SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB

         [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                       OR

         [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

          For the transition period from _____________ to ____________

Commission File Number:  1-12536

                        STRATEGIC SOLUTIONS GROUP, INC.
             (Exact name of Registrant as specified in its charter)

     Delaware                                                  11-2964894
-------------------------------                             --------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification  No.)

326 First Street, Suite 100
Annapolis, Maryland                                                21403
----------------------------------------                         ----------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number,
including area code:                                           (410) 263-7761
                                                               --------------

Securities registered pursuant to Section 12(b) of the Act:  Common Stock,
$.0001 par value
--------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:  None
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                                (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 Regulations S-K (ss.229.405 of this chapter) 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-KSB or any amendment to this Form 10-KSB. [ ]

         As of March 27, 1998 the aggregate market value of the voting stock
held by non-affiliates, approximately 2,777,000 shares of Common Stock, $.0001
par value, was approximately $3,992,000 based on the closing sales price of $1
7/16 for one share of Common Stock on the Nasdaq Small Cap Market on such date.
The number of shares outstanding of the Registrant's Common Stock, as of March
27, 1998 was 2,821,463.

         Documents incorporated by reference: Portions of the Registrant's
definitive Proxy Statement regarding its 1998 Annual Meeting of Stockholders are
incorporated by reference in Part III of this Report.


<PAGE>


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

GENERAL

       During 1997, the Company was a full service provider of technology based
solutions and computer systems integration and support services, including the
sale of hardware and software products, specializing in the development of
software applications related to work group and work flow computing solutions
and custom interactive multimedia software. The Company's systems integration
division was comprised of the business of U.S. Technologies, Inc. ("UST"), a
wholly owned subsidiary, which the Company acquired in July 1996. UST is a Lotus
Premium Business Partner that develops software applications used in conjunction
with, and provides services related to the use of Lotus Notes(R) and Domino(TM),
and was an IBM Industry Remarketer of AS/400(R) and RS/6000(R) midrange
computers. The Company's multimedia division designs, develops, and markets
custom multimedia software used to deliver computer-based and web-based
training, electronic performance support systems, multimedia manuals, sales and
marketing presentations, and corporate communications. For the year ended
December 31, 1997, approximately 81% of the Company's revenue was attributable
to the systems integration division and approximately 19% to the multimedia
division. References to the "Company" herein refer to Strategic Solutions Group,
Inc. and its subsidiaries.

       In April 1998, UST was merged into and with SSGI-UST Acquisition
Corporation, an existing corporation formed on March 5, 1998 and owned by the
President of UST and other third parties. UST continued as the surviving
corporation; accordingly, SSGI-UST Acquisition Corp. ceased to exist. Effective
upon the merger, the Company's ownership in UST was reduced from 100% to
approximately 14%. See "Systems Integration Services Merger of UST" below and
the Notes to the Consolidated Financial Statements. Accordingly, after that
date, the Company's operations will comprise the multimedia division only.

SYSTEMS INTEGRATION SERVICES

       The Company acquired UST, a full-service provider of computer systems
integration and support services, in July 1996. Products and services included
the sale of hardware and software products and the development of software
applications for and providing services related to work group and work flow
computing solutions. UST is a Lotus Premium Business Partner that develops
software applications used in conjunction with, and provides services related to
the use of Lotus Notes(R) and Domino(TM). Through June 30, 1997, UST was also an
IBM Industry Remarketer of AS/400(R) and RS/6000(R) midrange computers. However,
effective June 30, 1997, UST chose to no longer sell the IBM AS/400(R) and
RS/6000(R) midrange computers due to gross margins being lower than originally
anticipated.

       LOTUS PREMIUM BUSINESS PARTNER. Lotus Notes(R) and Domino(TM) are
proprietary groupware and messaging software products developed by Lotus
Development Corporation that enable users to communicate and collaborate over a
local area network or telecommunications link and access


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documents and data residing on a shared computer, or server. As a Lotus Premium
Business Partner, UST develops a wide variety of custom software applications
expanding the applicability of Lotus Notes(R)/Domino(TM) to a particular
customer's needs. Such applications have included numerous project, time, sales,
and database management applications. For example, UST recently has developed a
sales force automation system for a publisher and distributor of secondary
education products and a quality control application for an international
manufacturer of consumer goods. UST also provides a full complement of services
related to the use of Lotus Notes(R)/Domino(TM), including the integration,
design, development and installation of computer systems, intranet and Internet
services, and education and support services.

       DEVELOPMENT AND SERVICES. At the outset of each systems integration
project, UST provides each of its customers with a statement of work that
details the products and services that UST will provide, sets forth a good faith
estimate of the amount UST will charge, and provides a work and payment
schedule. The payment schedule varies from customer to customer, but usually
includes some form of up-front payment and either weekly or monthly payments or
payments based upon the completion of phases of the project. UST generally
charges an aggregate of $10,000 to $250,000 for systems integration services
(including the purchase of hardware) and the amount of time required to complete
such services ranges from several days to a year. Post-installation support
services are billed separately, usually on an hourly basis.

       Because of the extensive testing and evaluation procedures that are
undertaken in conjunction with its customers with respect to the Company's
systems integration services, the Company does not provide warranties with
respect to such services. Lotus Development Corporation and IBM, as well as
other equipment manufacturers, provide the Company's customers with limited
warranties on their products.

       IBM INDUSTRY REMARKETER. In November 1996, UST became an IBM Industry
Remarketer for the AS/400(R) and RS/6000(R) midrange computers. Midrange
computers generally are the most powerful computers frequently used by mid-sized
companies (companies with annual sales of $25 to $250 million). During the
fourth quarter of 1996, UST entered into an agreement with Support Net, Inc.,
IBM's largest Managing Industry Remarketer, that enabled UST to sell the
AS/400(R) and RS/6000(R) midrange computers on a non-exclusive basis to end
users of those computers located in the United States. However, effective June
30, 1997, UST chose to no longer sell the IBM AS/400(R) and RS/6000(R) midrange
computers due to gross margins being lower than originally anticipated.
Accordingly, these agreements were terminated. Total product sales by UST for
the year ended December 31, 1997 was approximately $2.1 million, of which
approximately 64% was attributable to the sales of the IBM AS/400(R) and
RS/6000(R) midrange computers.

       MERGER OF UST. In April 1998, UST was merged into and with SSGI-UST
Acquisition Corporation, an existing Florida company owned by the President of
UST and other third parties, and UST continued as the surviving corporation.
Accordingly, after that date, the Company's operations will not include the
operations of UST. UST will be immediately pursuing a private placement of its
equity securities for approximately $2,000,000 and has long-term plans to pursue
a public offering of its equity securities.


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       In consideration for the merger, SSGI received the following:

         (1)      100,000 shares of common stock of UST valued at $500,000 or
                  $5.00 per share. These shares are subject to a registration
                  rights agreement giving the Company the right to demand
                  registration or a piggy back registration of UST's shares;
         (2)      A promissory note from UST in the principal amount of $600,000
                  with 6% interest due the earlier of the closing of the
                  $2,000,000 private placement or 60 days from the closing of
                  the merger. The promissory note is secured by all the assets
                  of UST and the pledge of all of the outstanding stock of UST;
                  and
         (3)      A 6% subordinated convertible debenture in the principal
                  amount of $927,000 (to be increased for any funding provided
                  by the Company to UST after February 6, 1998, the date the
                  merger was agreed to). The debenture is due the earlier of a
                  public offering of UST's securities or 18 months from the date
                  of the merger. In addition, the Company has the option to
                  convert the debenture into shares of UST's common stock at a
                  20% discount to market value conversion ratio at the time of
                  conversion.

CUSTOM MULTIMEDIA SOFTWARE

       The Company's multimedia division (the "division") provides technical
consulting services that include analysis, design, and development of
technology-based solutions and specializes in providing training solutions.
Technology-based training encompasses a wide range of emerging technologies in
the area of employee training, and can come in the form of computer-based
training, web-based training, electronic performance support systems, and
multimedia manuals. In addition to training, the division also designs and
develops software for sales and marketing applications and corporate
communications.

       Depending on a customer's needs, the division can produce multimedia
software that includes interactive computer animation, full motion video, audio,
high-end color graphics, text and hypertext providing vivid and effective
instruction and information. The software developed by the division can be
distributed over multiple platforms including MSWindows(TM) and DOS and can be
delivered on diskette or CD-ROM. The Company believes that it can adapt its
services using new and emerging technologies, such as internal corporate
intranets or the Internet using the World Wide Web ("Web"). In addition, the
incorporation of Web-Based training ("WBT") allows users to have access from
anywhere in the world. The Company believes that the Internet and intranets will
become increasingly important delivery methods in the future.

       According to a market research firm, International Data Corp. ("IDC"),
companies spent approximately $18 billion worldwide in training for their
workers in 1996 and by the year 2001 that annual bill is expected to grow to
approximately $27.9 billion. In addition, according to IDC, offering employee
training via the Internet and corporate intranets is a business that could grow
at annual rates greater than 100% over the next few years.


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       COMPUTER-BASED TRAINING ("CBT"). The division designs and develops custom
computer-based training software, which provides an interactive learning
experience to instruct employees how to use complex equipment or to understand
complicated industrial processes by simulating operation and production
procedures. The division's software typically replaces or supplements technical
manuals and operating documentation and provides interactive self-paced
training. It also often incorporates cut-away views of equipment that would be
difficult or impossible to display in a real-world setting and enables users to
learn complex processes by viewing them in real or lapsed time or in slow
motion. Based on studies conducted and published by the American Society for
Training and Development, management believes that CBT enables users to master
skills and retains information more effectively than traditional instructor-led
training.

       WEB-BASED TRAINING. Recent technological developments and advances in
computer network technology enable the Company to deliver computer-based
training over corporate intranets or the Internet via the Web. Web-based
materials can be text-based (such as, lecture notes, case studies, and
assignments) or they may be much like sophisticated CBT courseware. As a result
of rapidly advancing Web browsers, high-speed communications, and innovative
instructional design, it is possible that real-time animation, video, audio, and
conferencing could be features included in a WBT solution. In addition, the
incorporation of WBT allows users to have access from anywhere in the world. The
Company believes that the Internet and intranets will become increasingly
important delivery methods in the future.

       ELECTRONIC PERFORMANCE SUPPORT SYSTEMS ("EPSS"). The goal of an EPSS is
to provide whatever information is necessary to accelerate performance and
learning at the moment of need - commonly referred to as HELP SYSTEMS. The
division designs and develops custom EPSS software to enable users to perform
better at their jobs. This software provides computer-based support that is
integrated into a workstation or work environment, and acts as a combination
coach/trainer/job aid/reference. The Company believes that EPSS increases
employee productivity by providing needed information and training when and
where it is needed - and in an amount and format that is the most useful to the
user.

       MULTIMEDIA MANUALS. The division provides turn-key multimedia manual
services, using an internally developed software product known as TechShelf(TM).
TechShelf(TM) enables the division to convert customer manuals, reference
guides, or other technical materials into interactive multimedia software,
including full-motion video, audio, animation and interaction. The Company
believes that these services enable customers to obtain a technology-based
solution in less time and at a relatively low cost as compared to traditional
custom software services.

       SALES AND MARKETING. The division designs and develops custom sales and
marketing software which enables manufacturers and distributors to demonstrate
their products to potential customers at trade shows or in kiosks. This software
can enhance sales and marketing presentations by encouraging customer
participation through the use of interactive product demonstrations.

       CORPORATE COMMUNICATIONS. The division designs and develops custom
multimedia software for internal and external corporate communications. Examples
include software used to


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disseminate corporate policies and procedures and information about a company's
products and services. The Company believes that its custom multimedia
development services can be used to create a technology-based solution,
including web-based, that is comprehensive and cost-effective and delivers
lively and compelling messages to large groups of employees in disparate
locations.

       DEVELOPMENT AND SERVICES. The Company's custom multimedia services for
the above technology-based solutions include needs analysis, design
specification and product development. Needs analysis typically takes from three
to ten days and the charges for such services can range from $5,000 to $15,000.
The design phase lasts from four to six weeks and the charges for such services
can range from $20,000 to $40,000. Depending upon a project's scope and
features, the time required to complete software development can range anywhere
from one month to several years and the charges for such services can range from
$10,000 to $1 million.

       At the outset of each project, the Company provides the customer with a
statement of work that details the services that the Company will provide, sets
forth the amount that the Company will charge, and provides a work and payment
schedule. Any changes to the project that will result in additional charges are
submitted to the customer for approval prior to providing the services. The
payment schedule varies from customer to customer, but usually includes some
form of up-front payment and progress payments based upon the completion of
phases of the project. To date, the Company has not experienced any significant
difficulties in delivering its custom software products to customers in
accordance with schedules.

