UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                Form 10-K

  _x_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                          EXCHANGE ACT OF 1934
               For the fiscal year ended December 31, 1996

                                   OR

  ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                          EXCHANGE ACT OF 1934
  For the transition period from ______________ to _______________

                       Commission File Number 000-26668

                        SYSTEMS COMMUNICATIONS, INC.
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          (Exact name of Registrant as specified in its charter)

        FLORIDA                                65-0036344
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(State or other jurisdiction              (I.R.S. Employer
of incorporation or organization)         Identification No.)

4707 140th Avenue North, Suite 107, CLEARWATER, FLORIDA        33762
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(Address of principal executive offices)                     (ZIP Code)

Registrant's telephone number, including area code      (813)530-4800

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
===========================================================================
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 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 ____       No __X___

Indicate by check mark if disclosure of delinquent filers pursuant to  Item
405  of  Regulation S-K is not contained herein, and will not be contained,
to  the  best of registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.     _x__
<PAGE> 2

The  aggregate  market value of the voting stock held by non-affiliates  of
the  registrant on December 22, 1997, (based on the average of the high and
low bid prices of such stock on the over-the-counter securities market) was
$3,168,468.

The  number  of shares of the registrant's common stock, $.001  par  value,
outstanding as of December 22, 1997 was 12,099,176.

<PAGE> 3

ITEM 1. BUSINESS

Systems  Communications, Inc. (the " Company"), a Florida corporation,  was
organized  as Florida One Capital Corporation in 1987 and made  an  initial
public  offering  of its common stock  as a "blank check" company  for  the
purpose  of  acquiring  other  companies.  The  Company  underwent  several
corporate  name changes from its inception until 1991, when it changed  its
name to Systems Communications, Inc., and at various times, as a result  of
business  acquisitions,  was  a merchandiser  of  optical  products  and  a
developer  of  residential homes. All  business acquisitions  made  by  the
Company   prior to 1991 were rescinded in 1991 or earlier and  the  Company
was  inactive  from  1991 until August 1994. In August  1994,  the  Company
acquired   Ameristar   Telecommunications,  Inc.   ("ATI"),   an   Illinois
corporation,   and   Coast  Communications,  Inc.   ("CCI"),   an   Arizona
corporation.  ATI  sells  Operator Service Provider ("OSP"),  long-distance
telephone  and  Pay-Per-View ("PPV") television services  and  products  to
small  and  medium-sized  hotels and motels. CCI  is  in  the  business  of
installing and servicing PPV equipment. As more fully discussed below,  the
acquisitions by the Company of ATI and CCI were rescinded in  May  of  1997
and 1996, respectively.

In  June 1995, the Company acquired LCI Communications, Inc. ("LCI"),  from
an  officer and director of the Company, and Comstar Network Services, Inc.
("Comstar"),  both of which are Florida corporations; and, in  July   1995,
the  Company acquired Telcom Network, Inc. ("TNI"), a Delaware corporation.
All of these companies, individually, operated as switch-less re-sellers of
long-distance  telephone services and products and were combined  into  one
operating  division (hereinafter referred to, collectively, as "TNI").  TNI
is  also in the business of providing utility and telecommunications  audit
and  cost  recovery services to large and small businesses and governmental
entities. As more fully discussed below, the Company sold substantially all
of the operating assets of TNI in January 1997.

In  October  1995,  the  Company  acquired National  Solutions  Corporation
("NSC"),  a  Pennsylvania  corporation; and, in  March  1996,  the  Company
acquired  Health Management Technologies ("HMT"), a California corporation.
The  principal  business  of  NSC is (i) to develop,  for  commercial  use,
healthcare  management  information systems  technology  obtained  under  a
Cooperative Research and Development Agreement ("CRDA") between NSC and the
U.S.  Department  of  the Army (the "U.S. Army") pursuant  to  the  Federal
Technology  Transfer Act of 1986, as amended, and (ii)  sell  the  benefits
from  the  use of such technology to the U.S. automotive industry (and  its
down-line   vendors),  other  large,  self-insured  companies,   healthcare
insurers,   intermediaries,  including  health  maintenance   organizations
("HMO's")  and  preferred provider organizations ("PPO's"), and  healthcare
benefit plan administrators. HMT develops and markets PC based occupational
health  software  products for managing cases of work disability  (absence)
that facilitate return to work and reduce disability related costs. As more
fully  discussed herein, the Company's acquisition of HMT was rescinded  in
June 1997.

<PAGE> 4

The  amounts  and types of consideration paid by the Company in  connection
with  each of these acquisitions, the nature and terms of the CCI, ATI  and
HMT  rescission transactions and the terms of the sale of substantially all
of  the  operating assets of TNI are more fully described below and in  the
Notes to the Consolidated Financial Statements appearing elsewhere herein.

During  the  periods  following  the  dates  on  which  these  acquisitions
occurred, large operating losses have been incurred. These operating losses
have principally been funded by the private placement of the Company's debt
and  equity  securities  (see  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations").

In  May  1996, the Company informed the former shareholders of CCI that  it
was canceling the acquisition of CCI and terminating all of the acquisition
related documents (principally as a result of non-performance by CCI  under
the  agreements).  Pursuant  to the terms of the  acquisition  and  related
pledge agreements, the former shareholders of CCI are to receive the shares
of  stock of CCI acquired by the Company in the August 1994 acquisition  of
CCI  in return for 200,000 shares of the Company's Class A Preferred  Stock
and  $300,000  of debt securities issued by the Company in connection  with
the  acquisition ( see "Legal Proceedings" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" ).

In January 1997, the Company  sold substantially all of the assets of  TNI,
in  two separate transactions, for an aggregate of  $101,000 in cash and  a
$500,000 convertible debenture issued by International TeleData Corporation
(see  Note 17 to the Consolidated Financial Statements). The sale of  TNI's
assets did not include the award  in the amount of approximately $1,250,000
granted  to TNI in a binding arbitration proceeding  between and  among  GE
Capital   Communication  Services  Corporation  ("GECCS"),  New  Enterprise
Wholesale  Services,  Limited  Partnership ("News")  and  TNI  (see  "Legal
Proceedings").  The arbitration award was confirmed by  the  United  States
District Court, Northern District of Georgia on September 30, 1997 and  the
Company's  motion  for summary judgment was entered  October  1,  1997.  On
December  24, 1997, the Company, GECCS and NEWS entered into a Confidential
Settlement  Agreement and Mutual Full and Final Releases  (the  "Settlement
Agreement")  regarding the arbitration award in favor of the  Company  (see
Note  14). Pursuant to the Settlement Agreement, GECCS\NEWS paid $1,250,000
in  full satisfaction of the arbitration award. Of that amount, the Company
received  approximately $750,000, which is net of legal fees. The  proceeds
from the Settlement Agreement were used to pay trade and other obligations,
including the obligations to Mr. Telford Walker and Mr. James Gary May also
referred   to  in  Note  14  to  the  accompanying  consolidated  financial
statements.

In May 1997, the Company and the former shareholders of ATI entered into  a
rescission  agreement which provides for the rescission  of  the  Company's
August  1994  acquisition of ATI; and, in June 1997, the  Company   entered
into  an  agreement  with the former shareholders of  HMT  to  rescind  the
Company's  March 1996 acquisition of  HMT.

<PAGE> 5

The  ATI  rescission agreement provides for the return of all  of  the  ATI
stock  acquired by the Company to the former ATI shareholders  in  exchange
for 684,410 shares of  the Company's common stock, the 6% acquisition notes
payable  to  the former shareholders of ATI (see Note 7 to the Consolidated
Financial  Statements, included elsewhere herein) and warrants to  purchase
168,668 shares of the Company's common stock.

The  HMT  rescission agreement provides for the return of all  of  the  HMT
stock acquired by the Company to the former shareholders of HMT in exchange
for  $450,000  in cash (in payment of inter-company loans to HMT  from  the
Company)  and  the 309,837 shares of the Company's common stock  issued  in
connection   with  the  acquisition.  In  connection  with  the  rescission
agreement,  the  Company  and  HMT  entered  into  a  separate  Cooperative
Marketing  and  Option  Agreement.  The Cooperative  Marketing  and  Option
Agreement provides both the Company and HMT the non-exclusive right, for  a
five (5) year period, to market each other's products, on a fee basis,  and
granted the Company a non-transferable option, exercisable at any time  for
eighteen  months  after  the  date of grant  (June  9,  1997),  to  acquire
approximately  10%  of  HMT, adjusted for stock  splits,  stock  dividends,
reclassifications,   reorganizations,  consolidations   or   mergers,   for
approximately $45,000 in cash.

After the sale of substantially all of the operating assets of TNI and  the
rescission  of  the CCI, ATI and HMT acquisitions, the Company's  remaining
operations consist of NSC. As more fully discussed herein, it is  uncertain
whether   or  not  NSC's  operating  activities  will  generate  profitable
operations in the future or whether or not the Company will have  available
sufficient resources to fund NSC's future operating activities.

At the time the Company acquired these businesses, it anticipated that such
businesses  would generate higher revenues and operating income than  those
that have been achieved to date and that the amount of financing needed  by
the  acquired  businesses would be less than the  amount  the  Company  has
provided  to  date  and will likely be needed by those  businesses  in  the
future  in  order for them to attain profitable operations.  The  principal
reasons for the shortfall from the original expectations of the Company for
acquired businesses include, among others, (i) the failure, to date, of NSC
to  successfully  market  the  technology acquired  under  the  CRDA,  (ii)
constraints  on  the  part of the Company to fund the continuing  operating
losses  of  businesses  acquired,  (iii) higher  than  anticipated  product
development, sales and marketing costs incurred by both NSC and  HMT,  (iv)
the damage to TNI's business caused by  GECCS and News from the failure  of
GECCS  and  News  to, among other things, provision customer  accounts  for
telecommunication services and products offered by GECCS and News and  sold
by TNI pursuant the GECCS Agreement (which is more fully discussed herein -
see  "Legal  Proceedings"  and "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations") and (v) constraints on  the
part  of  the Company to fund the PPV capital requirements of new  business
opportunities available to ATI. See "Management's Discussion  and  Analysis
of Financial Condition and Results of Operations."

<PAGE> 6

The amount of financing necessary to continue to support the operations and
capital  needs of businesses acquired, the continuing operating  losses  of
businesses acquired, the lack of equity and debt financing available to the
Company  (together with the inability of the Company to  meet  its  funding
obligations under the HMT acquisition agreement and its payment obligations
to trade and other creditors), and the desire of the former shareholders of
ATI  and  HMT  to rescind the original purchase transactions,  among  other
factors,  led to management's decision to dispose of ATI and HMT  and  sell
substantially  all  of  the operating assets of  TNI.  See  "Liquidity  and
Capital Resources".

After  the rescission of the CCI, ATI and HMT acquisitions and the sale  of
substantially all of the operating assets of TNI, the remaining  operations
of  the  Company  consist  of NSC. NSC has incurred  substantial  operating
losses since its acquisition by the Company in October 1995 and there is no
assurance that NSC will be able to reverse this trend in the future.  NSC's
operating  loss  for  the period from the date of its  acquisition  by  the
Company  to  December 31, 1995 was $363,857, and for 1996 was  $16,275,288,
including  the  write-off as of December 31, 1996 of the  unamortized  cost
($14,233,953)  of  intangibles and goodwill  recorded  by  the  Company  in
connection  with the acquisition (see Note 5 to the Consolidated  Financial
Statements).

The  Company's  operations are classified into two (2)  industry  segments:
healthcare   management  information  products  and  services  ("Healthcare
Management");    and,    telecommunications    products    and     services
("Telecommunications"). The Healthcare segment includes the  operations  of
NSC   and  HMT  from  their  respective  dates  of  acquisition;  and,  the
Telecommunications segment includes the operations of TNI from the date  of
its  acquisition in June 1995, and the operations of  ATI and CCI  for  all
periods presented. As a result of the disposition of the operations of  ATI
and  CCI  and  the  sale of substantially all of the  assets  of  TNI,  the
operating results of the Company's telecommunications businesses are  shown
as  discontinued  operations  in  the accompanying  consolidated  financial
statements.

<PAGE> 7

Following  is a summary of segment information for each of the three  years
in the period ended December 31, 1996, excluding corporate and other:

                               1996          1995          1994
                           -----------   -----------   -----------
Healthcare:
Net revenues              $  2,832,123   $   91,106    $    --
Operating loss(1)          (17,104,177)    (363,857)        --

Telecommunications:
Net revenues                 2,177,858    2,893,778       807,669
Operating loss(1)           (1,932,649)  (4,036,371)     ( 48,348)

(1)  Includes  impairment  losses  in 1996  of  $14,233,953  and  $194,901,
recognized in the Healthcare and Telecommunications segments, respectively,
and   $2,758,779   of  impairment  losses  in  1995,  recognized   in   the
Telecommunications  segment.  See  Note 5  to  the  Consolidated  Financial
Statements.

