.
               Caravetta and the Registrant, dated as of October 12,
               1994, as amended. (XIII)                              

 10(31)        Letter of Intent, dated June 26, 1995, between the
               Registrant and Frontenac VI Limited Partnership. (XIV)

 10(32)        Registrant's Amended 1993 Stock Option Plan. (XIV)    

 10(33)        Registrant's Amended 1994 Stock Option Plan for Non-
               Employee Directors. (XIV)                             

 10(34)        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(35)        Promissory Note of Graham O. King, dated June 14, 1995, 
               payable to the Company. (XVI)                         

 10(36)        First and Second Amendments to Series A Convertible
               Preferred Stock and Warrant Purchase Agreements dated
               July 31, 1995 and October 10, 1995, respectively.
               (XVIII)                                               
               
 10(37)        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)

<PAGE>

 10(38)        Agreement for Administrative Services, dated          
               December 21, 1995, between New York Health and
               Hospitals Corporation and the Registrant. (XVIII)

 10(39)        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(40)        First Amendment to Registration Rights Agreement
               among U.S. Servis, Inc. and the Purchases
               signatory thereto, dated September 30, 1996. (XIX)    

 10(41)        Agreement for Services, dated December 31, 1996,
               between University Physician Associates and
               Registrant. (XX) 1998                                 

 10(42)        Office Lease for 220 Davidson Avenue, Somerset,
               New Jersey, dated October 9, 1996 between The
               Mutual Life Insurance of New York and
               US Servis, Inc.                                       

</TABLE>

<PAGE>
                                  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.