       The Company's contracts with respect to its services include an express
warranty that usually terminates upon acceptance of the software by the
customer. However, the Company generally will service the software to ensure
that it performs as set forth in the statements of work for a one-year period.
Because of the extensive testing and evaluation procedures performed in
conjunction with the customer that are undertaken during the development
process, to date, servicing cost after customer acceptance has been
insignificant. Post-development support services are available and are billed
separately, usually on an hourly basis.

CUSTOMERS AND BACKLOG

       Systems integration services customers are generally mid to large size
companies that have or require at least 50 individual computers to be attached
to a network. These customers represent a wide variety of industries and service
organizations. While a substantial percentage of the systems integration
revenues historically have been generated by customers located within Florida,
where UST is located, this percentage has decreased as UST markets its products
and services to customers located outside of the state.

       The Company's multimedia customers traditionally have been comprised
primarily of large manufacturers who must train employees to use complex
equipment or understand complicated industrial processes. To date, such
customers have represented a broad range of industries, including the
automotive, packaging, electronics, pharmaceutical, beverage bottling, and
fitness and food manufacturing industries, as well as government agencies
located throughout the United States. As part of its strategy to grow revenues,
the multimedia division has identified strategic


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vertical markets with business-critical needs that can be addressed by the
Company's technology-based solutions. The multimedia division has implemented a
new sales and marketing strategy which targets its efforts on the manufacturing
and transportation industries. The division intends to leverage its existing
relationships and expand its sales and marketing efforts to increase market
share in these industries.

       During fiscal 1997, there were no customers that accounted for at least
10% of the Company's consolidated revenue. During fiscal 1996, one systems
integration customer, Data Systems International, accounted for approximately
10% of the Company's consolidated revenue. During fiscal 1995, three customers,
Bell & Howell, TRW, Inc., and Mack Trucks, Inc., accounted for approximately
17%, 17%, and 13%, respectively, of the Company's revenue.

       As of December 31, 1997, backlog (i.e., the difference between the fees
payable to the Company set forth in existing contracts and the amount of such
fees that had been recognized as revenue on the Company's financial statements)
of its custom multimedia software services totaled approximately $400,000, all
of which is expected to be earned during 1998. As of December 31, 1997, backlog
of UST's systems integration services and product sales totaled approximately
$450,000, of which approximately $150,000 is expected to be earned by the
Company during 1998 prior to the merger. There can be no assurance that
contracts reflected in backlog will not be canceled or delayed. Accordingly, the
Company believes that backlog is not a reliable measure of future revenue.

RESEARCH AND DEVELOPMENT

       For the years ended December 31, 1997 and 1996, costs associated with
research and development activities totaled approximately $323,000 and $252,000,
respectively. Historically, research and development activities included the
development of a library of reusable applications, codes, utilities, and tools
that the Company can utilize in the early stages of development of many of its
software applications. To date, no costs have been capitalized due to the
expenditures for any one reusable application, code, utility, or tool not
totaling a material amount. The Company believes that costs for research and
development will continue in the future at consistent levels as the Company
plans to continue improving its existing reusable applications, codes,
utilities, and tools, as well as the development of new reusable applications,
codes, utilities, and tools. In addition, future research and development
efforts may include the development of products to be sold.

SALES AND MARKETING

       As of February 28, 1998, the Company employed 10 people involved in sales
who receive a combination of salary and commission (6 by UST and 4 by the
multimedia division). The direct sales force focuses on large customers and
leverages its industry experience to access target organizations within
particular vertical markets. These markets are characterized by business areas
to which the Company's services and technology are particularly well-suited, and
by participants who possess the financial resources and scale of operations
necessary to support the types of services provided the Company. The Company
also employs other business development


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and marketing techniques to communicate directly with current and prospective
clients. These techniques include exhibiting at trade shows, authoring articles
and presenting papers regarding the Company's solutions and technology, trade
journal advertising, telemarketing, and direct mail marketing.

       In addition, as described above under "Systems Integration Services,"
UST's strategy includes being a Lotus Premium Business Partner and may receive
leads from Lotus Development Corporation.

       In order to increase revenues, the multimedia division has recently
implemented a more focused sales and marketing strategy which targets its
efforts to providing technology-based training solutions to the manufacturing
and transportation industries. In addition, the division will endeavor to become
a Microsoft Solutions Provider which requires that the Company maintain two
certified Microsoft professionals on staff. The Company believes that this
affiliation may provide sales leads for its services.

       Existing clients are also an important component of the Company's
marketing strategy. Follow-on projects leverage sales and marketing resources
and strengthen the Company's client relationships. The Company believes that it
has good relationships with its existing customer base and expects that these
contacts will enable it to successfully pursue this strategy.

COMPETITION

       The information technology consulting, software development, and business
solution markets include a large number of participants, are subject to rapid
change, and are highly competitive. The Company competes with and faces
potential competition for clients and experienced personnel from a number of
companies that have substantially greater financial, technical, sales,
marketing, and other resources, and generate greater revenues, as well as have
greater name recognition than the Company. These markets are highly fragmented
and served by numerous firms, many of which serve only their respective local
markets. In addition, clients may elect to use their internal information
systems resources to satisfy their needs for software and application
development and consulting services, rather than using those offered by the
Company.

       The Company's systems integration business competes with Lotus
Development Corporation, IBM, other Lotus Business Partners and IBM Industry
Remarketers, companies that manufacture and market midrange computers that
compete with the AS/400(R) and RS/6000(R) and their remarketing agents,
companies that manufacture software that competes with Lotus Notes(R)/Domino(TM)
and their business partners, and numerous other providers of systems integration
and consulting services.

       The Company's custom multimedia software business competes with companies
that produce interactive training software (custom and off-the-shelf) and other
third-party suppliers of training and marketing materials, as well as internal
training and information systems resources of potential customers.


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       The Company's clients primarily consist of large organizations, including
agencies of the federal government, and there are an increasing number of
professional services firms seeking information technology consulting and
software development engagements from that client base. The Company believes
that the principal competitive factors in the information technology consulting
and software development industry include responsiveness to client needs,
project completion time, quality of service, price, project management
capability, and technical expertise. The Company believes that it presently
competes favorably with respect to each of these factors. However, the Company's
markets are still evolving and there can be no assurance that the Company will
be able to compete successfully against current and future competitors and the
failure to do so successfully will have a material adverse effect upon the
Company's business, operating results, and financial condition. The Company
believes that its ability to compete also depends in part on a number of
competitive factors outside its control, including, the ability of its
competitors to hire, retain and motivate personnel; the development by others of
software that is competitive with the Company's services; the price at which
others offer comparable services; and the extent of its competitor's
responsiveness to customer needs.

INTELLECTUAL PROPERTY

       Most of the Company's contracts state that its software is proprietary
and that title to and ownership of its software generally reside with the
Company. The Company grants nonexclusive licenses to customers for software
developed by the Company for such customers. Like many software firms, the
Company has no patents. The Company attempts to protect its rights with a
combination of copyright, trade secret laws, and employee and third-party
nondisclosure agreements. Despite these precautions, it may be possible for
unauthorized third parties to copy certain portions of the Company's products or
obtain and use information that the Company regards as proprietary, such as
source codes or programming techniques.

       As the number of software products increases and their functionality
further overlaps, the Company believes that software programs will increasingly
become the subject of infringement claims. Although the Company's products have
never been the subject of an infringement claim, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future or that any such assertion may not require the Company to enter into
royalty arrangements or result in costly litigation.

PRODUCT LIABILITY INSURANCE

       The Company does not currently carry product liability insurance and
there can be no assurance that such coverage, if obtainable, would be adequate
in terms and scope to protect the Company against material adverse effects in
the event of a successful product liability claim. Although the Company has not
been subject to any product liability claims, such claims could arise in the
future. There can be no assurance that the Company would have sufficient
resources to satisfy any liability resulting from these claims or would be able
to have its customers indemnify the Company against such claims.


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EMPLOYEES

       As of February 28, 1998, the Company had 44 full-time employees, 10 of
whom were in administration (4 for UST), 10 of whom were in sales and marketing
(6 for UST), and 24 of whom held professional technical positions (16 for UST).
None of the Company's employees are represented by unions. Management believes
the Company's employee relations are good.

       The Company's success will depend upon its ability to attract, retain,
and motivate highly-skilled employees, particularly project managers and other
senior technical personnel. Qualified personnel are in particularly great demand
and are likely to remain a limited resource for the foreseeable future. However,
the Company believes that it has been successful in its efforts to attract and
retain the number and quality of professionals needed to support present
operations and future growth. Although the Company expects to continue to
attract sufficient numbers of highly skilled employees and to retain its
existing technical personnel for the foreseeable future, there can be no
assurance that the Company will be able to do so.

ITEM 2.  DESCRIPTION OF PROPERTY.

       The Company leases office space in Annapolis and Rockville, Maryland;
Tampa and Orlando, Florida; and Atlanta, GA. The leases require the Company to
pay monthly rent of approximately $4,400, $3,900, $3,000, $2,200, and $950,
respectively, and expire at various times through 2000. In addition, the Company
leases office space in Redmond, Washington, for a monthly rent of approximately
$9,500, which is subleased to an unaffiliated third party through the end of the
Company's lease term in May 1998 due to the consolidation of the multimedia
division. Management believes that its current office facilities are adequate
and suitable for the Company's current operations.

ITEM 3.  LEGAL PROCEEDINGS.

         In January 1998, the company redeemed its 6% Subordinated Convertible
Debenture ("the Debenture") and issued 1,052,624 shares of the Company's common
stock as payment for the $1,710,514 redemption amount. The holder of the
Debenture refused to accept the shares as payment and filed suit against the
Company alleging that the terms of the Debenture permit the Company to pay the
redemption price only in cash and as a result, the redemption by the Company and
the issuance of the Company's common stock is invalid. The holder is seeking a
determination to that effect and that the Company has forfeited its right to
redeem the debenture. The complaint also seeks damages resulting from the
Company's failure to honor the plaintiff's attempted post-redemption conversion
of $115,000 principal amount of the Debenture. In April 1998, the Company and
the holder began negotiation discussions to settle this litigation out of court.
If the Company is unable to negotiate a settlement with the holder, a court
hearing will be held on April 15, 1998. If the court hearing is held, the
Company will vigorously defend this action. However, the Company cannot predict
the outcome of the court hearing. See Note 16 to the Consolidated Financial
Statements.


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       The Company is not subject to any other legal proceedings other than
claims that arise in the ordinary course of its business.

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

       None.


                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

       The Company's Common Stock has been listed on the Nasdaq Small Cap Market
under the symbol "SSGI" and on the Boston Stock Exchange under the symbol "STG."
Before November 11, 1993, the Company's Common Stock traded in Nasdaq's
over-the-counter market and was quoted in the "Pink Sheets."

       In February 1998, the Company was notified by Nasdaq that it was not in
compliance with Nasdaq's new net tangible assets requirement and that the
Company's securities were scheduled for delisting. However, the Company has
requested a temporary exemption to the new requirements by its submission of a
proposed compliance plan. The Company is awaiting the decision of Nasdaq
regarding its request and until a decision is reached by Nasdaq the delisting
action has been stayed.

       The following table shows the high and low sale prices for the Company's
Common Stock, for the periods indicated, based upon information supplied to the
Company from Nasdaq.

                  Year                             High             Low
                  ----                             ----             ---
                  1997
                  ----
                  1st Quarter                     $15.625          $12.00
                  2nd Quarter                     $13.125           $4.50
                  3rd Quarter                      $7.125           $3.375
                  4th Quarter                      $5.375           $0.75

                  1996
                  ----
                  1st Quarter                     $10.875           $8.875
                  2nd Quarter                     $13.75            $9.625
                  3rd Quarter                     $13.375          $10.625
                  4th Quarter                     $15.00           $12.25

       The closing bid price for the Company's Common Stock on March 27, 1998,
was $1 7/16.

       The Company had approximately 167 holders of record of Common Stock as of
March 13, 1998. Management believes that the number of beneficial holders of the
Company's Common Stock as of March 13, 1998, was approximately 3,000.


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       No cash dividends have been paid by the Company on its Common Stock and
no such payment is anticipated in the foreseeable future.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

THE FOLLOWING PARAGRAPHS CONTAIN CERTAIN FORWARD LOOKING STATEMENTS, WHICH ARE
WITHIN THE MEANING OF AND MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE FORWARD LOOKING STATEMENTS
INCLUDE, WITHOUT LIMITATION, THOSE REGARDING THE PROSPECTS FOR AND FACTORS
AFFECTING FUTURE REVENUES AND PROFITABILITY, LIKELIHOOD OF ADDITIONAL FINANCING,
MARKETING, AND CASH REQUIREMENTS FOR FUTURE OPERATIONS. READERS ARE CAUTIONED
THAT FORWARD LOOKING STATEMENTS INVOLVE RISKS, UNCERTAINTIES, AND FACTORS THAT
MAY AFFECT THE COMPANY'S BUSINESS AND PROSPECTS, INCLUDING WITHOUT LIMITATION
THOSE DESCRIBED BELOW AS WELL AS THE RISKS ASSOCIATED WITH: THE NATURE OF
COMPETITION; TECHNOLOGICAL DEVELOPMENTS; AND EFFECTIVE MARKETING; ALL AS
DISCUSSED IN THE COMPANY'S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION.