<PAGE> 8

HEALTHCARE MANAGEMENT

The Company's healthcare management segment consists of NSC and HMT.

The  principal  business  of  NSC is (i) to develop,  for  commercial  use,
healthcare  management information systems technology  obtained  under  the
CRDA  between NSC and the U.S. Army in connection with the Civilian  Health
and Medical Program for the Uniformed Services ("CHAMPUS") developed by the
U.S  Army,  Navy  and  Air Force (the "Tri-Services")  and  (ii)  sell  the
benefits  from  the use of such technology to the U.S. automotive  industry
(and   its   down-line  vendors),  other  large,  self-insured   companies,
healthcare   insurers,   PPO's,    HMO's  and   healthcare   benefit   plan
administrators.   NSC's  systems  technology  is   designed   to   identify
unnecessary  costs  and manage healthcare benefits.  NSC anticipates  using
its  management information systems technology to assist large self-insured
companies,  insurers,  PPO's, HMO's and healthcare plan  administrators  to
improve  the  management  and  administration  of  healthcare  benefits  by
combining  intelligent  application of data  analysis  with  strategies  to
identify  misapplied expenditures and overpayments, together  with  quality
management services to effect positive changes in benefits planning.

CHAMPUS  is  a  unique  data-warehousing system with extensive  data-mining
capabilities and  has reduced the healthcare related costs of retirees  and
dependents of men and women serving in the uniformed services. The  CHAMPUS
data  base covers over 18 million individuals. It was developed by the Tri-
Services at a cost of over twenty million dollars. This technology has been
enhanced   and   incorporated  into  NSC's  technology  base.    Analytical
measurements,  profiling and other decision-making  tools  have  also  been
incorporated   into   NSC's   software  and   databases,   increasing   the
comprehensive  analysis and decision-making capabilities of  NSC's  current
technology.

The  CHAMPUS healthcare program and database is one of the largest  in  the
world. By having the exclusive rights to one of the largest healthcare data
banks  in the world, NSC has the unique ability to provide potential  users
of  NCS's technology with extensive data-mining capabilities to assist them
in managing and controlling their healthcare costs.

The  revenues  of  NSC  to date have been derived  from  the  analysis  and
recovery of healthcare claims that have previously been paid by large self-
insured companies such as Chrysler Corporation and Ford Motor Company using
the  services of Health Management Services ("HMS") on a subcontract basis.
The  agreement with HMS (the "Teaming Agreement") calls for  a  portion  of
revenues derived by NSC, which typically range from 10% to 20% of recovered
claims,  to  be  paid  to HMS.  HMS's portion of revenues  derived  by  NSC
typically ranges from 50% to 60%.

The Company, NSC and HMS are currently in dispute regarding the performance
of HMS under the Teaming Agreement and the amounts due to HMS by NSC under
the Teaming Agreement; consequently, the Teaming Agreement was terminated
by provisions contained therein, effective May 16, 1997. On August 19,
1997, HMS filed a notice of intent to arbitrate and demand for arbitration.
No date for arbitration has been set.

<PAGE> 9

The  Company has entered into a strategic alliance with another  healthcare
claims  management company ( HMG Health Care Claims Auditing, Inc.  ("HMG")
to  replace  HMS, as its subcontractor, on terms comparable to those  under
the  HMS  Teaming  Agreement. HMG provides a full range of healthcare  cost
containment services. HMG's services are broader than those offered by  HMS
and  include, among others, electronic review and reporting of health  care
claims  paid  and on an ongoing basis to identify duplicate,  erroneous  or
medically inconsistent charges, payments for ineligible patients and  other
responsible  party liabilities from other group benefit programs,  workers'
compensation  coverage,  motor vehicle or third party  liability  coverage,
payments  for non-covered services, misapplied deductibles and  co-payments
and provider agreement compliance utilizing data bases available to HMG and
those available to NSC under the CRDA.

To  date,  no  revenues have been derived from NSC's management information
systems  technology but, the Company is encouraged by the future  prospects
of NSC's business in light of its exclusive rights to use the sophisticated
healthcare  management information systems technology and  the  statistical
databases obtained under the CRDA. However, as more fully described herein,
it  is  uncertain whether or not the Company will have available sufficient
resources to continue to fund NSC's future operating activities or, whether
or not NSC will be able to generate profitable operations in the future.
NSC's  initial  software development activities are now virtually  complete
and two distinct products have evolved: an analytical database product with
extensive  data-mining  capabilities; and a retrospective  healthcare  cost
containment  product  which  uses selective reporting  formats  within  the
databases. The analytical database product contains extensive revisions  to
the  healthcare management information systems technology obtained from the
U.S.  Army and unique features applicable to both the indemnity and managed
care  markets.  The  Company  to  date,  however,  has  not  been  able  to
successfully market these products.

HMT,  founded  in  June 1986, in response to the emerging  PC  industry  in
combination  with  the growing need to capture better healthcare  data  and
produce   reports  useful  to  employers  and  occupational-health  medical
providers,  develops  and markets PC-based software products  for  managing
cases  of  work  disability (absence) that facilitate return  to  work  and
reduce  overall health claims costs. HMT's market consists of mid to  large
U.S.  employers, insurers, hospitals, Third Party Administrators ("TPA's"),
PPO's,   HMO's  and  other  healthcare management companies.  As  discussed
elsewhere  herein, the Company and the former shareholders of  HMT  entered
into an agreement in June 1997 to rescind the acquisition agreement between
the Company and HMT.

<PAGE> 10

The  revenues  and  operating  loss of NSC  in  1996  were  $1,574,825  and
$16,275,288,  respectively, and  $91,106 and $363,857,  respectively,  from
the  date  of  acquisition (October 1995) to December 31,  1995.  The  1996
operating loss includes a charge to income of $14,233,953 to write-off  the
unamortized  cost of goodwill and intangibles recorded by  the  Company  in
connection  with  the  acquisition of NSC (see Note 5 to  the  Consolidated
Financial  Statements). The write-off of the unamortized cost  of  goodwill
and  intangibles recorded in connection with the acquisition of NSC is  due
to  the  failure  of  NSC, to date, to successfully market  its  healthcare
management information systems technology, the likelihood that NSC may  not
be able to market such technology in the future without further significant
capital  investment and the likelihood of the Company being able to provide
NSC   with  additional  capital  investment  (see  "Liquidity  and  Capital
Resources"). The revenues and operating loss of HMT for the period from the
date  of acquisition (March 1996) to December 31, 1996 were $1,257,298  and
$828,895, respectively.

SERVICES AND PRODUCTS.

NSC has developed the technology licensed under the CRDA to include a broad
form  of  episode  building, which has been copyrighted as Continuum.  This
proprietary  technology allows NSC to review multiple hospitalizations  and
medical  services  around  a  common clinical  connection.  Continuum  also
includes enhancements to the CHAMPUS software obtained under the CRDA which
provides  for  a broad array of clinical reports, demographic and  provider
analyses  along  with  special  reports that help  users  evaluate  adverse
outcomes, surgical cases, trauma cases, AIDS cases and catastrophic  cases.
Continuum  analyzes claims from both a wide and narrow focus with extensive
data-mining  capabilities within the database and has wide  application  in
the managed care environment, which is the chief use within the CHAMPUS-Tri-
Care  environment.  The system is also able to perform  pharmaceutical  and
research studies for special projects.

NSC has also developed a retrospective healthcare cost containment product,
together  with  a third party healthcare management company, that  utilizes
NSC's  software  analytical tools to focus specifically on coordination  of
benefit  concepts  and,  with  the selective  use  of  variables,  identify
healthcare  claim  overpayments. The Company  also  anticipates  using  its
technology,   in   connection  with  the  formation  of  cost   containment
partnerships, to implement pre-payment reviews of healthcare claims  before
they  are paid to identify those claims which should be pended for  further
documentation  and review. NSC contemplates that its services,  once  these
cost  containment  partnerships are formed,  will  include  the  review  of
healthcare expenditures for misapplied expenditures on both a retrospective
and  a  concurrent/pre-payment  basis. The services  contemplated  by  NCS,
together  with  those  available  to NSC  from   strategic  alliances,  are
anticipated  to  go  beyond  those services traditionally  offered  by  its
competitors,   which  are  usually  limited  to  duplicate   payments   and
coordination  of  benefits for other insurance and for  Medicare  coverage.
There  is  no  assurance,  however,  that  the  Company  will  be  able  to
successfully   market   its  healthcare  management   information   systems
technology and related cost containment services and products.

<PAGE> 11

LICENSES, TRADEMARKS AND AGREEMENTS

On  June  2,  1994, NSC entered into a Cooperative Research and Development
Agreement ("CRDA") with the U.S. Army to further develop and commercialize,
on  an exclusive basis, the healthcare management information systems  used
by the Tri-Services to reduce the cost associated with the CHAMPUS program.
Under  the  CRDA,  NSC has an irrevocable, perpetual  license  to  use  the
CHAMPUS  database  and software technology to perform evaluation,  analysis
and  recovery of benefit payments involving the healthcare benefit programs
of  the  U.S.  Automotive industry and their down-line  vendors,  including
indemnity claims, coordinated benefits and workers compensation claims and,
to  perform  in-depth  studies  of U.S. CAR'S healthcare  benefit  programs
("field  of  use").   The original CRDA expired on June  1,  1997  and  was
extended  for an additional one-year period, effective June 18,  1997.  The
extension  of  the CRDA also gave the Company the ability, with  the  prior
approval  of  the  U.S.  Army,  to use the management  information  systems
technology  and  CHAMPUS databases obtained under the CRDA to  analyze  the
healthcare  benefits of companies outside of the U.S. automotive  industry.
The  license  to  use  the  management information systems  technology  and
databases  obtained  under  the  CRDA  will  convert  to  a  non-exclusive,
perpetual  license,  unless the CRDA is further extended  on  an  exclusive
basis by the mutual consent of the parties.

NSC is entitled to patent any inventions made by NSC through the course  of
the  CRDA. Similarly, NSC is entitled to copyright any works created by NSC
during the course of the CRDA.

MARKET.

The  market  for  NSC's  services presently includes  the  U.S.  Automotive
industry,  and their down-line vendors. As discussed elsewhere herein,  the
Company has been granted the ability to expand its market ("field of use"),
with  prior approval of the U.S. Army, to include other large corporations,
outside  of the U.S. automobile industry, that self-insure and have  relied
on  third-party  administrators (TPA's) to manage their healthcare  benefit
programs,  the TPA's themselves, HMO's, PPO's and insurers.  NSC  has  also
targeted   healthcare   programs  administered  by  state   and   municipal
governments, which it believes have cost-control needs for their healthcare
programs at least comparable to those of the large corporations which self-
insure.   Should  opportunities arise to expand NSC's  field  of  use,  the
Company has no reason to believe that the approval of the U.S Army would be
unreasonably withheld.

HMT's  market  consists  of mid to large U.S. employers,  insurers,  TPA's,
PPO's, HMO's, and other healthcare management companies.

<PAGE> 12

CUSTOMERS.

NSC  entered  into  a service agreement with Chrysler Corporation  in  1993
which  accounted  for  a  majority of NSC's 1995 and  1996  revenues.  This
agreement was terminated in September 1997, due to performance issues among
NSC,  Chrysler  and  HMS.  In  October 1995, NSC  entered  into  a  service
agreement with Ford Motor Company. The service agreement with Ford  expired
by  its  terms on March 31, 1997. The service agreement with Ford  has  not
been extended as of this date. The Company is currently pursuing renewal of
the  Chrysler  and Ford service agreements but, there is no assurance  that
the Company will be successful in securing such renewals.

As  compensation for its services, NSC receives a percentage of the savings
which  it obtains for its customers. As described above, NSC pays a portion
of  the  revenues  it receives from customers to certain subcontractors  in
return for certain medical coding and analytical services.

HMT's  customers  include insurers, payors and self-insured  companies.  As
more fully described herein, the Company and the former shareholders of HMT
entered into an agreement in June 1997 which provides for the rescission of
the Company's acquisition of HMT.

COMPETITION.

Other  healthcare management information companies, insurers, TPA's,  PPO's
and  HMO's  are  currently the competition for the  Company's  approach  to
control the healthcare costs of large self-insured companies. The Company's
competitors have substantially greater financial resources than the Company
but,  management  believes  none  of these  competitors  has  the  advanced
management information systems technology and database capabilities of  the
Company.  The  Company,  however, has not  been  successful,  to  date,  in
marketing such technology.

EMPLOYEES.

As of December 31, 1996, NSC had 8 employees and HMT had 18 employees.

<PAGE> 13

TELECOMMUNICATIONS.

The businesses included in the Company's Telecommunications segment include
TNI,  Comstar,  LCI,  CCI and ATI. Following the acquisition  of  TNI,  the
operations  of  TNI,  Comstar  and LCI were  combined  into  one  operating
division ( collectively referred to herein as "TNI" ).
TNI,  until  the  sale by the Company of substantially all of  its  assets,
operated  as a switch-less re-seller of long distance services and provided
utility  and telecommunications audit and cost recovery services  to  large
and small businesses and governmental entities.

ATI  sells  Operator Service Provider ("OSP"), long-distance telephone  and
PPV  television products to small and medium sized hotels and motels;  and,
CCI  is  engaged in the business of installing and servicing PPV equipment.
As discussed elsewhere herein, these companies were disposed of in May 1997
and May 1996, respectively.

The  revenues  and  operating  loss of TNI  in  1996  were  $1,481,317  and
$1,792,795  respectively, and $2,373,491 and $3,122,623,  respectively,  in
1995. Included in TNI's operating loss for the year ended December 31, 1995
is the write-off of goodwill recorded in connection with the acquisition of
TNI  by  the Company. The revenues and operating loss of ATI in  1996  were
$673,995   and   $116,460,   respectively,  and  $427,445   and   $631,391,
respectively, in 1995; and, the revenues and operating loss of CCI in  1996
were   $22,546   and  $23,394,  respectively,  and  $92,842,and   $282,356,
respectively, in 1995.

EMPLOYEES.

As of December 31, 1996, TNI had 8 employees and ATI had 6 employees.
Employees  of  the parent company (the "Registrant"), as  of  December  31,
1996, totaled ten (10).

<PAGE> 14

ITEM 2.  PROPERTIES

The  Company  and  its subsidiaries do not own any properties.  All  office
space is leased and the Company believes the leased facilities are adequate
for  its current needs and that additional suitable space will be available
as required.

The following table sets forth information with respect to the office space
leased by the Company and its subsidiaries as of December 31, 1996.

<TABLE>
<CAPTION>

                                   Square            Annual          Lease
Entity         Location             Footage           Rental     Expiration
Date
-----------   -------------------  -------          --------    -----------
<S>             <C>                  <C>              <C>             <C>
The Company   2575 Ulmerton Road
              Clearwater, FL (1)    3,959           $52,952        09-14-98

ATI           1151 Old McHenry Rd.
              Buffalo Grove, IL (2) 1,888            19,500        05-01-97

TNI           25 S. Magnolia
              Orlando, FL  (2)      1,200            21,168          N/A

              408 Nutmeg Street
              San Diego, CA (2)(4)  6,600            47,520        03-31-00

NSC           602 Sarasota Quay
              Sarasota, FL (3)      3,316            52,860        10-13-99

              4241 Piedras
              San Antonio, TX       4,429            47,832        11-30-00

HMT           1150 Moraga Way
              Moraga, CA (2)        9,239            67,814        12-10-97
</TABLE>

N/A means that this location is being leased on a month-to-month basis.

(1)  On June 1, 1997, the Company relocated its corporate offices to 4707
140th Avenue North, Suite 107, Clearwater, Florida 33762. The lease
agreement for these premises expires on May 31, 1998 and the annual rental
is $19,478.

(2) These leased facilities are no longer in use by the Company as a result
of the rescission of the ATI and HMT acquisition agreements and the sale
of substantially all of the assets of TNI (see "Business").

(3)  The  Company has closed its Sarasota Quay, FL office and has relocated
the  NSC  Corporate functions performed at that location to  the  Company's
offices in Clearwater, FL.

(4) The TNI San Diego, CA location was closed on December 31, 1996 and is
currently being subleased.

<PAGE> 15

ITEM 3.  LEGAL PROCEEDINGS

The Company is subject to various legal and administrative proceedings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 14 to the Consolidated Financial Statements,  included
elsewhere  herein. These proceedings include (i) a consent  order  executed
between the Company and the State of Michigan requiring the Company to  use
its  best  efforts  to  satisfy the prerequisites  of  the  Securities  and
Exchange Commission  and the Michigan Securities Bureau for registering the
common  stock  sold by the Company to purchasers of its securities  in  the
State of Michigan, for resale by them in the public market, (ii) an action,
in  arbitration,  by  the former shareholders of CCI to enforce  promissory
notes  in  the  principal  amount of $300,000  issued  by  the  Company  in
connection with the acquisition of CCI and canceled by the Company  in  May
1996  in  connection  with the Company's decision  to  cancel  all  of  the
acquisition  related  documents,  (iii) actions  on  the  part  of  certain
creditors  to  enforce the terms of certain promissory notes, (iv)  actions
brought  against  the  Company  by certain  former  employees  and  persons
formerly  under contract with the Company for payments allegedly due  them,
(v)  an  action by a shareholder seeking the rescission of the sale by  the
Company  of  its common stock to the shareholder and (vi) an  action  by  a
purchaser  of the Company's convertible debentures issued in reliance  upon
exemptions  under  Regulation  S  of the Securities  Act  of  1933  seeking
performance   of  the  terms  of  the  related  offering  and  subscription
agreements.  The Company and its subsidiaries are also subject  to  a  suit
filed  by  Boston  Financial Corporation seeking  amounts  owed  to  Boston
Financial  Corporation under a lease agreement entered into between  Boston
Financial  Corporation and NSC. The lease agreement was guaranteed  by  the
Company, ATI and TNI.

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

There  were  no matters submitted to a vote of security holders during  the
fourth quarter of 1996.

<PAGE> 16

PART II

ITEM  5.   MARKET FOR THE REGISTRANTS' COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

The Company's common stock is quoted under the stock symbol "SCMI" on the
NASDA  OTC  Bulletin Board and the over-the-counter market.  The  following
table  sets  forth  the  approximate high and low bid  quotations  for  the
Company's Common Stock for each quarter during the last two years  and  for
the  first  three  quarters of 1997. These bid quotations are  inter-dealer
prices  without  retail  markup,  mark-down  or  commission,  and  may  not
represent actual transactions.

Quarter ended         High bid       Low bid
-------------         --------       -------
March 31, 1995        $  4.25        $ 2.00

June 30, 1995         $  3.875       $  .75

September 30, 1995    $  8.50        $ 2.625

December 31, 1995     $ 15.50        $ 3.25

March 31, 1996        $ 17.75        $ 9.375

June 30, 1996         $ 12.375       $ 8.50

September 30, 1996    $  9.00        $ 6.125

December 31, 1996     $  5.875       $ 4.25

March 31, 1997        $  1.50        $ 1.4375

June 30, 1997         $  0.3125      $ 0.28125

September 30, 1997    $  0.40625     $ 0.1875

The  high and low bid quotations for the Company's common stock on December
22,  1997  were $.3125 and $.2812 per share, respectively. As of  the  date
hereof,  there is no market for the Company's outstanding warrants, options
or debentures and a market is not expected to develop.

The Company has not paid any dividends on its Common Stock from the date of
its incorporation.  There are no restrictions on the declaration or payment
of  dividends or any provisions which restrict dividends.  The  payment  by
the  Company of dividends in the future rests within the discretion of  the
Company's Board of Directors and will depend, among other things, upon  the
Company's  earnings, its capital requirements, its financial condition  and
other relevant factors.

As  of  December  22, 1997, the Company had 571 beneficial  owners  of  its
common stock.

<PAGE> 17

ITEM 6.  SELECTED FINANCIAL DATA

The  following table sets forth selected financial data of the Company  for
the  years  1993  through 1996. In 1992, the Company had no  operations  or
assets  and was dormant. This table should be reviewed in conjunction  with
the Consolidated Financial Statements of the Company and the notes thereto
included elsewhere herein.


<TABLE>
<CAPTION>

INCOME STATEMENT DATA:

                                             Year Ended December 31,
                                    ------------------------------------------
                                       1996         1995      1994      1993
                                    ----------  ----------  --------  --------
<S>                                     <C>         <C>        <C>       <C>
Net  revenues                     $  2,832,123 $    91,106   $  --   $    --
Loss from continuing operations
   before income taxes (1)         (20,488,639) (2,004,228)  (78,233)     --
Loss from continuing operations    (17,934,489) (1,989,104)  (78,233)     --
Income (loss) from operations of
   discontinued telecommunications
   businesses (less income tax
   benefit of $649,044 in 1996
   and $241,577 in 1995) (1)       ( 1,322,179) (3,818,921)  (50,769)  338,909
Net  income  (loss)                (19,256,668) (5,808,025) (129,002)  338,909
Income (loss) per share:
   Loss from continuing operations $     (2.15) $    (0.58)  $ (0.06) $    --
Income (loss) from operations of
   discontinued telecommunications
   businesses                            (0.16)      (1.23)    (0.04)     0.41
                                    -----------  ----------  --------  ---------
                                   $     (2.31) $    (1.81)  $ (0.10) $   0.41
                                    ===========  ==========  ========  =======
Weighted average number
of common shares and common
share equivalents outstanding        8,349,459   3,201,991  1,306,493  825,765
                                    ===========  ========== =========  =======

<PAGE> 18

BALANCE SHEET DATA (2):

                                                 December 31,
                                    ------------------------------------------
                                       1996        1995      1994       1993
                                    ---------   ---------  --------  --------
Current   assets                 $  1,403,881  $4,156,868  $442,069  $492,216
Current    liabilities              7,908,138   5,417,864   652,107    13,335
Total    assets                     5,847,300  21,545,654   780,222   578,549
Long-term    liabilities(3)         1,207,488   4,597,671    77,750   553,750
Common stock subject to 
   rescission(4)                      709,124     789,624       --        --
Stockholders' equity (deficit)     (3,977,450) 10,740,495    50,365    11,464

</TABLE>

(1) Includes impairment losses of $14,233,953 applicable to continuing
    operations and $194,901 applicable to operations of discontinued
    telecommunications businesses in 1996 and $2,758,779 applicable to
    discontinued telecommunications businesses in 1995. See Note 5 to the
    Consolidated Financial Statements.
(2) Includes the assets and liabilities of discontinued telecommunications
    businesses. See Note 4 to the Consolidated Financial Statements
    included elsewhere herein.
(3) Includes long-term portion of notes and debentures payable; obligations
    under capital leases, deferred compensation and other long-term
    liabilities.
(4) See Note 14 to the consolidated financial statements for a description
    of common stock subject to rescission.

<PAGE>19

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
The following table sets forth certain information derived from the
Consolidated  Financial Statements of the Company for  each  of  the  three
years  in  the period ended December 31, 1996. The results from  continuing
operations include the operations of NSC, acquired in October 1995,and HMT,
acquired  in  March  1996.  NSC and HMT comprise the  Company's  healthcare
segment.   The  results  from  discontinued  telecommunications  businesses
include  the  operations  of  TNI (including  the  operations  of  LCI  and
Comstar), ATI and CCI. These businesses were sold or otherwise disposed  of
in 1996 and 1997 (see Note 4 to the Consolidated Financial Statements). The
following  discussion should be read in conjunction with  the  Consolidated
Financial Statements and notes thereto, appearing elsewhere herein.