OVERVIEW

       The Company's revenue are comprised of service fees, product sales, and
royalties. Service fees are for systems integration services provided by UST,
the Company's subsidiary acquired in July 1996, and for the development of
custom multimedia software. Product sales are for software and hardware products
primarily sold by UST. Pursuant to the merger described in "Description of
Business - Systems Integration Services" and Note 16 to the Consolidated
Financial Statements, in April 1998, UST was merged into a separate operating
entity and accordingly, its revenues and results of operations will not be
included in the Company's results of operations after that date. Royalties are
paid to the Company by customers who resell copies of software developed by the
Company for such customers.

FISCAL 1997 COMPARED TO FISCAL 1996

       Total revenues for the year ended December 31, 1997 were $4,791,823 as
compared to $1,588,094 for the same period of 1996, an increase of approximately
$3.2 million. This increase was primarily attributable to the inclusion of
twelve months of UST revenues of approximately $3.9 million in 1997 as compared
to the inclusion of six months of UST revenues of approximately $960,000 in the
prior year following its acquisition by the Company in July 1996, as well as an
increase in UST's revenue from product sales. In addition, revenue from the
Company's custom software services increased by approximately $303,000 from the
prior year. The net loss and net loss per share were $2,900,356 and $1.70 per
share, respectively, for the year ended December 31, 1997 as compared to a net
loss and net loss per share of $3,823,621 and $2.58 per share, respectively, for
the prior year.


                                       11


<PAGE>


       During the year ended December 31, 1997, revenue from services fees for
systems integration and software development services provided by UST was
$1,802,643 as compared to $603,366 in the prior year, an increase of
approximately $1.2 million. The increase is due to the inclusion of twelve
months of UST revenues in 1997 as compared to only six months in the prior year
following its acquisition by the Company in July 1996. In addition, UST's
revenues increased during 1997 due to improved sales focus achieved after the
acquisition.

       During the year ended December 31, 1997, revenue from custom multimedia
software development services was $855,766 as compared to $552,397 for the prior
year, an increase of approximately $303,000 or 55%. The increase was primarily
due to an increase in the size of new contracts the Company was able to secure.
The Company's strategy to grow revenue from custom multimedia software
development services includes continuing to pursue larger contracts.

       During the year ended December 31, 1997, revenue from sales of products
was $2,095,218, as compared to $372,256 in the prior year, an increase of
approximately $1.7 million. This revenue represents sales of computer hardware
and software products by UST as part of their systems integration services. The
increase is due to the inclusion of twelve months of UST revenues in 1997 as
compared to only six months in the prior year following its acquisition by the
Company in July 1996. In addition, UST's revenues increased during 1997 due to
the sales of IBM AS/40 and RS/6000 midrange computers under UST's Industry
Remarketer Agreement with IBM through June 30, 1997. Sales of the IBM midrange
computers accounted for approximately 70% of the revenue from product sales
through June 30, 1997. However, effective June 30, 1997, UST chose to no longer
sell the IBM AS/400 and RS/6000 midrange computers due to gross margins being
lower than anticipated. UST continues to sell miscellaneous computer hardware
and software as part of their systems integration business. Accordingly, revenue
from product sales decreased in the second half of 1997 and is expected to stay
at similar levels through the date of the merger.

       The Company has entered into agreements that allow certain customers to
resell copies of the Company's software products in exchange for royalty
payments. Royalties were $38,196 during the year ended December 31, 1997 as
compared to $60,075 for the prior year, a decrease of approximately $22,000 or
36%. The Company generally expects royalty revenue to decrease due to the aging
shelf life of products for which the Company currently receives royalties.
However, the Company continually explores additional marketing and development
partners to increase revenues generated from royalty arrangements.

       During the year ended December 31, 1997, total operating expenses were
$7,342,245 as compared to $5,419,016 in the prior year, an increase of
approximately $1.9 million, or 35%. The prior year expenses included
approximately $867,000 for the write-offs of purchased research and development
and goodwill in connection with the acquisitions of Forsight and UST.
Accordingly, the increase from the prior year excluding the write-offs was
approximately $2.8 million. This increase is primarily due to the inclusion of
twelve months of UST operating expenses in 1997 as compared to only six months
in the prior year following its acquisition by the Company in July 1996. In
addition, the first six months of 1997 included the cost of product


                                       12


<PAGE>


sales related to the sale of IBM AS/40 and RS/6000 midrange computers under
UST's Industry Remarketer Agreement with IBM.

       During the year ended December 31, 1997, the cost of service fees for
systems integration services provided by UST was $1,054,825 as compared to
$602,718 in the prior year, resulting in gross margins of approximately 41% and
0%, respectively. The improved gross margin for 1997 is due to an increase in
revenue for services and improvements in UST's project bidding and tracking
procedures. The break-even gross margin for the 1996 period was primarily due to
the lower than anticipated level of sales for that period, as well as employee
turnover as a result of the July 1996 acquisition of UST by the Company.

       During the year ended December 31, 1997, the cost of service fees for
custom multimedia software services was $623,879 as compared to $782,413 in the
prior year, resulting in gross margins of approximately 27% and (42%),
respectively. The improvement in gross margins is primarily due to the
consolidation of the multimedia related operations into one location, as well as
an increase in revenue. The consolidation of the Redmond, Washington office was
completed by December 31, 1996. Gross margins are expected to be positive in
future periods when there are increases in revenues.

       Cost of product sales was $1,848,385 for the year ended December 31,
1997, as compared to $223,498 in the prior year, resulting in gross margins of
approximately 12% and 40%, respectively. The lower gross margin for 1997 is due
to UST's attempt to enter the IBM AS/400 and RS/6000 midrange computer market by
making sales at low gross margins. As discussed above, UST discontinued the sale
of these computers effective June 30, 1997. Although UST will continue to sell
miscellaneous computer hardware and software items as part of their systems
integration business, gross margins are not expected to be significant in future
periods. The gross margin for 1996 was unusually high due to an unusual one-time
transaction related to the sale of an IBM mid-range computer recognized during
1996 by UST.

       During the year ended December 31, 1997, research and development
expenses were $323,002 as compared to $251,778 for the prior year. Research and
development expenses included improvements on existing tools and the development
of software tools and applications to be sold.

       During the year ended December 31, 1997, selling, general and
administrative expenses were $3,492,154 as compared to $2,691,483 in the prior
year, an increase of approximately $800,000, or 30%. The increase is primarily
due to the inclusion of twelve months of UST operations in 1997 as compared to
only six months in the prior year following its acquisition by the Company in
July 1996.

       During the year ended December 31, 1997, total other income (expense)
increased by approximately $357,000 from the prior year primarily due to a
beneficial conversion interest charge of approximately $339,000 recognized in
1997 in connection with the Company's 6% subordinated convertible debenture. In
addition interest expense increased due to the inclusion of twelve months of
interest on UST's obligations to a bank in 1997 as compared to only six months


                                       13


<PAGE>


in the prior year following its acquisition by the Company in July 1996 and
interest expense for the Company's 6% debentures issued in October 1997.

FISCAL 1996 COMPARED TO FISCAL 1995

       Total revenues for the year ended December 31, 1996 were $1,588,094 as
compared to $708,652 for the same period of 1995, an increase of approximately
$879,000. This increase was primarily attributable to the inclusion of six
months of UST revenues of approximately $960,000 following its acquisition by
the Company in July 1996, offset by a decrease in sales of the Company's custom
software products of approximately $81,000. The net loss and net loss per share
were $3,823,621 and $2.58 per share, respectively, for the year ended December
31, 1996 as compared to a net loss and net loss per share of $1,949,415 and
$3.52 per share, respectively, for the prior year.

       During the year ended December 31, 1996, revenue from services fees for
systems integration and software development services provided by UST following
its acquisition by the Company in July 1996 was $603,366, as compared to $0 in
the prior year.

       During the year ended December 31, 1996, revenue from custom multimedia
software development services was $552,397 as compared to $633,092 for the prior
year, a decrease of approximately $81,000 or 13%. The decrease was primarily due
to the number and size of new contracts the Company was able to secure and to
ongoing delays in certain contracts with customers, particularly the Company's
subcontract with TRW. During the first quarter of 1997, the Company was notified
that TRW's contract with the State of California was terminated; accordingly,
the Company's subcontract with TRW was terminated. The Company recognized
approximately $134,000 in revenue from this contract during 1996 as compared to
approximately $118,000 during 1995.

       During the year ended December 31, 1996, revenue from sales of products
was $372,256, as compared to $21,739 in the prior year, an increase of
approximately $350,000. Approximately $357,000 of the revenue for the year ended
December 31, 1996, represents six months of sales of computer hardware and
software products by UST. UST sells computer hardware and software products as
part of their systems integration services. The remaining $15,000 in revenue for
the year ended December 31, 1996 and all of the revenue for the year ended
December 31, 1995 represents sales of two consumer off-the-shelf products which
the Company began marketing during the last quarter of 1995 when it initiated
test market mailing programs for certain products. Both mailings generated low
response rates; accordingly, the Company does not plan to perform any additional
mailings for these products.

       The Company has entered into agreements that allow certain customers to
resell copies of the Company's software products in exchange for royalty
payments. Royalties were $60,075 during the year ended December 31, 1996 as
compared to $53,821 for the prior year, an increase of approximately $6,000 or
12%. The Company generally expects royalty revenue to decrease due to the aging
shelf life of products for which the Company currently receives royalties.


                                       14


<PAGE>


However, the Company continually explores additional marketing and development
partners to increase revenues generated from royalty arrangements.

       During the year ended December 31, 1996, total operating expenses were
$5,419,016 as compared to $2,697,069 in the prior year, an increase of
approximately $2.7 million. The acquisitions of Forsight, Inc. ("Forsight") and
UST in February 1996 and July 1996, respectively, primarily accounted for the
increase. The increase includes the write-off of purchased research and
development in connection with the acquisition of Forsight, which totaled
approximately $289,000, and the write-off of goodwill in connection with the
acquisition of UST, which totaled approximately $578,000.

       For the years ended December 31, 1996 and 1995, the cost of service fees
for custom multimedia software exceeded custom multimedia software revenue,
resulting in negative gross margins of approximately (42%) and (14%),
respectively. The negative gross margin for 1996 is primarily due to the lower
than anticipated level of sales of the Company's custom multimedia software
services, particularly for sales expected in connection with the acquisition of
Forsight.

       Cost of service fees for systems integration services provided by UST
following its acquisition by the Company was approximately $603,000 for the year
ended December 31, 1996, resulting in an approximate break-even gross margin for
1996. The break-even gross margin for the 1996 period was primarily due to the
lower than anticipated level of sales of UST's services, as well as employee
turnover as a result of the merger.

       Cost of product sales was $223,498 for the year ended December 31, 1996,
as compared to $11,253 in the prior year. Approximately $219,000 of these costs
for the year ended December 31, 1996 was from the sale of products by UST
following its acquisition by the Company and resulted in a gross margin of
approximately 40%, an unusually high margin due to a one-time transaction
related to the sale of an IBM mid-range computer recognized during 1996.
Approximately $5,000 of these costs for the year ended December 31, 1996 and all
of the costs for the prior year are the costs associated with the consumer
off-the-shelf marketing initiative discussed above.

       During the year ended December 31, 1996, research and development
expenses were $251,778 as compared to $257,979 for the prior year. Research and
development expenses were consistent with the prior year as the Company
continued to improve on existing tools as needed and develop modified versions
of traditional custom software products to be sold to a broad range of
commercial customers.

       During the year ended December 31, 1996, selling, general and
administrative expenses were $2,691,483 as compared to $1,707,521 in the prior
year, an increase of approximately $984,000, or 58%. Approximately $922,000 of
the increase is due to the acquisitions of Forsight and UST. The remaining
increase is due to the Company's increased sales and marketing efforts.

       During the year ended December 31, 1996, total other income (expense)
decreased by approximately $32,000 from the same period of the prior year due to
losses recognized during


                                       15


<PAGE>


1996 related to the consolidation of the multimedia division, the write off of
certain obsolete inventory and computer equipment, as well as interest expense
on UST's line-of-credit and bank note.

CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES

       The Report of Independent Accountants on the 1997 consolidated financial
statements of the Company includes an explanatory paragraph stating that the
recurring losses from operations and the existing cash resources may be
insufficient to fund planned operations and that these conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The Company incurred a net loss of $2,900,356 for the year ended December 31,
1997, and as of December 31, 1997 had an accumulated deficit of $13,566,315. In
addition, the Company is in litigation with the holder of its subordinated
convertible debenture related to the redemption of the debenture and the
issuance of 1,052,624 shares of the Company's common stock in January 1998 (See
"Legal Proceedings" and Note 15 to the Consolidated Financial Statements.) As
discussed in Note 1 to the Notes to the Consolidated Financial Statements and
under STRATEGY TO ACHIEVE PROFITABLE OPERATIONS below, the Company plans to
implement certain actions to address the losses and liquidity matters. However,
there can be no assurance that such actions will generate sufficient cash flow
to ensure the continued existence of the Company; or that additional financing
will be available from any sources at terms and conditions suitable to the
Company.

       For the year ended December 31, 1997, the Company used cash of
approximately $2.2 million in operations. In addition to the net loss of
approximately $2.9 million, the Company experienced an increase in accounts
receivable and a corresponding increase in accounts payable and accrued
expenses. Net cash of approximately $474,000 was provided from proceeds received
at maturity of U.S. government securities, offset by net cash of approximately
$87,000 used for the purchase of equipment. Net cash of approximately $2.0
million was provided by financing activities representing approximately $2.3
million provided by the issuance of the Company's 6% Subordinated Convertible
debenture and the exercise of common stock options and warrants, offset by
approximately $334,000 used to make payments on UST's obligations to a bank.

       For the year ended December 31, 1996, the Company used cash of
approximately $2.8 million in operations, primarily due to the net loss of
approximately $3.8 million, net of amortization and depreciation and the
write-offs of purchased research and development and goodwill in connection with
the acquisitions of Forsight and UST, which totaled approximately $1.1 million.
Net cash of approximately $634,000 was used for investing activities for the
purchase of U.S. government securities, equipment, and Forsight. Net cash of
approximately $200,000 was provided by the exercise of 28,571 common stock
options, offset by approximately $43,000 used to make payments on UST's
obligations to a bank.

       For the year ended December 31, 1995, the Company used cash of
approximately $1.8 million in operating activities. In addition to the net loss,
the Company experienced increases in accounts receivables and other assets. Net
cash of approximately $1.7 million was provided by investing activities
primarily from proceeds received at maturity of liquid investment securities.
Net cash of


                                       16


<PAGE>


approximately $3.8 million was provided from financing activities as a result of
net proceeds received from the December 1995 public offering of 920,000 shares
of the Company's Common Stock. Working capital at December 31, 1995 was
approximately $4.1 million.

       Working capital of approximately $650,000 at December 31, 1997, together
with funds to be generated from investment income and future revenues are not
expected to provide sufficient liquidity to meet anticipated cash needs on
either a short-term or long-term basis. On April 8, 1998, the Company completed
the divestiture of its wholly owned subsidiary, UST, as described in
"Description of Business - Systems Integration Services" and Note 16 to the
Notes to the Consolidated Financial Statements. Consideration received by the
Company includes (i) 100,000 shares of common stock of UST valued at $500,000 or
$5.00 per share; (ii) a $600,000 promissory note due the earlier of the closing
of a $2,000,000 private placement or sixty days of the closing of the merger;
and (iii) a convertible debenture for $927,000 due the earlier of 18 months from
the closing of the merger or at the time of a public offering by UST. In
addition, in February 1998, the Company was notified by Nasdaq that it was not
in compliance with Nasdaq's new net tangible assets requirement and that the
Company's securities were scheduled for delisting. However, the Company has
requested a temporary exemption to the new requirements by its submission of a
proposed compliance plan. The Company is awaiting the decision of Nasdaq
regarding its request and until a decision is reached by Nasdaq the delisting
action has been stayed. Management recognizes that the Company will require
additional financing until such time that revenues are of sufficient volume to
generate positive cash flows from operations. Although the Company will be
seeking financing from placements of equity or debt securities, there can be no
assurances that such financing will be available, or if available, will be under
terms and conditions suitable to the Company.

STRATEGY TO ACHIEVE PROFITABLE OPERATIONS

       Subsequent to the merger and resulting divestiture of UST in April 1998,
the Company's strategy to increase revenue, which solely comprises the
multimedia division, includes the implementation of an operating plan built
around the division's mission statement - "We optimize human performance using
leading edge technology-based training solutions to eliminate the barriers of
time and space."

       The plan also includes the implementation of a more focused sales and
marketing strategy which targets the division's sales and marketing efforts of
technology-based training solutions to the manufacturing and transportation
industries. Existing clients are also an important component of the Company's
marketing strategy. Follow-on projects leverage sales and marketing resources
and strengthen the Company's client relationships. The Company believes that it
has good relationships with its existing customer base and expects that these
contacts will enable it to successfully pursue this strategy.

       In addition, the division will endeavor to become a Microsoft Solutions
Provider which requires that the Company maintain two certified Microsoft
professionals on staff. The Company believes that it can acquire this
certification during 1998 and that this affiliation will provide sales leads for
its services.


                                       17


<PAGE>


       In the normal course of business, the Company evaluates the acquisition
of businesses, products and technologies that complement the Company's business.
In addition, the Company may also evaluate other strategic alliances and joint
ventures that can provide the Company with additional complementary capabilities
or further broaden its base of customers requiring the products and services
currently provided. The Company has no present commitments or agreements with
respect to any such transaction. However, the Company may acquire businesses,
products, or technologies in the future.

       There can be no assurance that the strategies addressed above and
elsewhere herein will generate sufficient revenues and cash flow for the Company
to reach profitability or to ensure the continued existence of the Company.

IMPACT OF INFLATION

       Inflation has not had any significant effect of the Company's operations.

NEW ACCOUNTING STANDARDS

       The Financial Accounting Standards Board issued SFAS No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information," in June 1997, which are both effective for
the year ending December 31, 1998. SFAS No. 130 establishes standards for
reporting comprehensive income in a full set of general purpose financial
statements either in the income statement or in separate statement. The Company
will begin reporting comprehensive income in the first quarter of 1998. SFAS No.
131 establishes standards for reporting information about operating segments,
including related disclosures about products and services, geographic areas and
major customers. The Company will begin making the disclosure required by SFAS
No. 131 in the financial statements for the year ended December 31, 1998.

       In October 1997, the AICPA issued Statement of Position ("SOP") 97-2,
Software Revenue Recognition, which will supercede SOP 91-1 effective January 1,
1998. Management has assessed this new statement and believes that its adoption
will not have a material effect on the timing of the Company's revenue
recognition or cause changes to its revenue recognition policies.

IMPACT OF YEAR 2000 ISSUE

       The Company is in the process of assessing its computer applications to
ensure their functionality with respect to the "Year 2000" millennium change. At
present, the Company does not anticipate that material incremental costs will be
incurred in any single future year.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THE STATEMENTS CONTAINED IN THIS DOCUMENT AND OTHER STATEMENTS WHICH ARE
NOT HISTORICAL FACTS ARE FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING, THE SUCCESS OF NEWLY IMPLEMENTED SALES AND MARKETING
STRATEGIES; THE CONTINUED EXISTENCE OF AGREEMENTS WITH CUSTOMERS; MARKET
ACCEPTANCE OF THE COMPANY'S PRODUCTS AND SERVICES;


                                       18


<PAGE>


THE ABILITY TO OBTAIN A LARGER NUMBER AND SIZE OF CONTRACTS; THE TIMING OF
CONTRACT AWARDS; WORK PERFORMANCE AND CUSTOMER RESPONSE; THE IMPACT OF
COMPETITIVE PRODUCTS AND PRICING; TECHNOLOGICAL DEVELOPMENTS BY THE COMPANY'S
COMPETITORS OR DIFFICULTIES IN THE COMPANY'S RESEARCH AND DEVELOPMENT EFFORTS;
AND OTHER RISKS AS DETAILED IN THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION
FILINGS.


ITEM 7.  FINANCIAL STATEMENTS

         The information required by Item 7 begins at page F-1 that appears
after this page.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.
         None.


                                       19


<PAGE>


                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES

                               TABLE OF CONTENTS




                                                                       Page No.

Report of Coopers & Lybrand L.L.P, Independent Accountants, on the
         December 31, 1997 and 1996 Consolidated Financial Statements    F-2

Consolidated Balance Sheets, December 31, 1997 and 1996                  F-3

Consolidated Statements of Operations for the years
         ended December 31, 1997, 1996, and 1995                         F-4

Consolidated Statements of Stockholders' Equity for the years
         ended December 31, 1997, 1996, and 1995                         F-5

Consolidated Statements of Cash Flows for the years
         ended December 31, 1997, 1996, and 1995                         F-6

Notes to Consolidated Financial Statements                            F-7 - F-18


                                      F-1


<PAGE>


                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders
Strategic Solutions Group, Inc.

We have audited the accompanying consolidated balance sheets of Strategic
Solutions Group, Inc. and its subsidiaries (the Company) as of December 31, 1997
and 1996 and the consolidated statements of operations, stockholders' equity,
and cash flows for each of the three years ended in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as of
December 31, 1997 and 1996 and the consolidated results of their operations and
their cash flows for each of the three years ended in the period ended December
31, 1997 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has a significant accumulated deficit, and its existing cash
resources are insufficient to fund planned operations. In addition, as discussed
in Notes 1 and 15 to the consolidated financial statements, the Company is
involved in litigation with the holder of its convertible debenture. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans to address these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.



                                                     COOPERS & LYBRAND L.L.P


McLean, Virginia
March 27, 1998, except for Note 16 for which the date is April 8, 1998


                                      F-2

<PAGE>


                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,       DECEMBER 31,
                                                                                                 1997               1996
                                                                                            ---------------    ---------------
<S><C>
                                     ASSETS
    Current assets
           Cash and cash equivalents                                                        $    1,149,372     $      939,281
           Investment in U.S. government securities                                                    --             474,144
           Accounts receivable, net of allowance for doubtful accounts
              of $75,000 and $40,201, respectively                                                 666,841            411,220
           Prepaid expenses and other current assets                                               137,618            189,471
                                                                                            ---------------    ---------------
              Total current assets                                                               1,953,831          2,014,116
                                                                                            ---------------    ---------------

    Property and equipment, at cost
           Computers, furniture and equipment                                                    1,058,313            990,105
           Less accumulated depreciation                                                           701,390            490,193
                                                                                            ---------------    ---------------
              Net property and equipment                                                           356,923            499,912
                                                                                            ---------------    ---------------

    Other assets                                                                                 1,446,066             55,681
                                                                                            ---------------    ---------------

                                                                                            $    3,756,820     $    2,569,709
                                                                                            ===============    ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
           Accounts payable and accrued liabilities                                         $    1,027,935     $      796,729
           Deferred revenue                                                                         66,558             66,088
           Note payable to bank                                                                     40,334             34,989
           Line of credit                                                                              --             320,833
           Other current liabilities                                                               168,700            111,074
                                                                                            ---------------    ---------------
              Total current liabilities                                                          1,303,527          1,329,713

    Note payable to bank                                                                               --              18,253
    Convertible subordinated debenture                                                           1,487,864                --
    Other long-term liabilities                                                                        --             149,125
                                                                                            ---------------    ---------------

              Total liabilities                                                                  2,791,391          1,497,091
                                                                                            ---------------    ---------------

    Commitments and contingencies

    Stockholders' equity
           Common stock, $.0001 par value.  Authorized 5,000,000
              shares; issued and outstanding 1,768,839 and 1,518,880
              shares as of December 31, 1997 and 1996                                                  177                152
           Additional paid-in capital                                                           14,647,910         11,893,549
           Accumulated deficit                                                                 (13,566,315)       (10,665,959)
           Deferred compensation                                                                  (116,343)          (155,124)
                                                                                            ---------------    ---------------
              Total stockholders' equity                                                           965,429          1,072,618
                                                                                            ---------------    ---------------

                                                                                            $    3,756,820     $    2,569,709
                                                                                            ===============    ===============
</TABLE>

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


                                      F-3

<PAGE>


                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                     ---------------------------------------------------
                                                                         1997               1996              1995
                                                                     --------------    --------------    ---------------
<S><C>
       Revenue

            Service fees                                             $   2,658,409     $   1,155,763     $      633,092
            Product sales                                                2,095,218           372,256             21,739
            Royalties                                                       38,196            60,075             53,821
                                                                     --------------    --------------    ---------------
                       Total revenue                                     4,791,823         1,588,094            708,652
                                                                     --------------    --------------    ---------------

       Expenses

            Cost of service fees                                         1,678,704         1,385,131            720,316
            Cost of product sales                                        1,848,385           223,498             11,253
            Research and development                                       323,002           251,778            257,979
            Selling, general and administrative                          3,492,154         2,691,483          1,707,521
            Write-off of purchased research and development                     --           289,330                 --
            Write-off of goodwill related to purchase of
                U.S. Technologies, Inc.                                         --           577,796                 --
                                                                     --------------    --------------    ---------------
                       Total operating expenses                          7,342,245         5,419,016          2,697,069
                                                                     --------------    --------------    ---------------
       Loss from operations                                             (2,550,422)       (3,830,922)        (1,988,417)