<TABLE>
<CAPTION>
                                            Year Ended December 31,
                                        ---------------------------------
                                          1996         1995       1994
                                        --------     ---------   --------
<S>                                        <C>          <C>        <C>
Operations of continuing businesses:
Net revenues                          $ 2,832,123    $ 91,106   $    --
Cost of revenues                          827,063        --          --
Selling and administrative
   expenses                             6,322,627   1,887,275      78,233
Impairment losses                      14,233,953        --          --
Depreciation and amortization           1,459,436     148,192        --
Interest income                            (8,183)     (3,777)       --
Interest expense                          381,975      63,644        --
Other, net                                103,891        --          --
Loss from continuing operations
    before income taxes                20,488,639   2,004,228      78,233
Operations of discontinued
    telecommunications businesses:
Net revenues                            2,177,858   2,893,778     807,669
Cost of revenues                        1,320,256   2,014,460     134,607
Selling and administrative expenses     2,304,059   1,845,775     649,036
Impairment losses                         194,901   2,758,779        --
Depreciation and amortization             291,291     311,135      72,374
Interest income                              (971)       (627)       --
Interest expense                           38,713      20,466       2,421
Other, net                                    832       4,288        --
Loss from operations of discontinued
    businesses before income taxes      1,971,223   4,060,498      50,769
</TABLE>

<PAGE> 20

As  more  fully discussed below and elsewhere herein, the operating results
of  acquired  businesses  (including businesses acquired  and  subsequently
disposed  of  in 1996 and 1997) are well below those which were anticipated
at  the time of the respective acquisitions. The business of TNI (which  is
included  in operations of discontinued telecommunications businesses)  has
been severely damaged by the actions of GECCS and News (See Note 14 to  the
Consolidated  Financial  Statements)  and,  the  revenues  and  results  of
operations of the Company's healthcare businesses are less than anticipated
at  the time of the respective acquisitions of NSC and HMT, principally due
to  delays  in NSC's software development activities and higher  levels  of
spending for software development and marketing than originally anticipated
(and  limitations  on  the  part of the Company to  fund  those  collective
efforts). These factors, combined, have strained the financial resources of
the  Company.  For  further discussion of the impact of  these  events  and
uncertainties  on future operations and the Company's financial  condition,
see "Liquidity and Capital Resources"

OPERATIONS OF BUSINESS ACQUIRED

The  Company  acquired  various businesses  in  1995  and  1996,  the  most
significant  of  which were TNI, acquired in July 1995,  NSC,  acquired  in
October  1995,  and  HMT,  acquired in March  1996.  For  purposes  of  the
following discussion, the operations of TNI include the operations of  TNI,
LCI and Comstar. TNI, LCI and Comstar all operate as switch-less re-sellers
of long-distance telephone services and products and were combined into one
operating division after the acquisition of TNI.

<PAGE> 21

The  net  revenues and loss from operations of TNI (which are  included  in
operations  of discontinued telecommunications businesses) for  the  period
from  the  date  of acquisition (July 7, 1995) to December  31,  1995  were
$2,373,491  and  $3,122,621 (including impairment  losses  of  $2,758,779),
respectively,  and $1,480,541 and $1,791,788, respectively,  for  the  year
ended  December 31, 1996. TNI's operating results for the period subsequent
to  the  date of acquisition were adversely affected by (i) the failure  of
GECCS  and  News  to, among other things, provision customer  accounts  for
telecommunications products offered by GECCS/News and sold by TNI  pursuant
to   a  contractual  agreement  among  TNI,  GECCS  and  News  (the  "GECCS
Agreement"),  (ii)  the cancellation of TNI customers by  GECCS  and  News,
(iii)the failure of GECCS/News to properly bill and collect revenues due to
TNI  and (iv) a diminution of TNI's marketing and distribution organization
as  a  result of such failures and other actions taken by GECCS  and  News.
TNI,  as  claimant  in a binding arbitration proceeding against  GECCS  and
News,  was  awarded  damages under the GECCS Agreement  in  the  amount  of
approximately $1,250,000. The award, which was entered on October 10, 1996,
was  appealed by GECCS to the U.S. District Court for the Northern District
of  Georgia  on the grounds that the arbitrators exceeded their  powers  by
awarding TNI damages under the GECCS Agreement. On September 30, 1997,  the
U.S. District Court confirmed the award; and, a motion for summary judgment
was  entered  on October 1, 1997. On December 24, 1997, the Company,  GECCS
and  NEWS entered into a Confidential Settlement Agreement and Mutual  Full
and  Final  Releases (the "Settlement Agreement") regarding the arbitration
award  in  favor  of  the  Company. Pursuant to the  Settlement  Agreement,
GECCS\NEWS  paid $1,250,000 in full satisfaction of the arbitration  award.
Of  that amount, the Company received approximately $750,000, which is  net
of  legal fees. The proceeds from the Settlement Agreement were used to pay
trade  and  other  obligations, including the obligations  to  Mr.  Telford
Walker  and  Mr. James Gary May referred to in Note 14 to the  accompanying
consolidated financial statements. The accompanying consolidated  financial
statements do not give effect to the award.

The  diminution  in  TNI's  marketing and  distribution  organization  that
occurred as a result of such failures and other actions taken by GECCS  and
News,  together with limitations on the ability of the Company  to  provide
additional   working  capital  to  TNI,  also  adversely   affected   TNI's
operations.  As a result thereof, in January 1997, the Company disposed  of
substantially all of TNI's operating assets.

The revenues of TNI declined from $2,373,491 in 1995 to $1,480,541 in 1996.
This  decrease is principally the result of reduced revenues from the GECCS
Agreement.  The  operating  loss  of  TNI  was  $343,842  in  1995  (before
$2,758,779  of  impairment  losses) compared to  $1,791,788  in  1996.  The
increase  in  TNI's  net  loss  (before impairment  losses)is  due  to  the
reduction  in  revenues from the GECCS Agreement and valuation  adjustments
recorded  at year-end 1996 to reduce assets sold in January 1997  to  their
net   realizable  value  and  the  write-off  of  the  Company's  remaining
investment  in Comstar, including goodwill, the effects of which  were  not
fully  offset  by  reduced operating expenses. Asset valuation  adjustments
recorded  at year-end 1996 totaled approximately $370,000 and the write-off
of the Company's investment in Comstar totaled approximately $194,000.

<PAGE> 22

The  net  revenues and loss from operations of NSC (which are  included  in
operations  from  continuing businesses) for the period from  the  date  of
acquisition  (October  27,  1995) to December 31,  1995  were  $91,106  and
$363,857  respectively, and $1,574,825 and $16,275,288 , respectively,  for
the  year ended December 31, 1996. The loss from operations of NSC in  1996
includes  one-time  charges of $14,233,953, to write-off,  as  of  December
31,1996, the unamortized cost of intangibles and goodwill recorded  by  the
Company  in  connection with its acquisition of NSC. The write-off  of  the
unamortized  cost of goodwill and intangibles recorded in  connection  with
the  acquisition  of  NSC  is  due to the  failure  of  NSC,  to  date,  to
successfully   market   its  healthcare  management   information   systems
technology,  the  likelihood  that NSC may  not  be  able  to  market  such
technology in the future without further significant capital investment and
the  likelihood  of the Company being able to provide NSC  with  additional
capital investment (see "Liquidity and Capital Resources"). Also negatively
impacting  NSC's  operating results during these periods  were  lower  than
expected  revenues  from  retrospective  healthcare  claims  analysis   and
recovery  services,  which  services  to  date  have  been  executed  on  a
subcontract   basis,  costs  associated  with  delays  in  NSC's   software
development activities and costs related to sales and marketing.

The  net  revenues and loss from operations of HMT (which are  included  in
operations  from  continuing businesses) for the period from  the  date  of
acquisition  (March  12,  1996) to December 31, 1996  were  $1,257,298  and
$828,895  respectively.  The  loss  from  operations  principally  reflects
amortization of intangibles and goodwill and costs related to  new  product
development, sales and marketing.
<PAGE> 23

OPERATIONS OF BUSINESSES DISPOSED OF

In  May  1996, the Company informed the former shareholders of CCI that  it
was canceling the acquisition of CCI and terminating all of the acquisition
related documents, principally as a result of non-performance by CCI  under
the  agreements  (see "Legal Proceedings"). In January  1997,  the  Company
sold  substantially all of the assets of TNI; and, in May 1997, the Company
and  the  former  shareholders of ATI entered into a  rescission  agreement
which  provides for the rescission of the Company's August 1994 acquisition
of  ATI. As a result of the disposition of the businesses included  in  the
Company's    telecommunications   segment,   the    operations    of    the
telecommunications  segment  are shown as discontinued  operations  in  the
accompanying  consolidated  statements of operations.  In  June  1997,  the
Company  entered into an agreement with the former shareholders of  HMT  to
rescind the Company's March 1996 acquisition of HMT. The operations of  HMT
are   shown  as  continuing  operations  along  with  the  Company's  other
healthcare subsidiary ( NSC) in the accompanying consolidated statements of
operations.

The  revenues  and  operating losses, respectively, of CCI,  TNI,  and  ATI
(which  are  included  in  operations  of  discontinued  telecommunications
businesses)  were  $22,546,  and  $23,394,  respectively,  $1,481,317   and
$1,792,795, respectively, and $673,995 and $116,460, respectively, in 1996,
and   $92,842,  and  $282,356,  respectively,  $2,373,491  and  $3,122,621,
respectively,  and  $427,445  and  $289,791,  respectively,  in  1995.  The
revenues  and  operating loss of HMT (which are included in  operations  of
continuing businesses) were $1,257,298 and $828,895, respectively, in 1996.

The amount of financing necessary to continue to support the operations and
capital  needs of  businesses acquired, the continuing operating losses  of
businesses  acquired, the lack of equity and debt financing   available  to
the Company (together with the inability of the Company to meet its funding
obligations under the HMT acquisition agreement and its payment obligations
to trade and other creditors), and the desire of the former shareholders of
ATI  and  HMT  to rescind the original purchases transactions, among  other
factors,  led to management's decision to dispose of ATI and HMT  and  sell
substantially  all  of  the operating assets of TNI (  see  "Liquidity  and
Capital Resources").

NET REVENUES

Net revenues are summarized as follows:

                                           1996        1995        1994
                                         --------    ---------   ---------
  Net revenues from operations of
   continuing businesses                $2,832,123  $   91,106   $    --
  Net revenues from discontinued
   telecommunications businesses         2,177,858   2,893,778     807,669
                                         --------    ---------   ---------
                                        $5,009,981  $2,984,884   $ 807,669
                                         =========   =========   =========
<PAGE> 24

The  increase in net revenues from operations of continuing businesses from
1995  to  1996  reflects  higher  healthcare  revenues.  The  increase   in
healthcare revenues is the result of the acquisitions of HMT and  NSC.  HMT
contributed $1,257,298 to this increase and NSC contributed $1,483,719. HMT
was  acquired  in  March 1996 and NSC was acquired  in  October  1995.  The
decrease  in  net revenues from discontinued telecommunications  businesses
from 1995 to 1996 is due to lower revenues from the GECCS Agreement, offset
by an increase in net revenues of approximately $177,000 from the Company's
pay-per-view business, principally in Mexico.

The  increase in net revenues from operations of continuing businesses from
1994 to 1995 is the result of the acquisition of NSC; and, the increase  in
net  revenues from discontinued telecommunications businesses from 1994  to
1995  is  the  result of the acquisition of TNI in July 1995, offset  by  a
reduction  in  the pay telephone revenues of the Company's ATI  subsidiary.
The  reduction  in  pay  telephone revenues is the result  of  management's
decision to target the OSP and PPV hospitality market.


COST OF REVENUES

Cost  of revenues from operations of continuing businesses in 1996 consists
of the cost of healthcare revenues of businesses acquired.

The  cost  of  revenues from discontinued telecommunications businesses  in
1996   was   61%  of  net  revenues  from  discontinued  telecommunications
businesses compared to 70% in 1995. This decrease is the result of  product
mix  changes,  which  included lower revenues from the resale  of  domestic
telecommunication  services under the GECCS Agreement and  higher  revenues
from the sale of pay-per-view and related telecommunication products to the
hospitality industry, principally in Mexico.

The  relationship  of cost of revenues from discontinued telecommunications
businesses  to  net revenues of discontinued telecommunications  businesses
changed  dramatically  in  1995  as  compared  to  1994.  This  change  was
principally due to the acquisition of TNI and the inclusion of the cost  of
long  distance  services  provided  to  TNI's  customers  in  the  cost  of
telecommunications revenues. In 1995, the Company also made a provision  of
$145,776  to  reduce the value of obsolete PPV equipment to net  realizable
value.  Prior  to 1995, the cost of telecommunication revenues  principally
reflected the cost of PPV installation, only.

<PAGE> 25

SELLING AND ADMINISTRATIVE EXPENSES

Selling  and administration expenses applicable to operations of continuing
businesses  increased  by  $4,093,749 in  1996  over  1995.  This  increase
reflects  the  operations  of  businesses  acquired  and  higher  corporate
expenses.  Corporate expenses increased primarily due to  costs  associated
with  the  registration of the Company's securities  under  the  Securities
Exchange  Act of 1934, costs related to a failed attempt by the Company  to
file  a  registration statement under the Securities Act of 1933 and  costs
associated  with  the development, sale and marketing of  NSC's  healthcare
management  information products. Offsetting this increase was a  reduction
in  stock  compensation expense and the effect of stock  purchase  warrants
issued  in  1995  in  connection  with  the  extension  of  related   party
indebtedness.

Selling    and   administrative   expenses   applicable   to   discontinued
telecommunications businesses increased by $845,441 in 1996 over 1995. This
increase principally reflects the selling and administrative costs  of  TNI
which was acquired by the Company in July 1995.