       Other (expense) income, net                                        (349,934)            7,301             39,002
                                                                     ==============    ==============    ===============
       Net loss                                                      $  (2,900,356)    $  (3,823,621)    $   (1,949,415)
                                                                     ==============    ==============    ===============

       Net loss per common share - basic and diluted                 $       (1.70)    $       (2.58)    $        (3.52)
                                                                     ==============    ==============    ===============

       Weighted average number of common shares outstanding              1,705,228         1,483,831            553,687
                                                                     ==============    ==============    ===============
</TABLE>


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


                                      F-4

<PAGE>


                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                      COMMON STOCK         ADDITIONAL
                                                  ---------------------     PAID-IN       ACCUMULATED      DEFERRED
                                                    SHARES      AMOUNT      CAPITAL         DEFICIT      COMPENSATION     TOTAL
                                                  ----------   --------  -------------  --------------   ------------ -------------
<S><C>
Balance, December 31, 1994                           520,739        52      7,551,490      (4,892,923)          --       2,658,619

   Exercise of incentive stock options                   285        --          2,250              --           --           2,250
   Net proceeds from public offering of
     shares of common stock, $5.25 per share,
     net of offering costs of $1,103,104             920,000        92      3,726,884              --           --       3,726,976
   Net loss                                               --        --             --      (1,949,415)          --      (1,949,415)
                                                  ----------   --------  -------------  --------------  -----------   -------------
Balance, December 31, 1995                         1,441,024       144     11,280,624      (6,842,338)          --       4,438,430

   Exercise of  stock options                         32,856         3        238,424              --           --         238,427
   Stock issued for services                          25,000         3        193,904              --     (193,907)             --
   Stock issued in connection with
     Forsight acquisition                             20,000         2        159,373              --           --         159,375
   Adjustment to 1995 offering costs                      --        --         21,224              --           --          21,224
   Amortization of deferred compensation                  --        --             --              --       38,783          38,783
   Net loss                                               --        --             --      (3,823,621)          --      (3,823,621)
                                                  ----------   --------  -------------  --------------  -----------   -------------

Balance, December 31, 1996                         1,518,880       152     11,893,549     (10,665,959)    (155,124)      1,072,618

   Exercise of  stock options and warrants           111,071        11        792,606              --           --         792,617
   Grant of stock options in connection with
     financial consulting agreement                       --        --      1,150,000              --           --       1,150,000
   Exercise of  stock options in connection with
     financial consulting agreement                  100,000        10        188,979              --           --         188,989
   Stock issued for services                          38,888         4        171,246              --           --         171,250
   Warrants issued in connection with
     convertible subordinated debenture                   --        --        112,136              --           --         112,136
   Value of beneficial conversion feature on
     convertible subordinated debenture                   --        --        339,394              --           --         339,394
   Amortization of deferred compensation                  --        --             --              --       38,781          38,781
   Net loss                                               --        --             --      (2,900,356)          --      (2,900,356)
                                                  ==========   ========  =============  ==============  ===========   =============
Balance, December 31, 1997                         1,768,839   $   177   $ 14,647,910   $ (13,566,315)  $ (116,343)   $    965,429
                                                  ==========   ========  =============  ==============  ===========   =============
</TABLE>


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


                                      F-5

<PAGE>


                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                   YEAR ENDED DECEMBER 31,
                                                                                          1997             1996            1995
                                                                                       ------------    -------------   -------------
<S><C>
     CASH FLOWS FROM OPERATING ACTIVITIES
        Net loss                                                                       $(2,900,356)    $ (3,823,621)   $ (1,949,415)
        Adjustments to reconcile net loss to net cash used in
               operating activities, net of effects from purchases
               of Forsight, Inc. and U.S. Technologies, Inc.
            Depreciation and amortization                                                  284,917          308,524         146,867
            Loss on disposal of assets                                                       4,666           22,634          21,022
            Provision for bad debt expense                                                 119,096           28,981           6,000
            Interest expense associated with beneficial conversion
               feature on convertible subordinated debentures                              339,394               --              --
            Noncash expense for services                                                   171,250               --              --
            Write-off of purchased research and development                                     --          289,330              --
            Write-off of goodwill                                                               --          577,796              --
            Increase (decrease) in cash from changes in assets and liabilities
               Accounts and interest receivable                                           (374,717)         (31,119)       (109,073)
               Prepaid expenses and other current assets                                    51,853          (27,009)         68,586
               Other assets                                                                  2,415           25,276         (48,102)
               Accounts payable and accrued liabilities                                    231,206           (1,146)         17,322
               Other liabilities                                                           (91,029)        (130,659)         62,100
                                                                                       ------------    -------------   -------------
        Net cash used in operating activities                                           (2,161,305)      (2,761,013)     (1,784,693)
                                                                                       ------------    -------------   -------------
     CASH FLOWS FROM INVESTING ACTIVITIES
        Purchase of U.S. government securities                                                  --         (474,144)             --
        Proceeds from maturity of U.S. government securities                               474,144               --       1,698,319
        Capital expenditures                                                               (86,570)        (134,033)        (46,462)
        Proceeds from sales of property and equipment                                           --           11,200          14,038
        Payment for purchase of Forsight, Inc., net of cash acquired                            --          (46,424)             --
        Cash acquired from purchase of U.S. Technologies, Inc.                                  --            9,549              --
                                                                                       ------------    -------------   -------------
        Net cash provided by (used in) investing activities                                387,574         (633,852)      1,665,895
                                                                                       ------------    -------------   -------------
     CASH FLOWS FROM FINANCING ACTIVITIES
        Net proceeds from issuance of convertible subordinated debenture                 1,335,957               --              --
        Net proceeds from exercise of options and warrants                                 981,606          199,997           2,250
        Net proceeds from sale of common stock                                                  --               --       3,788,321
        Payments on line of credit                                                        (290,833)         (26,886)             --
        Payments on notes payable to bank                                                  (42,908)         (16,499)             --
                                                                                       ------------    -------------   -------------
        Net cash provided by financing activities                                        1,983,822          156,612       3,790,571
                                                                                       ------------    -------------   -------------
     Net increase (decrease) in cash and cash equivalents                                  210,091       (3,238,253)      3,671,773

     Cash and cash equivalents, beginning of year                                          939,281        4,177,534         505,761
                                                                                       ------------    -------------   -------------
     Cash and cash equivalents, end of year                                            $ 1,149,372     $    939,281    $  4,177,534
                                                                                       ============    =============   =============
     SUPPLEMENTAL DISCLOSURES OF CASH PAID:
        Interest                                                                       $    33,901     $     22,701    $         --
        Income taxes                                                                            --               --              --

     SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
        Stock issued as payment for unearned professional fees                         $ 1,150,000     $    193,907    $         --
        Stock issued as payment for services                                               171,250               --              --
        Stock options exercised in lieu of payment for professional fees                        --           38,430              --
        Stock issued in connection with acquisition of Forsight                                 --          159,375              --
        Adjustment to 1995 offering costs                                                       --           21,224              --
        Discount on convertible subordinated debenture                                     112,136               --              --
</TABLE>


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


                                      F-6




<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------



1.     THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       DESCRIPTION OF BUSINESS. Strategic Solutions Group, Inc. (formerly,
Pacific Animated Imaging Corporation) and its subsidiaries (the "Company") are
full-service providers of technology based software solutions and computer
systems integration (including the sale of hardware and software products) and
support services. The Company's Multimedia division specializes in the
development of custom interactive multimedia software for use in the areas of
process enhancement, technical documentation, training, and performance support
for a variety of commercial and industrial end-users. The Company's wholly owned
subsidiary, U.S. Technologies, Inc. ("UST"), specializes in computer systems
integration and support services and in the development of software applications
related to work group and work flow computing solutions.

       GOING CONCERN. The Company's financial statements for the year ended
December 31, 1997 have been prepared on a going concern basis which contemplates
the realization of assets and the settlement of liabilities and commitments in
the normal course of business. The Company incurred a net loss of $2,900,356 for
the year ended December 31, 1997, and as of December 31, 1997 had an accumulated
deficit of $13,566,315. The Company is in litigation with the holder of its
subordinated convertible debenture related to the redemption of the debenture
and the issuance of 1,052,624 shares of the Company's common stock in January
1998 (see Note 15.) In addition, in February 1998, the Company was notified by
Nasdaq that it was not in compliance with Nasdaq's new net tangible assets
requirement and that the Company's securities were scheduled for delisting.
However, the Company has requested a temporary exemption to the new requirements
by its submission of a proposed compliance plan. The Company is awaiting the
decision of Nasdaq regarding its request and until a decision is reached by
Nasdaq the delisting action has been stayed. Management recognizes that in order
to develop and market its services effectively, the Company will require
additional financing until such time that service fees are of sufficient volume
to generate positive cash flows from operations. Although the Company may seek
financing from placements of its equity securities or placements of debt, there
can be no assurances that such financing will be available or, if available,
will be under terms and conditions suitable to the Company. Management's plans
to address the losses and liquidity matters include (i) disposing of the
Company's wholly owned subsidiary, UST, for securities and short and long-term
notes receivable (see Note 16); (ii) growing the multimedia operations by
implementing a more focused marketing and sales program; and (iii) pursuing an
acquisition program of related businesses. However, no assurances can be given
that these measures, even if successful, will ensure the continued existence of
the Company. The Company's financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

       PRINCIPLES  OF  CONSOLIDATION.  The  consolidated  financial  statements
include the  accounts of Strategic Solutions Group, Inc. and its wholly owned
subsidiaries.

       REVENUE RECOGNITION. Revenues from hardware and software product sales
are recognized on delivery. Revenues from software development, consulting and
training services are recognized as services are performed. Revenues from
certain custom multimedia software products are recognized using the percentage
of completion method due to the significant customization involved in their
development. Cost estimates are reviewed periodically as work progresses, and
adjustments to revenue are reflected in the period in which revisions to such
estimates are deemed necessary. Revenues from royalties are recognized in the
period for which the royalties are earned. Software products generally are
delivered without post sale vendor obligations and without a significant
obligation to the customer. Deferred revenue represents amounts advanced by
customers and is recognized as revenue upon delivery of the products or services
and is adjusted on a quarterly basis to reflect the status of projects.

                                      F-7

<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


       USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and contingent liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

       CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.

       INVESTMENTS IN U.S. GOVERNMENT SECURITIES. The Company anticipates that
any investments in U.S. Government securities, composed of U.S. Treasury Bills
and Notes, would be available for sale in response to the Company's liquidity
needs, if necessary. Accordingly, these securities are principally considered as
available-for-sale as defined by Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." As of December 31, 1996, amortized cost approximated market,
therefore, no adjustment was made to stockholders' equity. Interest income is
accrued as earned.

       PROPERTY AND EQUIPMENT. Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. The Company has estimated the useful lives
of computer hardware and software to be three years and furniture and fixtures
to be seven years. Amortization of leasehold improvements is computed using the
straight-line method over the shorter of the estimated useful life of the
improvements or the remaining lease term. When assets are retired or disposed,
the cost and the related accumulated depreciation are removed from the accounts,
and any resulting gain or loss is recognized in operations for the period.

       PER SHARE DATA. Effective December 31, 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." Basic earnings per share is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing the net loss by the weighted average
number of common shares outstanding after giving effect to all dilutive
potential common shares that were outstanding during the period. Potential
common shares include stock options, warrants, or other convertible securities
that could be exercised or converted into common stock and are not included in
the computation of dilutive earnings per share if they are anti-dilutive. The
Company did not have any dilutive potential common shares for any of the years
presented. Net loss available to common stockholders was not adjusted for any of
the years presented. Earnings per share for all periods presented conforms to
SFAS No. 128.

       RESEARCH AND DEVELOPMENT EXPENSES AND SOFTWARE DEVELOPMENT COSTS.
Statement of Financial Accounting Standards No. 86, "Accounting for the Cost of
Computer Software to be Sold, Leased or Otherwise Marketed" (SFAS 86) requires
the capitalization of certain software development costs once technological
feasibility is established, which the Company generally defines as the
completion of a working model. Capitalization ceases when the products are
available for general release to customers, at which time amortization of the
capitalized costs begins on a straight-line basis over the estimated product
life, or on the ratio of current revenues to total projected product revenues,
whichever is greater. To date, software development costs qualifying for
capitalization have been insignificant. Accordingly, the Company has not
capitalized any software development costs with respect to its continuing
operations. In addition, research and development costs including software
development costs prior to technological feasibility are expensed in the period
in which they are incurred.

       CONCENTRATION OF CREDIT RISK. The Company had approximately $950,000 and
$750,000 on deposit in money market funds with strong credit ratings and
checking accounts at various commercial banking institutions in excess of
insured amounts at December 31, 1997 and 1996, respectively. The Company has not
experienced losses on these investments.