Selling  and administrative expenses applicable to operations of continuing
businesses  increased  by  $2,150,645 in  1995  over  1994.  This  increase
includes the selling and administrative expenses of acquired businesses and
higher  corporate  expenses  for personnel, office  space  and  information
systems  for expanded operations, legal, professional and consulting  costs
incurred  in  connection  with  the Company's  acquisition  activities  and
$793,373 from the issuance of stock and common stock purchase warrants  for
services  rendered  and  in consideration for extension  of  related  party
indebtedness.

Selling    and   administrative   expenses   applicable   to   discontinued
telecommunications businesses increased by $809,582 in 1995 over 1994. This
increase principally reflects the selling and administrative costs  of  TNI
which  was  acquired  by  the Company in July 1995 and  costs  incurred  in
connection with the GECCS/News arbitration.

IMPAIRMENT LOSSES

In 1996, the Company recognized impairment losses applicable to  operations
from  continuing  businesses  of $13,806,557,  net  of  a  tax  benefit  of
$427,396,  to write off the unamortized cost, as of December 31,  1996,  of
intangibles  and  goodwill recorded in connection with the  acquisition  of
NSC.  The  write-off  of the unamortized cost of goodwill  and  intangibles
recorded  in connection with the acquisition of NSC is due to the  failure,
to   date,   of  NSC  to  successfully  market  its  healthcare  management
information systems technology, the likelihood that NSC may not be able  to
market  such  technology in the future without further significant  capital
investment and the likelihood of the Company being able to provide NSC with
additional capital investment (see "Liquidity and Capital Resources").

<PAGE> 26

Impairment  losses applicable to discontinued telecommunications businesses
recognized  in  1996  consist  of  the write-off  the  Company's  remaining
investment in Comstar. Comstar was acquired in June 1995 and its operations
were  combined  with the operations of TNI. As a result  of  the  Company's
decision  to divest TNI, the Company wrote-off its remaining investment  in
Comstar.

As  of  December  31, 1995, the Company recognized a charge  to  income  of
$2,758,779 to write off, with no associated income tax benefit, all of  the
goodwill  related  to  its  acquisition of TNI. This  write-off,  which  is
included  in  operations  of  discontinued  telecommunications  businesses,
reflects the Company's belief that the business of TNI was severely damaged
as  a  result  of  actions taken by GECCS and News which actions  included,
among  other  things,  (i)the failure of GECCS/News to  provision  customer
accounts for telecommunications products and services offered by GECCS/News
and  sold  by TNI pursuant to a contractual agreement among TNI, GECCS  and
News,  (ii) the cancellation of TNI customers by GECCS/News and  (iii)  the
failure of GECCS/News to properly bill and collect revenues due to TNI.  As
further  discussed in Note 14 to the Consolidated Financial Statements  and
elsewhere  herein,  the  Company  is  claimant  in  a  binding  arbitration
proceeding with GECCS/News.

DEPRECIATION AND AMORTIZATION

Depreciation  and amortization applicable to both operations of  continuing
businesses  and  operations  of discontinued telecommunications  businesses
increased  in  1996  over 1995 and in 1995 over 1994. These  increases  are
principally  due  to the amortization of intangibles and  goodwill  arising
from  business  acquisitions  and  a higher  investment  in  furniture  and
equipment.

INTEREST EXPENSE

Interest expense applicable to both operations of continuing businesses and
operations of discontinued telecommunications businesses totaled  $420,688,
$84,110 and $2,421 in 1996, 1995 and 1994, respectively. The increases from
period-to-period in interest expense are principally due to  higher  levels
of  borrowings  outstanding, interest accrued on common  stock  subject  to
rescission  and  the  accrual  of default interest  on  certain  notes  and
debentures payable. See Note 7 to the Consolidated Financial Statements.

INCOME TAXES

For  information  concerning the deferred income tax benefits  recorded  in
1996  and 1995, as well as information regarding deferred income tax assets
and  liabilities  as  of  December 31, 1996  and  1995  and  the  Company's
effective tax rate, see Note 10 to the Consolidated Financial Statements.

<PAGE> 27

In  1996  and  1995,  the  Company recorded deferred  income  tax  benefits
applicable  to  operations  of  continuing  businesses  of  $2,554,150  and
$15,124,  respectively.  The effective tax rate  applicable  to  continuing
operations  was 12.5% in 1996 and 0.7% in 1995. The difference between  the
Federal  statutory  rate  of  34%  and the  Company's  effective  tax  rate
applicable to continuing operations for the year ended December 31, 1996 is
principally  due  to  an increase in the net deferred tax  asset  valuation
allowance as a result of the write-off of intangibles and goodwill recorded
in connection with the acquisition of NSC; and, the difference for the year
ended  December  31, 1995 is primarily attributable to the  tax  effect  of
intangibles  acquired in connection with the acquisition  of  NSC.  No  tax
benefit applicable to continuing operations was recognized in 1994  due  to
the Company having net deferred tax assets which were fully reserved.

Income    tax    benefits   allocated   to   operations   of   discontinued
telecommunications businesses were $649,044 and $241,517 in 1996 and  1995,
respectively.  The  difference between income tax  benefits  applicable  to
discontinued operations, computed by applying the U.S. federal  income  tax
rate  of  34  percent  to loss from discontinued operations  before  income
taxes, is due primarily to amortization of goodwill, impairment losses  and
adjustments to the valuation allowance recorded as a reduction of  goodwill
in conjunction with the acquisition of NSC.

LIQUIDITY AND CAPITAL RESOURCES

The  principal factors having a negative impact on the Company's  liquidity
during 1996 were cash used in operations of approximately $4.2 million (see
the  Consolidated  Statements  of  Cash Flows),  capital  expenditures   of
$553,000  and  cash  used in connection with the acquisition  of  HMT.  The
Company  also loaned a member of Retiring Management (see Note 17)  $50,000
during  the year, repurchased $80,500 of common stock subject to rescission
in  the  State  of Michigan and made payments on notes and  capital  leases
totaling  approximately $637,600. The positive impacts  on  liquidity  were
proceeds from the sale of common stock and issuance of notes and debentures
payable, which in the aggregate totaled approximately $4.6 million.

During  1996,  the  Company received $2,187,273 in cash from  the  sale  of
2,254,910  shares of its common stock and $2,422,752 from the  issuance  of
notes  and  debentures.  Of the $2,422,752 of notes and  debentures  issued
during   the   year  1996,  $1,279,000  were  10%  cumulative   convertible
debentures, due on various dates through November 1997, issued in  reliance
upon  exemptions  under  Regulation D of the Securities  Act  of  1933  and
$500,000 were 10% cumulative convertible debentures, due in November  1997,
issued  to  RANA Investment Company ("RANA") and an affiliate of RANA  (non
U.S.  persons)  in  reliance  upon exemptions under  Regulation  S  of  the
Securities  Act  of  1993.  See  Note 7 for  a  description  of  notes  and
debentures  payable. The remaining notes and debentures  totaling  $643,752
were  issued  to  shareholders, officers, directors and  creditors  of  the
Company in private placement transactions.

<PAGE> 28

The   10%  cumulative  convertible  debentures  issued  in  reliance   upon
exemptions  under  Regulation  D  of  the  Securities  Act  of  1933,   are
convertible  into  shares of the Company's common stock  on  various  dates
through  November 1997 but may be converted earlier if the Company  has  an
effective registration statement under the Securities Act of 1933  covering
the  sale  of  the shares of common stock issuable upon conversion  of  the
debentures. As of the date hereof, the Company has not filed a registration
statement covering the shares of common stock issuable upon conversion  and
no  conversions  have  been  made. The number of  shares  of  common  stock
issuable  upon conversion of these debentures, in either case, is generally
to  be determined by dividing the principal amount of the debentures,  plus
accrued  and  unpaid  interest, by the lesser of (a) the  fixed  conversion
price set forth in the debentures or (b) a conversion price equal to 50% of
the average closing bid and ask prices of the Company's common stock at the
close of trading on the next day following the conversion date as set forth
in  the  respective convertible debenture. The fixed conversion prices  set
forth in these debentures range from $1.50 to $5.00 per share.

The 10% cumulative convertible debentures issued to RANA Investment Company
("RANA")  and its affiliate in reliance upon exemptions under Regulation  S
of  the  Securities Act of 1933 are convertible at any time  for  one  year
after  the  date of issuance, or any time thereafter, into  shares  of  the
Company's common stock at a conversion price equal to the lesser of (a) 70%
of the average closing bid price of the Company's common stock for the five
trading  days immediately preceding the conversion date or (b) 80%  of  the
average  closing bid price of the Company's common stock for the five  days
preceding  the  issuance of the debentures. The net proceeds,  after  fees,
from  the  issuance of these debentures were $450,000. As of September  30,
1997,  the  Company  has converted $330,000 of such convertible  debentures
into 93,301 shares of the Company's common stock and has pending notices of
conversion in the amount of $60,000, convertible into 162,554 shares of the
Company's common stock.

The  principal factors having a negative impact on the Company's  liquidity
during  fiscal  1995  were cash used in operations  of  approximately  $1.8
million  (see  the Consolidated Statements of Cash Flows), acquisitions  of
businesses  which  required approximately $1.4 million in  cash  and  other
investing  activities of approximately $250,000. The  positive  impacts  on
liquidity  during  the fiscal year were the proceeds of approximately  $4.1
million from the issuance of common stock, sold in reliance upon exemptions
under  Regulation  D  of  the  Securities  Act  of  1933,  and  borrowings,
principally  from  related  parties, net of  repayments,  of  approximately
$213,000.

<PAGE> 29

In  1996  and prior to the rescission of the Company's acquisition of  ATI,
the  Company  obtained, and guaranteed, a $250,000 financing  facility  for
ATI's  PPV  equipment  needs for its entrance into the Mexican  hospitality
market.  As  of  December 31, 1996, ATI had used $59,025 of this  equipment
financing facility and had $199,975 available. This financing facility  was
terminated by the lender in 1997 due to non-payment by ATI of payments  due
under  the  related  lease agreements. At the time of termination  of  this
facility,  the  aggregate minimum lease payments  due  the  lessor  totaled
approximately  $180,000.  In connection with  the  rescission  of  the  ATI
acquisition, ATI issued a promissory note to the Company in the  amount  of
$180,000,  payable  upon  the default by ATI  of  payments  due  under  the
financing  facility. Payments due to the Company under the promissory  note
are  to be equal to the amount, if any, the Company may be required to  pay
under the lease guaranty agreement(s) entered into between the Company  and
ATI's equipment lessor(s). There is no assurance, however, that the Company
would be able to satisfy the terms of the guarantee agreement(s).

On February 24, 1997, the Company issued $1,120,000 of 4% convertible
debentures  due  October  1,  1998 to Timboon, LTD  ("Timboon",a  non  U.S.
person)  in  reliance upon exemptions under Regulation S of the  Securities
Act  of  1933. These debentures are convertible at any time after  45  days
from  the date of their issuance, until maturity, into the Company's common
stock  at a conversion price equal to the lesser of (a) 80% of the  average
closing bid price of the Company's common stock for the five days preceding
the  issuance of the debentures or (b) 70% of the average closing bid price
of  the  Company's common stock for the five days preceding the  conversion
date.  The  Company  incurred costs in connection with  this  financing  of
$120,000  and  received net proceeds of $1,000,000.  The  Company,  through
September  30,  1997, has converted $120,000 of the convertible  debentures
issued to Timboon into 256,361 shares of the Company's common stock and has
subsequently   received conversion notices from Timboon to convert  $20,000
of  the  convertible debentures into 126,554 shares of the Company's common
stock. Such conversion notices have not been effected; and, the Company  is
currently  in  litigation  with  Timboon  arising  from  the  issuance  and
conversion of the debentures (see "Legal Proceedings" and Note  14  to  the
Consolidated Financial Statements).

The proceeds from the financing transactions described above were used
primarily to fund the operating losses of acquired businesses and corporate
overhead.

The  Company  is having cash flow difficulties and is currently  unable  to
meet all of its trade and other obligations (a substantial portion of which
are  currently  past  due  and  some of which  are  subject  to  legal  and
administrative  proceedings  for collection) and  is  attempting  to  raise
additional  debt or equity financing to provide the Company with sufficient
funds to carry-on its operations. While the Company has been successful  in
raising  debt and equity financing in the past, there is no assurance  that
additional  financing  will  be  available in  sufficient  amounts  or,  if
available, that such financing will be available on terms acceptable to the
Company. As of December 31, 1996, the Company and its subsidiaries have  no
material used or unused lines of credit.

<PAGE> 30

As  discussed  elsewhere  herein,  the amount  of  financing  necessary  to
continue  to  support  the  operations  and  capital  needs  of  businesses
acquired, the continuing operating losses of businesses acquired, the  lack
of  equity and debt financing available to the Company (together  with  the
inability  of  the Company to meet its funding obligations  under  the  HMT
acquisition  agreement  and  its payment obligations  to  trade  and  other
creditors),  and the desire of the former shareholders of ATI  and  HMT  to
rescind  the original purchases transactions, among other factors,  led  to
management's decision to dispose of ATI and HMT and sell substantially  all
of the operating assets of TNI during the first half of 1997.
After the rescission of the CCI acquisition in May 1996, the rescission  of
the  ATI  and  HMT acquisitions in the first half of 1997 and the  sale  of
substantially  all  of  the operating assets of TNI in  January  1997,  the
remaining  operations  of  the Company consist of  NSC.  NSC  has  incurred
substantial  operating  losses  since its acquisition  by  the  Company  in
October  1995  and there is no assurance that NSC will be able  to  reverse
this trend in the future. NSC's operating loss for the period from the date
of  its acquisition by the Company (October 1995) to December 31, 1995  was
$363,857, and for the year 1996 was $16,275,288, including the write-off as
of  December  31, 1996 of the unamortized cost ($14,233,953) of intangibles
and  goodwill  recorded by the Company in connection with  the  acquisition
(see Note 5 to the Consolidated Financial Statements).
The  Company currently believes that it will require additional  equity  or
debt financing (excluding the net proceeds, if any, from the GECCS and News
arbitration  award) to fund NSC's operating activities.  It  is  uncertain,
however, whether or not NSC's operating activities will generate profitable
operations in the future or whether or not the Company will have  available
sufficient  resources  to  fund  NSC's  future  operating  activities.  The
proceeds  from  any  additional financing which may  be  available  to  the
Company,  if obtained, are intended to be used by the Company to  fund  the
introduction  of  NSC's  products  into  the  market  place.  There  is  no
assurance,  however,  that  the Company will be able  to  (i)  successfully
market  NSC's products and services or attain profitable operations in  the
future  or  (ii)  that  additional  financing  will  be  available,  or  if
available, that such financing will be available, in sufficient amounts, or
on terms acceptable to the Company. The Company does not currently have any
available financing facilities for working capital or for other purposes.

<PAGE> 31

The  Company  is  subject  to various legal and administrative  proceedings
which could have an adverse impact on the Company's cash flows (see Note 14
to  the  Consolidated Financial Statements). These include  (i)  a  consent
order executed between the Company and the State of Michigan requiring  the
Company  to  use  its  best  efforts to satisfy the  prerequisites  of  the
Securities and Exchange Commission  and the Michigan Securities Bureau  for
registering  the  common stock sold by the Company  to  purchasers  of  its
securities  in  the  State of Michigan, for resale by them  in  the  public
market, (ii) an action, in arbitration, by the former shareholders  of  CCI
to  enforce promissory notes in the principal amount of $300,000 issued  by
the  Company in connection with the acquisition of CCI and canceled by  the
Company in May 1996 in connection with the Company's decision to cancel all
of  the acquisition related documents, (iii) actions on the part of certain
other  creditors  to enforce the terms of certain other  promissory  notes,
(iv)  actions  brought against the Company by certain former employees  and
persons formerly under contract with the Company for payments allegedly due
them, (v) an action by a shareholder seeking the rescission of the sale  by
the Company of its common stock to the shareholder and (vi) an action by  a
purchaser  ("Timboon") of the Company's convertible  debentures  issued  in
reliance upon exemptions under Regulation S of  the Securities Act of  1933
seeking  performance of the terms of the related offering and  subscription
agreements.  The Company and its subsidiaries are also subject  to  a  suit
filed  by  Boston  Financial Corporation seeking  amounts  owed  to  Boston
Financial  Corporation under a lease agreement entered into between  Boston
Financial  Corporation and NSC. The lease agreement was guaranteed  by  the
Company, ATI and TNI.

<PAGE> 32

As  mentioned  above,  the Company is subject to a consent  order  executed
between the Company and the State of Michigan arising from the sale of  its
securities  in the State of Michigan without an exemption from registration
under  the Michigan Uniform Securities Act. The consent order requires  the
Company  to  use  its  best efforts by December 31,  1997  to  satisfy  the
prerequisites  of the Securities and Exchange Commission and  the  Michigan
Securities  Bureau for either (i) registering the shares  of  common  stock
sold  to Michigan purchasers of its common stock for resale by them in  the
public market or (ii) making a rescission offer to all such purchasers.  As
of  the  date hereof, the Company has not nor is it likely that the Company
will  be  able to satisfy the requirements of the consent order within  the
time frame required, if at all. First, the Company is unable to satisfy the
prerequisites of the Securities and Exchange Commission for registering the
shares of common stock sold to Michigan shareholders for resale by them  in
the  public  market  or  for  making a rescission  offer  to  the  Michigan
purchasers  of its common stock. The inability of the Company  to  register
the  shares  of  common  stock  sold to Michigan  shareholders  or  make  a
rescission  offer  is  due  to the Company not  having  filed  all  reports
required  to be filed with the Securities and Exchange Commission  pursuant
to sections 13 or 15(d) of the Securities Exchange Act of 1934. The Company
has  not yet filed its quarterly reports on Form 10-Q for the year 1997 due
principally  to the delay in the filing of its Annual Report on  Form  10-K
for  the  year ended December 31, 1996. The delay in filing of  the  Annual
Report on Form 10-K for the year ended December 31, 1996 is principally due
to  the  inability  of the Company to timely pay for the  services  of  its
independent  auditors and the time required by management to  complete  its
assessment of the carrying value of intangible assets and goodwill recorded
in  connection  with  the  acquisition of  NSC.  Furthermore,  the  Company
anticipates,  upon filing of its quarterly reports on Form 10-Q,  the  time
required from that point to obtain an effective registration statement will
extend beyond the date for filing the Company's 1997 Annual Report on  Form
10-K in which audited financial statements for the year ended December  31,
1997  are  required  to be included. Based upon the current  price  of  the
Company's  common stock, a rescission offer is the only means of compliance
with  the  Michigan consent order. At this time, the Company does not  have
sufficient  financial resources available to it to carry-out  a  rescission
offer if an offer were to be made. The consent order contemplates that  any
rescission offer made to Michigan purchasers of the Company's common  stock
would  be at a price per share at least equal to the purchasers' per  share
cost,  plus  interest  thereon,  which the Company  estimates  would  total
approximately   $800,000  (see  Note  14  to  the  consolidated   financial
statements included elsewhere herein).

Based  on the foregoing factors, it is uncertain whether or not the Company
will  be able to generate sufficient cash from operations or from financing
transactions  to  enable it to meet its short-term or  long-term  liquidity
needs,  satisfy the requirements of the Michigan consent order and pay  its
outstanding  obligations to trade and other creditors.  In  the  event  the
Company is unable to generate sufficient cash flows from operations or from
financing  activities,  the  Company  would  be  required  to  seek   other
alternatives, including sale, merger or discontinuance of operations.

<PAGE> 33

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In  March 1995, the FASB issued Statement of Financial Accounting Standards
No.  121, "Accounting for the Impairment of Long-lived Assets and for Long-
lived  Assets  to be Disposed Of," which requires impairment losses  to  be
recognized  when indicators of impairment are present and the  undiscounted
cash  flows  estimated to be generated by those assets are  less  than  the
assets'  carrying amount. Statement No. 121 also addresses  the  accounting
for  long-lived  assets  expected to be disposed of.  The  Company  adopted
Statement No. 121 for the year ended December 31, 1995. As a result of  the
adoption  of SFAS No. 121, the Company recorded impairment losses  in  both
1995 and 1996. See Note 5 to the Consolidated Financial Statements.

In  October  1995,  the  FASB  issued  Statement  of  Financial  Accounting
Standards  No.  123,  "Accounting for Stock Based Compensation."  SFAS  123
allows  companies  to  continue  following  existing  accounting  rules  as
prescribed  by Accounting Principals Board Opinion No. 25, "Accounting  for
Stock  Issued to Employees" and related interpretations (which the  Company
has  elected  to  follow) but, requires pro forma disclosure  of  what  net
income and earnings per share would have been had the Company accounted for
employee  stock options under the fair value method(s) prescribed  by  SFAS
123.  These  disclosures  are  included in  Note  11  to  the  Consolidated
Financial Statements.

In February 1997, the Financial Accounting Standards Board issued Statement
of  Financial Accounting Standards No. 128 "Earnings Per Share".  SFAS  No.
128  requires presentation of basic earnings per share and diluted earnings
per  share.   Basic  earnings  per share is  computed  by  dividing  income
available  to common shareholders by the weighted average number of  common
shares  outstanding.  Diluted earnings per share takes  into  consideration
common shares outstanding (computed as under basic earnings per share)  and
potentially  dilutive common shares. SFAS No 128 is effective  for  interim
and annual financial statements for periods ending after December 15, 1997.
The adoption of SFAS No. 128 is not expected to have any material impact on
previously reported EPS.

In  June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No. 130, Reporting  Comprehensive  Income
("SFAS  NO.  130"),  which is effective for fiscal  years  beginning  after
December 15, 1997. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of general-
purpose financial ststements. Although SFAS No. 130 only impacts display as
opposed  to  actual amounts recorded, it represents a change  in  financial
reporting.  Management has not completed its review of SFAS  No.  130,  but
does  not  anticipate  that  the adoption of this  statement  will  have  a
significant impact on the Company's reported earnings.

<PAGE> 34

In  June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting Standards No. 131, Disclosures about Segments  of  an
Enterprise and Related Information ("SFAS No. 131"), which is effective for
years beginning after December 15, 1997. SFAS No. 131 establishes standards
for  the way public enterprises report information about operating segments
in  annual financial statements and requires that those enterprises  report
selected information about operating segments in interim financial reports.
It  also  establishes standards for related disclosures about products  and
services,  geographic  areas  and  major  customers.  Management  has   not
completed  its review of this statement, but does not anticipate  that  the
adoption  of the statement will have a significant effect on the  Company's
reported segments.

IMPACT OF INFLATION

The impact of inflation on the costs of the Company and its business units,
and  the  ability to pass on cost increases to its customers over  time  is
dependent  upon  market  conditions.  The  Company  is  not  aware  of  any
inflationary  pressures  that  have  had  any  significant  impact  on  the
Company's  operations over the past three years and, the Company  does  not
anticipate  that  inflationary factors will have a  significant  impact  on
future operations.

<PAGE> 35

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>

<S>                                                               <C>
Independent Auditors' Report on the Consolidated Financial
    Statements for the year ended December 31, 1996 and 1995      36

Independent Auditors' Report on the Consolidated Financial
    Statements for the year ended December 31, 1994               37

Consolidated Balance Sheets as of December 31, 1996 and 1995      38

Consolidated Statements of Operations for each of the three
    years in the period ended December 31, 1996                   40

Consolidated Statements of Stockholders' Equity for each of
    the three years ended in the period December 31, 1996         41

Consolidated Statements of Cash Flows for each of the three
    years ended in the period December 31, 1996                   43

Notes to Consolidated Financial Statements                        44

<PAGE> 36

                        REPORT OF INDEPENDENT AUDITORS

Board of Directors
Systems Communications, Inc.

We  have  audited the accompanying consolidated balance sheets  of  Systems
Communications, Inc. and Subsidiaries as of December 31, 1996 and 1995, and
the  related  consolidated statements of operations, stockholders'  equity,
and  cash  flows  for  each  of  the years  then  ended.   These  financial
statements  are  the  responsibility  of  the  Company's  management.   Our
responsibility is to express an opinion on these financial statements based
on our audits.

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

In  our opinion, the financial statements referred to above present fairly,
in  all  material respects, the consolidated financial position of  Systems
Communications, Inc. and Subsidiaries at December 31, 1996 and 1995,and the
consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.

The  accompanying  consolidated  financial statements  have  been  prepared
assuming  that Systems Communications, Inc. and Subsidiaries will  continue
as  a  going  concern. As more fully described in Note 3, the  Company  has
incurred operating losses during each of the years in the three-year period
ended  December  31,  1996,  and  has  a  working  capital  deficiency  and
stockholders'  equity  deficiency at December 31, 1996.  In  addition,  the
Company  has  not complied with certain repayment terms of loan agreements.
These  conditions  raise substantial doubt about the Company's  ability  to
continue as a going concern. The consolidated financial statements  do  not
include  any  adjustments to reflect the possible  future  effects  on  the
recoverability   and   classification  of  assets  or   the   amounts   and
classification  of  liabilities that may result from the  outcome  of  this
uncertainty.