                                      F-8


<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


       The Company provides hardware and software products, develops software,
and performs services for its customers located throughout the United States.
The customer base of one of the Company's subsidiaries, which accounted for
approximately 81% and 60% of the Company's 1997 and 1996 revenues, respectively,
is located primarily throughout Florida. The Company provides credit in the
normal course of business and, to date, has not experienced significant losses
related to receivables from individual customers or groups of customers in a
particular industry or geographic area. In addition, for certain orders for
custom multimedia software development projects, the Company requires advances
or deposits of at least one-third of the price of the custom software with
additional amounts due at certain milestones during the custom software
development process. Due to these factors, management believes no additional
credit risk beyond amounts provided for in the doubtful account allowance is
inherent in the Company's accounts receivable.

       For the year ended December 31, 1997, no one customer accounted for 10%
of the Company's revenue. For the year ended December 31, 1996, one customer, a
systems integrator, accounted for 10% of the Company's revenue. For the year
ended December 31, 1995, three customers, an automobile parts distribution
company, a government contractor, and a truck manufacturer, accounted for 17%,
17%, and 13%, respectively, of the Company's revenue. At December 31, 1997, one
customer, an insurance company, accounted for approximately 12% of accounts
receivable. At December 31, 1996, two customers, a government contractor and a
department store, accounted for approximately 14% and 18%, respectively, of
accounts receivable.

       RECOVERABILITY OF LONG-LIVED ASSETS. The Company evaluates the
recoverability of the carrying value of property and equipment and intangible
assets in accordance with the provisions of Statement of Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of".
The Company considers historical performance and anticipated future results in
its evaluation of potential impairment. Accordingly, when indicators of
impairment are present, the Company evaluates the carrying value of these assets
in relation to the operating performance of the business and future and
undiscounted cash flows expected to result from the use of these assets.
Impairment losses are recognized when the sum of expected future cash flows are
less than the assets' carrying value. On December 31, 1996, the Company
recognized an impairment loss of approximately $578,000 related to the write-off
of goodwill that resulted from the purchase of UST (see Note 2). Factors leading
to the impairment were a combination of historical losses, anticipated future
losses, and inadequate cash flows.

       STOCK SPLIT. On January 30, 1997, the Board of Directors of the Company
voted and approved a three-for-two split of the Company's common stock. The
split was voted and approved by the shareholders at the annual meeting of
shareholders held on May 22, 1997. However, the Board of Directors exercised its
discretionary authority and voted affirmatively with respect to a shareholder
proposal to postpone the effective date of the three-for-two split until such
time deemed appropriate by the Board of Directors. Neither the par value of the
stock nor the number of authorized shares will be affected by the split. Had the
additional shares resulting from the proposed stock split been outstanding
during the years ended December 31, 1997 and 1996, net loss per share would have
been as follows: 1997, $1.13 and 1996, $1.72. Financial information contained
elsewhere in this report has not been adjusted to reflect the impact of the
proposed common stock split.

       INCOME TAXES. Deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable for the period and the
change during the period in deferred tax assets and liabilities.

                                      F-9

<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


       FAIR VALUE OF FINANCIAL INSTRUMENTS. During 1995, the Company adopted
Statement of Financial Accounting Standards No. 107, "Disclosure of Fair Value
of Financial Instruments" ("SFAS 107"). The Company believes that for all
financial instruments, as defined by SFAS 107, the carrying amount, as reported
in the balance sheet approximates fair value.

       NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board issued
SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosure
About Segments of an Enterprise and Related Information," in June 1997, which
are both effective for the year ending December 31, 1998. SFAS No. 130
establishes standards for reporting comprehensive income in a full set of
general purpose financial statements either in the income statement or in
separate statement. The Company will begin reporting comprehensive income in the
first quarter of 1998. SFAS No. 131 establishes standards for reporting
information about operating segments, including related disclosures about
products and services, geographic areas and major customers. The Company will
begin making the disclosure required by SFAS No. 131 in the financial statements
for the year ended December 31, 1998.

       In October 1997, the AICPA issued Statement of Position ("SOP") 97-2,
"Software Revenue Recognition," which will supercede SOP 91-1 effective January
1, 1998. Management has assessed this new statement and believes that its
adoption will not have a material effect on the timing of the Company's revenue
recognition or cause changes to its revenue recognition policies.

       RECLASSIFICATIONS.  Certain  prior year amounts have been  reclassified
to  correspond  to the current year presentation.


2.     ACQUISITIONS

       During 1996, the Company acquired the entities described below, which
were accounted for by the purchase method of accounting. The results of
operations of the acquired companies are included in the Company's statement of
income for the period in which they were owned by the Company.

       ACQUISITION OF FORSIGHT, INC.

       Effective February 2, 1996, the Company acquired substantially all the
assets of Forsight, Inc. ("Forsight"), a closely held corporation engaged in the
business of developing and selling interactive multimedia software to the
business communications and the consumer publishing market for a total purchase
price of approximately $375,000, plus direct expenses of the acquisition which
totaled approximately $23,000. The Company acquired cash, fixtures and
equipment, accounts receivable, intellectual property, and other miscellaneous
assets for the assumption of certain liabilities of Forsight, which totaled
approximately $200,000, and 20,000 unregistered shares of common stock of the
Company. Other terms of the acquisition included the employment by the Company
of certain of Forsight's key employees, who will continue as part of the
Company's senior management team; and the acquisition of all of the shares of
Series A Convertible Preferred Stock of Forsight from Circa Pharmaceuticals,
Inc. in an amount equal to thirty percent of the net income each year for three
years of Forsight's operations up to a maximum value of $600,000, payable in
unregistered shares of common stock of the Company. The Series A Convertible
Preferred Stock of Forsight was canceled after the acquisition. The Company
allocated approximately $109,000 to identifiable tangible assets and wrote-off
approximately $289,000 as in process research and development on the date of
acquisition. The acquisition did not meet materiality thresholds for separate
pro forma disclosure.

       ACQUISITION OF U.S. TECHNOLOGIES, INC.

       Effective July 19, 1996, U.S. Technologies Inc. Acquisition Corporation,
a wholly owned subsidiary of the Company, merged with and into U.S.
Technologies, Inc. ("UST"), with UST being the surviving

                                      F-10

<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


corporation. As a result of the merger, the Company owns 100% of UST.
Consideration at the time of purchase amounted to approximately $642,000 which
represents the excess of UST's liabilities over its assets as of the date of the
merger. On December 31, 1996, the Company wrote-off approximately $578,000,
which represented the purchase consideration of approximately $642,000, net of
approximately $64,000 of accumulated amortization, as an impairment loss (see
Note 1).

       In addition, under the terms of the merger, the former 100% owner of UST
has the ability to earn up to 31,068 shares of common stock in the Company (the
market value of which was $400,000 as of the date of the merger), provided
certain financial milestones are met by UST. The value of the shares of common
stock will be accounted for as compensation at the time of issuance. As of
December 31, 1997, no shares of the Company's common stock had been earned by
the former 100% owner of UST. Also in connection with the acquisition, the
Company made a commitment to provide working capital to UST. Through December
31, 1997, working capital provided to UST totaled approximately $2.3 million.

       If the acquisition of UST had occurred on January 1, 1995, management
estimates that on an unaudited pro forma consolidated basis, revenues, total
operating expenses, net loss, and net loss per common share would have been as
follows:
                                                         1996          1995
                                                         ----          ----
       Revenues                                       $2,918,235    $5,361,617
       Total operating expenses                       $6,945,473    $7,741,381
       Net loss                                      ($4,036,851)  ($2,379,764)
       Net loss per common share - basic and diluted    ($2.72)       ($4.39)

       These estimates were based on assumptions that management deems
appropriate, but the results are not necessarily indicative of those that might
have occurred had the acquisition taken place on January 1, 1995.


3.     ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

       Accounts payable and accrued liabilities as of December 31, 1997 and 1996
consist of the following:

                                                         DECEMBER 31,
                                                     1997            1996
                                                     ----            ----
       Accounts payable                           $  673,417      $ 398,273
       Payroll and related expense                   192,552        171,262
       Other                                         161,966        227,194
                                                  ----------     ----------
                                                  $1,027,935      $ 796,729
                                                 ============      =========


4.        LINE OF CREDIT

       As of December 31, 1996, UST had $320,833 of short-term debt outstanding
under a line of credit with a bank. This line of credit was collateralized by
accounts receivable as well as the personal guarantee of the former sole
stockholder of UST. In July 1996, in connection with the acquisition of UST,
this line of credit was renegotiated and required twelve monthly principal
payments, which were guaranteed by the Company, of $5,833 plus interest through
July 1997. Interest was at the bank's prime rate plus 2%. The remaining unpaid
principal balance was due on August 18, 1997. In August 1997, UST paid $250,000
toward the unpaid balance of approximately $280,000. Effective October 23, 1997,
the remaining balance on the line of credit of approximately $30,000 was
consolidated with the then outstanding balance of the note payable. As of
December 31, 1997, this is reflected in Note Payable to Bank (see Note 5).

                                      F-11

<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------



5.        NOTE PAYABLE TO BANK

       As of December 31, 1997 and 1996, UST had notes payable to a bank, as
follows:

                                                   DECEMBER 31,   DECEMBER 31,
                                                      1997           1996
                                                      ----           ----
Note payable to bank in monthly payments of
  $10,000, including interest at 10.5% through
  April 1998; collateralized by equipment,
  inventory, and accounts receivable (see Note 4)   $ 40,334              --
Note payable to bank in monthly payments of
  $3,222, including interest at 9.75% through
  June 1998; collateralized by equipment,
  inventory, and accounts receivable                      --        $ 53,242

Less current portion                                 (40,334)        (34,989)
                                                    --------        --------

Note payable to bank, less current portion          $     --        $ 18,253
                                                    ========        ========


6.      LONG-TERM DEBT

       On October 31, 1997, the Company issued a $1,600,000 6% Convertible
Subordinated Debenture (the "Debenture"). The Debenture accrues interest from
the date of issuance and is due and payable on October 31, 1999; or, at the
option of the Company, the principal of, and interest on, the Debenture are
payable in shares of the Company's common stock. The Debenture is subordinated
to all indebtedness and obligations of the Company for borrowed money, under
financing leases, for all obligations issued or assumed as full or partial
payment for property, and any trade obligation entered into in the ordinary
course of business. The holder of the Debenture is entitled, at its option, to
convert, in $50,000 increments, at any time commencing the earlier of (a)
December 30, 1997 or (b) the effective date of a Registration Statement filed
with the Securities and Exchange Commission. The Company filed a Form S-3 with
the Securities and Exchange Commission which was declared effective January 29,
1998. The conversion price for each share of common stock is equal to the lesser
of (a) $4.24 (the "Maximum Price") or (b) 80% of the average market price on the
five trading days immediately preceding the conversion date provided that in no
event shall the conversion price be less than a defined percentage of the
Maximum Price. The Company recognized interest expense of approximately $339,000
in 1997 resulting from the beneficial conversion feature. Debt issuance costs
approximate $264,000 and are being expensed over the term of the debt using the
straight-line method. See Note 15 for a discussion regarding litigation
involving the Debenture.

       In connection with the issuance of the Debenture, the Company also issued
40,000 Warrants (the "Warrants") exercisable at a price of $4.5375. The Company
ascribed a fair value of $112,136 to the Warrants at the time of issuance. The
debt will be written up to its face value of $1,600,000 and the corresponding
discount will be expensed using the straight-line method, which approximates the
interest method, over the term of the debt.

                                      F-12

<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


7.     COMMON STOCK

       In connection with the Company's public offering of 920,000 shares of its
common stock in December 1995, a warrant to purchase 80,000 shares of its common
stock was issued to the underwriter. The warrant is exercisable at the option of
the holder, in whole or in part, at a price of $7.09 per share at any time
during the period December 15, 1996 through December 15, 2000. These warrants
were exercised in February, 1997 for which the Company received net proceeds of
approximately $540,000.

       In connection with the Company's public offering of 171,428 shares of its
common stock in November 1993, a warrant to purchase 17,142 shares of its common
stock was issued to the underwriter. The warrant is exercisable at the option of
the holder, in whole or in part, at a price of $39.20 per share at any time
during the period November 10, 1994 through November 9, 1998.


8.     STOCK OPTION PLANS

       INCENTIVE STOCK OPTION PLANS

       In 1992, the shareholders approved the Company's Incentive Stock Option
Plan ("ISO Plan No. 1") for its employees to purchase up to a total of 39,222
registered shares of the Company's common stock. In 1994, the shareholders
approved the Company's Incentive Stock Option Plan No. 2 ("ISO Plan No. 2") for
its employees to purchase up to a total of 28,571 registered shares of the
Company's common stock. In 1997, the shareholders approved the Company's
Incentive Stock Option Plan No. 3 ("ISO Plan No. 3") for its employees to
purchase up to a total of 80,000 shares of the Company's common stock. For the
Incentive Stock Option Plans, the option price per share may not be less than
the fair market value of the stock on the date of the grant, the terms of the
options are ten years from the date of grant, and options vest over a five-year
period beginning on the date of grant. If immediately before a grant an employee
owns more than 10% of the total combined voting stock of the Company, the
exercise price shall be at least 110% of the fair market value of the stock on
the date of the grant and the options expire five years from the date of grant.