                                   /s/ Ernst & Young LLP

Tampa, Florida
December 24, 1997

<PAGE> 37
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Systems Communications, Inc.
Clearwater, Florida

We  have  audited  the  consolidated statements of operations,  changes  in
stockholders'  equity  and cash flows of Systems Communications,  Inc.  and
Subsidiaries  for  the  year  ended  December  31,  1994.  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 audit.

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

In  our  opinion, the consolidated financial statements referred  to  above
present  fairly,  in all material respects, the results of  operations  and
cash  flows of Systems Communications, Inc. and Subsidiaries for  the  year
ended  December 31, 1994, in conformity with generally accepted  accounting
principles.

The  accompanying  consolidated  financial statements  have  been  prepared
assuming  that  the Company will continue as a going concern.  The  Company
incurred  a loss from operations for the year ended December 31,  1994  and
had a net working capital deficiency and an accumulated deficit at December
31,   1994.  Additionally,  the  Company  is  dependent  upon  successfully
obtaining financing sufficient to pay its obligations. These factors, among
other  things,  raise  substantial doubt about  the  Company's  ability  to
continue as a going concern. Management's plans in regard to these  matters
are  described  in  Note  3 to the consolidated financial  statements.  The
financial statements do not include any adjustments that might result  from
the outcome of this uncertainty.


/s/ Lovelace, Roby & Company, P.A.

Orlando, Florida
March 29, 1995

<PAGE> 38

                       SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEETS

</TABLE>
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                 --------------------------
                                                      1996          1995      
                                                 -----------    -----------
ASSETS
<S>                                                   <C>            <C>
Current assets:
   Cash and cash equivalents                       $  61,039      $ 964,714
   Accounts receivable, less allowance for
      doubtful accounts of $28,074 in 1996
      and $510,000 in 1995                           802,079      1,322,469
   Notes receivable from officers and employees      102,000         52,000
   Equipment inventories                                 --         228,344
   Deferred expenses                                     --         481,897
   Deferred income taxes                                 --         608,277
   Other current assets                              438,763        499,167
                                                 -----------    -----------
Total current assets                               1,403,881      4,156,868
                                                 -----------    -----------
Furniture  and equipment                           1,812,867        693,046
   Less accumulated depreciation                    (587,598)      (220,524)
                                                 -----------    -----------
    Net furniture and equipment                    1,225,269        472,522
Deferred compensation                                662,199      1,190,374
Intangible assets, net of accumulated
    amortization of $566,666 in 1996 and
    $253,333 in 1995                               1,083,334     12,296,667
Excess of cost over fair value of net assets
    acquired, net of accumulated amortization
    of $75,034 in 1996 and $38,638 in 1995         1,298,950      3,125,675
Other  non-current assets                            173,667        303,548
                                                 -----------    -----------
                                                 $ 5,847,300   $ 21,545,654
                                                 ===========    ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 39
                             SYSTEMS COMMUNICATIONS,INC. AND SUBSIDIARIES
                                 CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>

                                                          DECEMBER 31,
                                                 -------------------------
                                                      1996           1995
                                                 ------------  -----------
LIABILITIES AND STOCKHOLDERS' EQUITY 
  (DEFICIENCY IN ASSETS)
<S>                                                   <C>            <C>
Current liabilities:
   Borrowings  under  lines  of  credit            $182,651   $    45,151
   Current portion of notes and debentures 
      payable                                     3,180,758     1,679,395
   Current portion of obligations under capital
      leases                                        242,477        29,328
   Accounts payable                               1,452,192     1,260,990
   Accrued expenses and other current
      liabilities                                   881,675       187,334
   Accrued compensation and employee benefits     1,528,153     1,358,947
   Deferred revenue                                 440,232       856,719
                                                 ----------    ----------
Total current liabilities                         7,908,138     5,417,864
                                                 ----------    ----------
Notes and debentures payable, less current
   portion                                             --          46,005
Obligations under capital leases, less current
   portion                                          458,654       129,190
Deferred compensation                               676,261     1,150,827
Deferred income taxes                                  --       3,271,649
Other liabilities                                    72,573           --
                                                 ----------    ----------
Total liabilities                                 9,115,626    10,015,535
                                                 ----------    ----------
Common stock subject to rescission                  709,124       789,624
                                                 ----------    ----------
Stockholders' equity (deficiency in assets):
   Class A convertible preferred stock, stated 
       value and liquidation preference - $1.00
       per share; authorized 5,000,000 shares,
       issued and outstanding 192,000 shares in
       1996 and 4,800,000 shares in 1995               630       178,125
   Class B convertible preferred stock, stated
       value and liquidation preference - $1.00
       per share; authorized 10,000,000 shares,
       issued and outstanding 4,550,000 shares
       in 1996 and 4,690,000 shares in 1995      2,491,745     2,728,345
   Common stock - $.001 par value; authorized 
       50,000,000 shares, issued and 
       outstanding 10,626,874 shares in 1996
       and 7,425,798 shares in 1995                 10,627         7,426
       Common stock to be issued                 2,000,000     2,000,000
   Additional paid in capital                   16,823,526    11,873,909
   Accumulated deficit                         (25,303,978)   (6,047,310)
                                               ------------   -----------
Total stockholders' equity
   (deficiency in assets)                       (3,977,450)   10,740,495
                                               ------------   -----------
                                               $ 5,847,300  $ 21,545,654
                                               ============  ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 40

                             SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                           ------------------------------------
                                             1996          1995        1994
                                           -----------   ----------  ---------
<S>                                           <C>            <C>        <C>
Net  revenues:                             $ 2,832,123   $   91,106  $    --
                                           -----------   ----------  ---------
Costs and expenses:
    Cost  of  revenues                         827,063         --         --
    Selling  and administrative expenses     6,322,627    1,887,275     78,233
    Impairment  losses                      14,233,953         --         --
    Depreciation and amortization            1,459,436      148,192       --
                                           -----------   ----------  ---------
                                            22,843,079    2,035,467     78,233
                                           -----------   ----------  ---------
                                           (20,010,956)  (1,944,361)  ( 78,233)
Interest income                                  8,183        3,777        --
Interest expense                              (381,975)     (63,644)       --
Other,  net                                   (103,891)        --         --
                                           -----------   ----------   --------
Loss from continuing operations before
   income taxes                            (20,488,639)  (2,004,228)  ( 78,233)
Income tax benefit                          (2,554,150)   (  15,124)       --
                                           -----------   ----------   --------
Loss from continuing operations            (17,934,489)  (1,989,104)  ( 78,233)
Loss from operations of discontinued
  telecommunications businesses (less
  income tax benefit of $649,044 in 1996
  and $241,577 in 1995)                    ( 1,322,179)  (3,818,921)  ( 50,769)
                                           -----------   ----------   --------
Net loss                                  $(19,256,668) $(5,808,025) $(129,002)
                                          ============  ===========  =========
Loss per share:
   Loss from continuing operations        $(      2.15) $(     0.58) $(   0.06)
  Loss from operations of discontinued
    telecommunications businesses          (      0.16)  (     1.23)  (   0.04)
                                          ------------  -----------  ---------
   Net loss                               $(      2.31) $(     1.81) $(   0.10)
                                          ============  ===========  =========

Weighted average number of
    common  shares outstanding               8,349,459    3,201,991   1,306,493
                                          ============  ===========  =========

See Notes to Consolidated Financial Statements

<PAGE> 41

                        SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                     (DEFICIENCY IN ASSETS)

<CAPTION>                           CLASS A                CLASS B           COMMON  
                                   PREFERRED               PREFERRED          STOCK
                               -------------------   -------------------   --------------------
                                SHARES    AMOUNT       SHARES     AMOUNT   SHARES    AMOUNT
                               ---------  --------   ---------  ---------  --------  ---------
<S>                               <C>        <C>          <C>        <C>     <C>         <C>
Balance at December 31, 1993    1,700,000  $   --          --     $    --     825,765  $    826
Issuance of common stock as
   compensation                       --       --          --          --   1,770,000     1,770
Issuance of common stock for
   cash                               --       --          --          --     201,720       202
Stockholders distributions, net       --       --          --          --         --         --
Net loss                              --       --          --          --         --         --
                                ---------  --------   ---------  ---------  ---------   --------
Balance at December 31, 1994    1,700,000      --          --          --   2,797,485     2,798
Issuance of common stock and
warrants for cash                     --       --          --          --   1,477,874     1,478
Issuance of stock as
compensation                    1,525,000    20,625        --          --   1,053,090     1,053
Issuance of stock and warrants
   in consideration for
   extension of related party
   indebtedness                       --       --      140,000     236,600     --          --
Issuance of stock and warrants
   in connection with business
   acquisitions                 1,575,000   157,500  4,550,000   2,491,745  2,339,765     2,339
Reclassification of common
   stock subject to rescission        --       --          --          --    (242,416)     (242)
Net loss                              --       --          --          --         --         --
                                ---------  --------  ----------  ---------   ---------   -------
Balance at December 31, 1995    4,800,000   178,125   4,690,000  2,728,345  7,425,798     7,426
Issuance of common stock and
   warrants for cash                  --       --          --          --     413,688       414
Conversion of preferred stock  (4,408,000) (177,495)   (140,000)  (236,600) 2,254,910     2,255
Issuance of common stock as
   compensation                       --       --          --          --      41,754        42
Issuance of common stock in
   connection with business
   acquisitions                       --       --          --          --     283,172       283
Issuance of stock for debt            --       --          --          --     207,552       207
Rescission of business
   acquisitions                  (200,000)     --          --          --         --        --
Net loss                              --       --          --          --         --        --
                                ---------  --------   ---------  ---------  ----------    -------
Balance at December 31, 1996      192,000  $    630   4,550,000 $2,491,745  10,626,874    $10,627
                                =========  ========   ========= ==========  ==========   ========

See Notes to Consolidated Financial Statements
<PAGE> 42


                                SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                       (DEFICIENCY IN ASSETS), Continued


<CAPTION>                          Common      Additional
                                   Stock to      Paid-In    Accumulated
                                   be issued     Capital      Deficit    Total
                                   ---------   ----------   ----------  --------
<S>                                   <C>          <C>         <C>          <C>
Balance at December 31, 1993           --     $   120,921  $ (110,283)  $    11,464
Issuance of common stock as
   compensation                        --          69,030         --         70,800
Issuance of common stock for cash      --         103,158         --        103,360
Stockholders distributions, net        --          (6,257)        --         (6,257)
Net loss                               --             --     (129,002)     (129,002)
                                   ---------   ----------   ----------    --------
Balance at December 31, 1994           --         286,852    (239,285)       50,365
Issuance of common stock and
   warrants for cash                   --       4,109,409         --      4,110,887
Issuance of stock as compensation      --         430,095         --        451,773
Issuance of stock and warrants in
   consideration for extension of
   related party indebtedness          --         105,000         --        341,600
Issuance of stock and warrants
   in connection with business
   acquisitions                   2,000,000     7,731,935         --     12,383,519
Reclassification of common stock
    subject to rescission              --        (789,382)        --       (789,624)
Net loss                               --             --    (5,808,025)  (5,808,025)
                                  ---------    ----------   ----------   ----------
Balance at December 31, 1995      2,000,000    11,873,909   (6,047,310)  10,740,495
Issuance of common stock and
   warrants for cash                   --       2,186,859         --      2,187,273
Conversion of preferred stock          --         411,840         --           --
Issuance of common stock as
   compensation                        --         260,151         --        260,193
Issuance of common stock in
   connection with business
   acquisitions                        --       1,891,824         --      1,892,107
Issuance of stock for debt             --         198,943         --        199,150
Rescission of business
   acquisitions                        --             --          --          --
Net loss                               --             --   (19,256,668) (19,256,668)
                                -----------    ----------  -----------    ----------
Balance at December 31, 1996    $ 2,000,000   $16,823,526 $(25,303,978) $(3,977,450)
                                ===========   =========== ============    ==========