       A summary of option activity since December 31, 1994 under ISO Plans No.
1, No. 2, and No. 3 is as follows:

                                                    NUMBER    WEIGHTED AVERAGE
                                                  OF OPTIONS    OPTION PRICES
                                                  ----------  ----------------
Options outstanding at December 31, 1994            22,282          $ 8.10
     Granted                                        41,138          $11.37
     Exercised                                        (285)         $ 7.87
     Expired                                        (7,999)         $ 8.34
                                                    -------
Options outstanding at December 31, 1995            55,136          $10.57
     Granted                                        37,711          $10.50
     Exercised                                         --             --
     Expired                                       (45,708)         $10.75
                                                   --------
Options outstanding at December 31, 1996            47,139          $10.00
     Granted                                        57,426          $ 6.34
     Exercised                                         --             --
     Expired                                       (57,139)         $10.95
                                                   --------
Options outstanding at December 31, 1997            47,426          $ 4.44
                                                    ======

                                      F-13

<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


       NONQUALIFIED STOCK OPTION PLANS

       In 1992, the shareholders approved the Company's Nonqualified Stock
Option Plan ("Nonqualified Plan") for its directors to purchase up to a total of
8,571 registered shares of the Company's common stock. Effective in 1994, the
Company adopted Nonqualified Stock Option Plan No. 2, under which the Company
authorized the issuance of options to consultants for the purchase of up to a
total of 71,428 registered shares of its common stock. Effective in 1995, the
Company adopted Nonqualified Stock Option Plan No. 3, under which the Company
authorized the issuance of options to consultants for the purchase of up to a
total of 13,571 shares of its common stock. Effective in 1996, the Company
adopted Nonqualified Stock Option Plans No. 4, 5, and 6 under which the Company
authorized the issuance of options to employees and consultants for the purchase
of up to a total of 32,500, 100,000, and 150,000 shares, respectively, of its
common stock. Effective in 1997, the Company adopted Nonqualified Stock Option
Plan No. 7 under which the Company authorized the issuance of options to
consultants for the purchase of up to a total of 100,000 registered shares of
its common stock. Options granted under Nonqualified Stock Option Plan No. 7
will be accounted for based upon their fair value at the date of their issuance.
The option price per share under these plans may be greater than or less than
the fair market value of the stock on the date of the grant. Both the option
price and the terms of the options are determined by the Board of Directors or a
committee of the Board as of the date of the grant. Generally, the terms of the
options are ten years from the date of grant, and options vest 100% on the date
of grant.

       A summary of option activity since December 31, 1994 under the
Nonqualified Plans is as follows:

                                              NUMBER     WEIGHTED AVERAGE
                                            OF OPTIONS    OPTION PRICES
                                            ----------   ----------------
Options outstanding at December 31, 1994       37,142          $ 7.20
     Granted                                   46,426          $ 8.88
     Exercised                                  --               --
     Expired                                    --               --
                                             --------
Options outstanding at December 31, 1995       83,568          $ 8.14
     Granted                                  182,500          $10.67
     Exercised                                (32,856)         $ 7.26
     Expired                                  (28,500)         $ 5.25
                                             --------
Options outstanding at December 31, 1996      204,712          $11.04
     Granted                                  443,284          $ 4.69
     Exercised                               (131,071)         $ 3.44
     Expired                                 (244,284)         $10.48
                                             --------
Options outstanding at December 31, 1997      272,641          $ 4.80
                                             ========


       The weighted average fair value per share of options granted during 1997
and 1996 was $4.59 and $6.95, respectively. The following table summarizes
additional information about the stock options outstanding under the Company's
ISO Plans and Nonqualified Plans at December 31, 1997:

<TABLE>
<CAPTION>
                                           Weighted                                      Weighted
                                           Average        Weighted                        Average
                                          Remaining       Average                        Exercise
    Range of Exercise      Number        Contractual      Exercise        Number         Price of
         Prices          Outstanding         Life          Price        Exercisable     Exercisable
    -----------------    -----------     -----------      --------      -----------     -----------
<S><C>
      $4.44 -  $4.44       288,710            9.9           $4.44         266,651          $4.44
      $7.00 - $10.50        31,357            8.7           $7.63          31,357          $7.63
                            ------            ---           -----          ------          -----
                           320,067            9.7           $4.75         298,008          $4.77
                           =======            ===           =====         =======          =====
</TABLE>

                                      F-14

<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


       PERFORMANCE BASED STOCK PLANS

       During 1994, the Company adopted a Performance Stock Plan under which
certain officers and key employees of the Company may be granted awards of up to
an aggregate of 85,714 Performance Shares upon the attainment of certain
performance objectives. Each awarded Performance Share is convertible to one
share of the Company's common stock at the earlier of December 31, 1997, death,
total disability, termination of the plan, or other event as determined by the
Executive Compensation and Stock Option Committee of the Board of Directors. As
of December 31, 1997, no Performance Shares had been awarded and the plan was
terminated.

       In connection with the acquisition of UST, the Company established a
Phantom Stock Plan for UST's key employees. Pursuant to the plan, UST's key
employees have the ability to earn up to 46,602 shares of the Company's common
stock, the market value of which was $600,000 as of the date of the merger. The
ability to earn these shares is subject to UST meeting certain financial
milestones. As of December 31, 1997, no shares had been awarded.

       PRO FORMA INFORMATION IN ACCORDANCE WITH SFAS 123

       The Company applies Accounting Principles Board Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for its equity participation programs. Accordingly, no compensation
cost has been recognized for its incentive and nonqualified stock option plans
related to stock options granted to employees. However, the Company has adopted
the disclosure-only provisions of Statements of Financial Accounting Standards
No. 123, "Accounting for Stock-based Compensation" ("SFAS 123") as they pertain
to the recognition of compensation expense attributable to option grants. If the
Company had elected to recognize compensation cost for the Company's incentive
and nonqualified stock option plans consistent with the method of accounting
under SFAS No. 123, the Company's net loss and net loss per share on a pro forma
basis would be:

                                                           1997         1996
                                                           ----         ----
  Net loss - as reported                                $2,900,356   $3,823,621
  Net loss - pro forma                                  $3,945,620   $4,861,148

  Net loss per share (basic and diluted) - as reported     $1.70        $2.58
  Net loss per share (basic and diluted) - pro forma       $2.31        $3.28

       The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions for each year:

                                                1997         1996
                                                ----         ----
       Risk-free interest rate                  6.11%        6.28%
       Expected life of options - years          5.0          3.9
       Expected stock price volatility           88%          66%
       Expected dividend yield                    0%           0%

                                      F-15


<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


9.     INCOME TAXES

       The tax effects of the primary temporary differences and carryforwards
which give rise to net deferred tax assets are as follows as of December 31,
1997 and 1996:

                                                       DECEMBER 31,
                                                  1997             1996
                                                  ----             ----
           Net operating loss carryforwards  $ 4,618,000       $ 3,574,000
           Other                                 297,000           273,000
                                             -----------       -----------
                                               4,915,000         3,847,000
           Valuation allowance                (4,915,000)       (3,847,000)
                                             -----------       -----------
                                                   --               --
                                             ===========       ===========

       Realization of deferred tax assets at the balance sheet date are
dependent on the Company's ability to generate future taxable income which is
uncertain. Accordingly, management has provided a full valuation allowance
against the Company's deferred tax assets as of December 31, 1997 and 1996.

       The change in the deferred tax asset valuation allowance is primarily
attributable to the increase in net operating loss carryforwards. As of December
31, 1997, net operating loss carryforwards total approximately $11.9 million
which expire at various times through 2012. As a result of certain changes in
ownership, the use of these carryforwards to offset future taxable income may be
limited.


10.    RELATED PARTY TRANSACTIONS

       Prior to the acquisition, UST's sole stockholder advanced amounts to UST
to fund working capital needs. The amounts due are non-interest bearing and are
to be repaid upon availability of funds and after all amounts due to the bank
are repaid in full by UST. These loans are considered short-term obligations as
of December 31, 1997 which are included in other current liabilities and
long-term obligations as of December 31, 1996 which are included in other
long-term liabilities. The amount due as of December 31, 1997 and 1996 was
$120,579.


11.    LEASES

       The Company leases office space and automobiles under separate
noncancelable operating leases which expire at various dates through 2000. The
agreements generally require that the Company pay applicable utility, property
taxes, maintenance, and insurance costs. Certain excess office space is
subleased to a third party. The future annual minimum rental payments, net of
sublease income, under these leases at December 31, 1997 are as follows: 1998,
$159,049; 1999, $75,870; 2000, $23,654; and thereafter, $0. Rental expense for
the years ended December 31, 1997, 1996, and 1995, was approximately $211,000,
$297,000, and $170,000, respectively.


12.    RETIREMENT AND OTHER BENEFIT PLANS

       Effective January 1, 1994, the Company established a defined contribution
retirement plan covering eligible full-time employees. Under this plan,
participants can contribute up to the lesser of 15% of their compensation or the
maximum allowable by IRS regulations, currently $9,500. Employees may direct the
investment of their contributions among several mutual fund options. The Company
may make discretionary contributions out of current or accumulated net profit.
Expense for the years ended December 31, 1997 and 1996 totaled approximately
$2,050 and $1,250, respectively.

                                      F-16


<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


       During 1994, the Company entered into split dollar agreements with two
officers whereby the Company pays the premiums on split dollar life insurance
policies held by these individuals. Under the agreements, the Company has an
interest in the policy equal to the cumulative value of all premiums paid by the
Company and will be reimbursed for these premiums upon death, termination of the
agreement, or termination of employment. However, since it is possible that the
Company at its discretion may waive this requirement, no asset for the premium
has been recorded. The Company paid approximately $15,000 and $15,000,
respectively, in premiums for the years ended December 31, 1997 and 1996.
Effective June 14, 1995, this plan was terminated with respect to one officer in
connection with his resignation from the Company.


13.    TITLELINK JOINT VENTURE

       In December 1996, the Company's subsidiary, UST, entered into an
agreement with Interliant to form a joint venture, Titlelink, L.L.C. Under the
terms of the agreement, the joint venture will be owned equally and managed by
both members, UST and Interliant. Interliant has been appointed as the
Administrative Member which has the right, power, and authority to act on behalf
of the joint venture all things necessary to carry out the business of the joint
venture. The joint venture owns and markets Titlelink, an on-line software
application designed to streamline the real estate closing process. The Company
accounts for UST's investment in the joint venture on the equity basis. The
initial investment in the joint venture totaled $26,000 and has been reduced by
UST's proportionate share of the joint venture's operating results. UST's
proportionate share of the joint venture's operating results are reflected in
the Company's consolidated statements of operations, which for the year ended
December 31, 1997 total a loss of approximately $215,000. Total revenue,
expenses, and net loss for the joint venture for the year ended December 31,
1997 were $44,990, $474,520, and $429,530, respectively.


14.    COMMITMENTS

       In connection with the development of certain software products, UST has
entered into royalty agreements with developers that require UST to pay
approximately one-third of gross revenue from sales of the products. Amounts are
payable once a certain amount advanced to the developer has been recovered. As
of December 31, 1997, no amounts have been accrued or paid to developers.

       On March 20, 1997, the Company entered into a financial consulting
agreement ("consulting agreement") with First Cambridge Securities Corporation
("First Cambridge"). The terms of the agreement included that First Cambridge
receive 100,000 stock options at an exercise price of $2.00 per share. First
Cambridge vested immediately in the 100,000 options and exercised their options
on March 28, 1997. The consulting agreement permitted the assignment by First
Cambridge of its obligation to perform financial consulting services thereunder.
First Cambridge has assigned its obligation to another party (the "assignee")
and the Company has accepted the assignment. The assignee is required to review
materials provided by the Company, perform financial consulting services, and
advise the Company and provide at least 50 hours of service per month on a
yearly average. The consulting agreement is for the five year period January 1,
1998 - December 31, 2002. Accordingly, the Company will be recognizing an
expense of $1,150,000, using the straight-line method over the term of the
consulting agreement, or approximately $20,000 per month, beginning January 1,
1998. As of December 31, 1997, the Company had a deferred asset of $1,150,000
arising from this transaction. However, if the services by the assignee are not
deemed satisfactory or the assignee is unable to perform the services, the
Company may be required to immediately expense the deferred asset.

                                      F-17


<PAGE>

                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


15.    LITIGATION

       In January 1998, the company redeemed its Debenture described in Note 6
and issued 1,052,624 shares of the Company's common stock as payment for the
$1,710,514 redemption amount. The holder of the Debenture refused to accept the
shares as payment and filed suit against the Company alleging that the terms of
the Debenture permit the Company to pay the redemption price only in cash and as
a result, the redemption by the Company and the issuance of the Company's common
stock is invalid. The holder is seeking a determination to that effect and that
the Company has forfeited its right to redeem the debenture. The complaint also
seeks damages resulting from the Company's failure to honor the plaintiff's
attempted post-redemption conversion of $115,000 principal amount of the
Debenture. In April 1998, the Company and the holder began negotiation
discussions to settle this litigation out of court. If the Company is unable to
negotiate a settlement with the holder, a court hearing will be held on April
15, 1998. If the court hearing is held, the Company will vigorously defend this
action. However, the Company cannot predict the outcome of the court hearing.


16.    SUBSEQUENT EVENTS

       On April 8, 1998, the Company merged UST into SSGI-UST Acquisition Corp.,
an existing Florida corporation formed on March 5, 1998 and owned by the
President of UST and other third parties. UST continued as the surviving
corporation; accordingly, SSGI-UST Acquisition Corp ceased to exist.
Consideration payable to the Company for the merger consists of (i) 100,000
shares of UST's Common Stock valued at $500,000, or $5.00 per share; (ii) a
promissory note from USTin the principal amount of $600,000 with 6% interest due
the earlier of the closing of a $2,000,000 private placement of UST's equity
securities or 60 days after the closing of the merger; and (iii) a 6%
subordinated convertible debenture in the principal amount of $927,000 (which
will be increased for any additional funding provided by the Company to UST) due
the earlier of a public offering of UST's common stock or the 545th day after
the closing of the merger. The promissory note is secured by all of the assets
of UST and the pledge of all of the outstanding stock of UST. The Company has
the option to convert the $927,000 debenture upon the occurrence of the first
public offering into shares of Common Stock of UST at a conversion price for
each share of Common Stock equal to the public offering price of the Common
Stock less twenty (20%) percent. As a result of this transaction, the Company's
direct ownership in UST was reduced from 100% to approximately 14%.

       The business of UST has not been presented as a discontinued operation as
of and for the year ended December 31, 1997 because (i) the principal
consideration in the above transaction is dependent on the ability of UST to
generate sufficient working capital and (ii) the Company will retain a total
ownership interest in UST of approximately 33% (direct and indirect).

       The following represents the condensed unaudited balance sheet of UST as
of December 31, 1997:

       Current assets  $435,202       Current liabilities         $   934,737
       Other assets    $256,914       Note payable to bank             40,334
                       --------       Payable to the Company        1,888,858
                                                                  -----------
                                      Total liabilities             2,863,929
                                      Total stockholders' deficit  (2,153,813)
                                                                  -----------
                       $710,116                                   $   710,116
                       ========                                   ===========

                                      F-18

<PAGE>

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.

         The following table sets forth certain information concerning the
directors and executive officers of the Company as of March 27, 1998.

NAME                          AGE       POSITION
----                          ---       --------
John J. Cadigan               67        Chairman of the Board, President, Chief
                                        Executive Officer, Secretary, and
                                        Treasurer of the Company

Suzanne C. Brown              32        Chief Financial and Accounting Officer
                                        of the Company

Ernest A. Wagner              37        President of the Company's Multimedia
                                        Division

A. David Rossin, Ph.D.        66        Director

Nagesh S. Mhatre, Ph.D.       65        Director


         JOHN J. CADIGAN has been Chairman, Chief Executive Officer, Secretary,
Treasurer, and a director of the Company since February, 1991. He assumed the
position of President in July 1995. Prior to joining the Company, Mr. Cadigan
served as Chairman of PAI from its inception in 1989 until it was merged into
the Company in February, 1991.

         SUZANNE C. BROWN,  C.P.A. has been with the Company since February,
1994. In January 1996, Ms. Brown was promoted to Chief Financial Officer. From
August, 1988 to February, 1994, Ms. Brown was with KPMG Peat Marwick, an
international accounting firm.

         ERNEST A. WAGNER has been with the Company since February, 1994. In
1998, Mr. Wagner was promoted to President of the Company's Multimedia Division.
From 1985 to February, 1994, Mr. Wagner served in various engineering and
management positions with SuperFlow Corporation, a manufacturer of computerized
engine and vehicle testing equipment.

         DR. A. DAVID ROSSIN has been a director of the Company since February,
1991. Dr. Rossin is currently the Center Affiliated Scholar at the Center for
International Security of Arms Control at Stanford University. He has been
employed since August 1987 as President of Rossin and Associates, a California
consulting firm which specializes in nuclear energy matters. Dr. Rossin served
as Assistant Secretary of the U.S. Energy Department from 1986 to 1987.

         DR. NAGESH S. MHATRE currently serves on the Boards of three small
business ventures. Dr. Mhatre served as President and a Director of the
Becton-Dickinson Co., a multibillion dollar international company in the medical
and hospital equipment field from 1979 to 1984. Dr. Mhatre


                                       20


<PAGE>


has held senior management, CEO, and corporate officer positions in the
biomedical and biotechnology fields and has worked with numerous startup
companies during the period from 1975 to 1979.

BOARD OF DIRECTORS

                  The Company's Certificate of Incorporation and Bylaws, as
amended, divide the Company's directors into three classes designated as Class
I, Class II and Class III, that serve staggered three-year terms that expire at
the annual meeting of the Stockholders in the final year of the term. Each class
consists, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. Directors serve for their
term and until their successors are duly elected, or until their earlier
resignation, removal from office, or death. The remaining directors may fill any
vacancy in the Board of Directors for an unexpired term.

         There are presently three directors serving on the Board. A. David
Rossin has been designated as a Class I director and his term expires in 1999.
Nagesh Mhatre has been designated as a Class II director and his term expires in
2000. John J. Cadigan has been designated as a Class III director and his term
expires in 1998.

         The Company has two standing committees, the Executive Compensation and
Stock Option Committee and the Audit Committee. Dr. Rossin and Dr. Mhatre are
the members of both the Executive and Stock Option and the Audit Committees. The
Executive Compensation and Stock Option Committee has the power and authority to
designate, recommend and/or review compensation of the Company's executive
officers and other employees, including salaries, bonuses, fringe benefits and
the grant of stock options. The Audit Committee has the power and authority to
recommend the engagement of independent accountants, review external and
internal auditing procedures and policies, review compensation paid to auditors
and make recommendations and/or implement changes with respect to the foregoing.

         Officers are elected by the Board of Directors at the annual meeting of
directors following the annual shareholders meeting and serve until their
successors are duly elected, subject to earlier removal by the Board of
Directors.

ITEM 10.  EXECUTIVE COMPENSATION

         This information will be contained in the definitive proxy statement of
the Company for the 1998 Annual Meeting of Stockholders under the captions
"Directors' Compensation", "Executive Compensation", "Employment Agreements",
and "Executive and Other Employee Benefit Plans" and is incorporated herein by
reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         This information will be contained in the definitive proxy statement of
the Company for the 1998 Annual Meeting of Stockholders under the caption
"Security Ownership of Certain Beneficial Owners and Management" and is
incorporated herein by reference.


                                       21


<PAGE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         This information will be contained in the definitive proxy statement of
the Company for the 1998 Annual Meeting of Stockholders under the caption
"Transactions Involving Directors and Officers" and is incorporated herein by
reference.


                                    PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)(1)(2)    Financial Statements
       A list of the Financial Statements filed as a part of this Report is set
forth in Item 7 and appears at Page F-1 of this Report; which list is
incorporated herein by reference.

(a)(3) Exhibits
       1(A)       Stock Purchase Agreement with Forsight, Inc. (6)
       1(B)       Asset Purchase Agreement with Forsight, Inc. (6)
       2          Plan of Merger between U.S. Technologies, Inc. Acquisition
                  Corporation and U.S. Technologies, Inc (7)
       2(A)       Articles of Merger of U.S. Technologies, Inc and U.S.
                  Technologies, Inc. Acquisition Corporation (7)
       2(B)       Agreement and Plan
                  of Merger Among Strategic Solutions Group and U.S.
                  Technologies, Inc. (11)
       2(B)(i)    "State of Florida Articles of Merger"
       2(C)       Promissory Note (11)
       2(D)       Pledge Agreement (11)
       2(E)       General Security Agreement for Promissory Note (11)
       2(F)       Secured Subordinated Debenture (11)
       2(G)       General Security Agreement for Debenture (11)
       2(H)       Registration Rights Agreement (11)
       3          Certificate of Incorporation and Amendment thereto (1)
       3(B)       By-Laws (1)
       3(C)       Form of Amendments to Certificate of Incorporation and Bylaws
                  dated October 20, 1995 (5)
       10         Form of Indemnification Agreement executed in favor of each
                  officer and director of the Company (1)
       10(A)      Form of Indemnification  Agreement  Amendment executed in
                  favor of certain officers and directors of the Company (6)
       10(B)      Form of Indemnification Agreement executed in favor of each
                  officer and director of the Company (6)
       10(C)      Securities Purchase Agreement, for 6% Convertible Subordinated
                  Debentures (10)
       10(D)      Form of Debenture (10)
       10(E)      Registration Rights Agreement (10)
       10(F)      Form of Common Stock Purchase Warrant (10)
       10(H)      Employment Agreement with John J. Cadigan dated September 1,
                  1995 (5)
       10(I)      Amendment to Employment Agreement with John J. Cadigan (11)
       10(U)      Employment Agreement (7/15/96) - Peter S. Steele (9)
       10(V)      Loan Renewal and Modification Agreement (9)
       21         Subsidiaries of Registrant (2)
       23         Consent of Coopers & Lybrand L.L.P. (11)
       99         Incentive Stock Option Plan No. 1 (4)
       99(A)      Nonqualified Stock Option Plan No. 1(4)
       99(B)      Incentive Stock Option Plan No. 2 (5)
       99(D)      Phantom Stock Performance Stock Plan (3)
       99(E)      Nonqualified Stock Option Plan No. 2 (5)
       99(F)      Nonqualified Stock Option Plan No. 3 (5)
       99(H)      Split Dollar Plan Agreement (11/21/94) - John J. Cadigan (3)
       99(I)      Nonqualified Stock Option Plan No. 4 (6)
       99(J)      Nonqualified Stock Option Plan No. 5 (9)
       99(K)      Nonqualified Stock Option Plan No. 6 (9)
       99(L)      Nonqualified Stock Option Plan No. 7 (8)
       99(M)      Incentive Stock Option Plan No. 3 (11)

-------------------
(1)    Incorporated by reference to Form S-1 Registration Statement, File No.
       33-68826
(2)    JMC Company, Inc. and Forsight, Inc., are wholly owned subsidiaries of
       the Company incorporated under the laws of the State of Maryland.  U.S.
       Technologies, Inc. is a wholly owned subsidiary incorporated under the
       laws of the State of Florida.
(3)    Incorporated by reference to December 31, 1994 Form 10-K.


                                       22


<PAGE>


(4)    Incorporated by reference to Form S-8 Registration Statement, File No.
       33-53536.
(5)    Incorporated by reference to Original Form SB-2, File No. 33-97776.
(6)    Incorporated by reference to December 31, 1995 Form 10-K.
(7)    Incorporated by reference to Form 8-K, dated July 19, 1996.
(8)    Incorporated by reference to Form S-8 Registration Statement, File No.
       333-23777.
(9)    Incorporated by reference to December 31, 1996 Form 10-KSB.
(10)   Incorporated by reference to Form 8-K, dated October 31, 1997
(11)   Filed herewith.


(b)    Reports on Form 8-K
       The following report on Form 8-K was filed during the three months ended
         December 31, 1997: October 31, 1997 - Other Events - Issuance of
         $1,600,000 6% Convertible Subordinated Debentures.


                                       23


<PAGE>


                                   SIGNATURES


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

STRATEGIC SOLUTIONS GROUP, INC.

BY:   /s/  John J. Cadigan                           Dated:  April 15, 1998
      ______________________
      John J. Cadigan, Chief Executive Officer & President

       /s/  Suzanne C. Brown                         Dated:  April 15, 1998
      ______________________
      Suzanne C. Brown, Chief Financial Officer

         Pursuant to the requirements of the Securities 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:

Signature                            Title                        Date
---------                            -----                        ----

/s/ John J. Cadigan                  Chairman of the Board,       April 15, 1998
________________________             President, Chief Executive
John J. Cadigan                      Officer, Secretary and
                                     Treasurer



/s/ Dr. A. David Rossin              Director                     April 15, 1998
________________________
Dr. A. David Rossin



/s/ Dr. Nagesh S. Mhatre             Director                     April 15, 1998
________________________
Dr. Nagesh S. Mhatre

                                       24