See Notes to Consolidated Financial Statements
<PAGE> 43
                              SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                  Year Ended December 31,
                                         -------------------------------------
                                           1996           1995          1994
                                         -----------    ----------    --------
<S>                                        <C>            <C>          <C>
Cash flows from operating activities:
  Net loss                             $ (19,256,668)  $(5,808,025)  $(129,002)
  Adjustments to reconcile net loss to
    net cash provided by (used in)
    operations:
      Depreciation and amortization        1,750,727       459,327      72,374
      Amortization of deferred
        compensation, net                    (16,552)       61,819        --
      Provision for bad debts                522,687       181,753        --
      Provision for inventory 
        obsolescence                            --         145,776        --
      Stock and warrants issued for 
        compensation and as consideration
        for extension of debt                260,193       793,373        --
      Deferred income taxes               (3,203,194)     (256,699)       --
      Impairment losses                   14,428,854     2,758,779        --
  Increase (decrease) in cash from
      change in operating assets and 
      liabilities:
        Accounts receivable                  214,330       317,161      13,908
        Equipment inventories                 73,211       (80,091)     39,690
        Deferred expenses                    498,697       (92,130)       --
        Other assets                          67,037       (42,702)     (5,000)
        Accounts payable                     (39,308)     (430,448)     12,247
        Accrued expenses                     703,117        84,297       9,574
        Accrued compensation                 356,902       140,651        --
        Deferred revenue                    (553,982)        5,937        --
                                          ----------     ---------     -------
   Net cash provided by (used  in)
      operating activities                (4,193,949)   (1,761,222)     13,791
                                          ----------     ---------     -------
Cash flows from investing activities:
      Acquisition of businesses, net of
        cash acquired                        (46,854)   (1,428,312)       --
      Expenditures for furniture and
        equipment                           (552,718)     (131,744)   (245,514)
      Notes receivable from officers
        and employees                        (50,000)      (52,000)       --
      Acquisition of other assets                --        (64,852)       --
                                           ----------    ---------     -------
    Net cash used in investing activities   (649,572)   (1,676,908)   (245,514)
                                           ----------    ---------     -------
Cash flows from financing activities:
     Proceeds from issuance of common
       stock                               2,187,273     4,110,887     103,360
     Proceeds from notes and debentures
       payable                             2,422,752       475,349     180,195
     Payments on notes payable and
       capital leases                       (637,596)     (262,814)     (1,000)
      Payments on shares subject to 
       rescission                            (80,500)         --           --
    Proceeds from (payments on) borrowings 
       under line of credit                   47,917        (2,100)        --
       Stockholder distributions, net            --           --        (52,381)
                                           ---------      ---------    -------
    Net cash provided by financing 
       activities                          3,939,846      4,321,322     230,174
                                           ---------      ---------    -------
Net increase (decrease)in cash              (903,675)       883,192      (1,549)
Cash and cash equivalents at beginning
    of the year                              964,714         81,522      83,071
                                           ---------      ---------    -------
Cash and cash equivalents at end of the
    year                               $      61,039       $964,714   $  81,522
                                           =========      =========   ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 44

             SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  FORMATION OF THE COMPANY AND DESCRIPTION OF BUSINESS

Systems  Communications, Inc. (the "Company") was organized as Florida  One
Capital Corporation in 1987 and in 1988 made an initial public offering  of
its  common  stock  as a blank check company for the purpose  of  acquiring
other  companies. During 1990 and 1991, the Company acquired  and  divested
companies  engaged  in the eye glass distribution and residential  building
industries  and  for a brief period of time, operating under  the  name  of
Highland Healthcare Corporation, was under the control of another publicly-
owned  blank  check company formed for the purpose of acquiring  healthcare
related businesses.  During the period from the fall of 1991 to the date of
the  first  acquisition described below, the Company had no  operations  or
assets and was dormant.

In  1994, the Company changed its name from Highland Healthcare Corporation
to  Systems  Communications, Inc. and, effective August 29, 1994,  acquired
all  of  the  outstanding  stock of (i) Ameristar Telecommunications,  Inc.
("ATI"),  a  re-seller  of  long-distance  and  pay-per-view  services  and
products,  principally  to  the  hospitality  industry,  and   (ii)   Coast
Communications, Inc. ("CCI"), whose principal business is the  installation
and  servicing of pay-per-view equipment. The Company identified ATI as the
accounting  acquirer  and  accounted for  the  transaction  as  a  purchase
business combination.

Effective June 1, 1995, the Company completed the acquisition of all of the
outstanding  stock  of  LCI Communications, Inc. ("LCI"),  a  re-seller  of
telecommunication services, from a Director and executive  officer  of  the
Company  (a person designated as a "promoter/shareholder" of the  Company).
The  net  assets  acquired  were  recorded  at  the  promoter/shareholder's
historical cost basis.

Effective June 12, 1995, the Company acquired all of the outstanding  stock
of Comstar Network Services, Inc. ("Comstar"), a re-seller of long-distance
telephone services.

Effective  July 7, 1995, the Company acquired all of the outstanding  stock
of Telcom Network, Inc. ("TNI"), a re-seller of telecommunications services
and  products, principally to residential and small business customers. TNI
also  audits  utility  and telecommunications payments  and  provides  cost
recovery  services  to  its  customers  (large  and  small  businesses  and
governmental entities) for a percentage of recovered savings.
<PAGE> 45

Effective  October  27, 1995, the Company acquired all of  the  outstanding
stock of National Solutions, Inc. ("NSC"). The principal business of NSC is
to  (i)  develop,  for  commercial use, healthcare  management  information
systems  technology  acquired  from the U.S.  Government  pursuant  to  the
Federal  Technology Transfer Act of 1986, as amended,  and  (ii)  sell  the
benefits  from the use of such technology to large, self-insured companies,
insurers,   third   party  administrators  ("TPA's"),  health   maintenance
organizations ("HMO's") and healthcare plan administrators.  To  date,  the
Company's revenues have been derived primarily from retroactive analysis of
claims paid, with respect to which the Company has received a percentage of
the recovered savings.

Effective March 12, 1996, the Company acquired all of the outstanding stock
of  Healthcare Management Technologies ("HMT"). The principal  business  of
HMT  is  the  development,  sale  and  maintenance  of  medical  management
"Windows" based computer software.

In  May 1996, the Company gave notice to the principals of CCI that it  was
canceling  all  of  the related acquisition agreements and  abandoning  the
business  of  CCI.  Pursuant to the terms of the  acquisition  and  related
pledge  agreements,  the  effect  of the cancellation  of  the  acquisition
agreements  is that the former shareholders of CCI will receive the  shares
of stock in CCI acquired in 1994 by the Company in return for the shares of
preferred  stock and debt issued by the Company to the former  shareholders
of CCI in connection with the acquisition (see Note 14).

In January 1997, the Company sold substantially all of the operating assets
of  TNI.  The  only  remaining significant asset of  TNI  consists  of  the
arbitration  award  of $1,250,000 granted to TNI in a  binding  arbitration
proceeding between and among TNI, GECCS and News. On December 24, 1997, the
Company,  GECCS  and NEWS entered into a Confidential Settlement  Agreement
and  Mutual Full and Final Releases (the "Settlement Agreement")  regarding
the  arbitration award in favor of the Company. Pursuant to the  Settlement
Agreement,  GECCS\NEWS  paid  $1,250,000  in  full  satisfaction   of   the
arbitration  award.  Of  that  amount, the Company  received  approximately
$750,000,  which  is  net of legal fees. The proceeds from  the  Settlement
Agreement  were  used  to  pay trade and other obligations,  including  the
obligations  to  Mr. Telford Walker and Mr. James Gary May referred  to  in
Note 14.

In May 1997, the Company and the former shareholders of ATI entered into  a
rescission  agreement which provides for the rescission  of  the  Company's
August  1994  acquisition of ATI; and, in June 1997, the  Company   entered
into  an  agreement  with the former shareholders of  HMT  to  rescind  the
Company's  March 1996 acquisition of  HMT ( see Note 17).

The  dispositions of CCI, TNI (which includes the operations of Comstar and
LCI  subsequent to the dates of their respective acquisitions) and ATI, all
of  which comprised the Company's telecommunications segment, are reflected
as   operations  of  discontinued  telecommunications  businesses  in   the
accompanying consolidated statements of operations(see Note 4).

<PAGE> 46

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts  of
the  Company  and  its  wholly-owned subsidiaries. All  significant  inter-
company transactions and balances have been eliminated in consolidation.

CASH EQUIVALENTS

The  Company  considers all highly liquid investments with  a  maturity  of
three months or less when purchased to be cash equivalents.

EQUIPMENT INVENTORIES

Equipment inventories, consisting of pay-per-view equipment, are net of  an
allowance  for obsolescence and are stated at the lower of cost or  market.
Cost is determined by the specific identification method. These inventories
were  eliminated from the Company's consolidated balance sheet as a  result
of the cancellation, in May 1996, of the CCI acquisition agreement.

FURNITURE AND EQUIPMENT

Furniture and equipment are stated at cost. Depreciation is provided  using
the  straight-line method over periods that approximate the assets'  useful
lives.

Capitalized  lease  assets are recorded at the lower of  present  value  of
minimum  future lease payments at inception of the lease or the fair  value
of  the asset and are amortized straight-line over the shorter of the lease
term or estimated useful life of the asset.

INTANGIBLE ASSETS

Intangible  assets as of December 31, 1996 consist of the cost of  acquired
medical management computer software and acquired customer lists. The  cost
of  medical computer software ($1,500,000) is being amortized over 3 years.
As  of  December 31,1996, the unamortized cost of medical computer software
was  $1,083,333 and amortization for the year 1996 was $416,667.  The  cost
of  acquired customer lists ($150,000) was fully amortized at December  31,
1995.

In  1995, the Company recorded $12,400,000 of intangible assets (healthcare
management  decision software technology) acquired in connection  with  its
acquisition  of  NSC.  The estimated useful life of the  acquired  software
technology was 20 years. The Company wrote-off the unamortized cost of  the
software technology acquired in connection with the NSC acquisition, as  of
December  31,  1996, due to continued operating losses and the  failure  of
NSC,  to date, to successfully market the technology acquired in connection
with the acquisition.

<PAGE> 47

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED

The  Company  assesses the recoverability of intangible  assets,  including
goodwill,  if facts and circumstances suggest that the carrying  amount  of
intangible  assets  may have been impaired. In making its  assessment,  the
Company gives consideration to the undiscounted cash flows from the use  of
such  assets,  the  estimated fair value of such assets and  other  factors
which  may  affect the recoverability of such assets. If such an assessment
indicates  that  the  carrying  value  of  intangible  assets  may  not  be
recoverable, the carrying value of intangible assets is reduced  (see  Note
5).

Excess  of  cost over the fair value of net assets acquired as of  December
31,  1996  consists of goodwill recorded in connection with the acquisition
of  HMT and is being amortized over 15 years. In 1995, the Company recorded
$2,718,169  in goodwill in connection with its acquisition of  NSC.  As  of
December  31, 1996, the Company wrote-off the unamortized cost of  goodwill
recorded in connection with the NSC acquisition, as an impairment loss, due
to  the  failure,  to  date, of NSC to successfully market  the  technology
acquired.


REVENUE RECOGNITION

The Company generally recognizes revenue in the period in which the service
is  provided or, in the case of software sales, at the time the software is
delivered. Revenues related to audit or retroactive claims review services,
which are based on a percentage of the savings, are recognized at the  time
of third party approval of the reimbursable amounts.

INCOME TAXES

The  Company  has  applied,  for  all years presented,  the  provisions  of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes,"  which  requires an asset and liability approach in accounting  for
income taxes.

LOSS PER SHARE

Loss  per  share is computed by dividing net loss by the average number  of
common  shares  outstanding  during  each  period.   Shares  issuable  upon
conversion  of  the Company's outstanding convertible preferred  stock  and
convertible debentures, shares issuable upon exercise of outstanding  stock
purchase  options  and warrants and shares subject to rescission  were  not
included in the calculation of loss per share because their inclusion would
be anti-dilutive.

<PAGE> 48

In February 1997, the Financial Accounting Standards Board issued Statement
of  Financial Accounting Standards No. 128 "Earnings Per Share".  SFAS  No.
128  requires presentation of basic earnings per share and diluted earnings
per  share.   Basic  earnings  per share is  computed  by  dividing  income
available  to common shareholders by the weighted average number of  common
shares  outstanding.  Diluted earnings per share takes  into  consideration
common shares outstanding (computed as under basic earnings per share)  and
potentially  dilutive common shares. SFAS No 128 is effective  for  interim
and annual financial statements for periods ending after December 15, 1997.
The adoption of SFAS No. 128 is not expected to have any material impact on
previously reported EPS.

STATEMENT OF CASH FLOWS

The   operating,  investing  and  financing  activities  included  in   the
consolidated statements of cash flows are presented net of the  assets  and
liabilities acquired in connection with business combinations. As permitted
by  Statement  of  Financial Accounting Standards No. 95, cash  flows  from
operations of discontinued telecommunications businesses are not separately
presented.

LONG-LIVED ASSETS

The Company has applied the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-lived Assets  and
for  Long-lived Assets to Be Disposed Of", beginning in fiscal 1995,  which
requires  impairment  losses to be recorded on long-lived  assets  used  in
operations  when indicators of impairment are present and the  undiscounted
cash  flows  estimated to be generated by those assets are  less  than  the
assets'  carrying amount. Statement No. 121 also addresses  the  accounting
for long-lived assets that are expected to be disposed of (see Note 5).

IMPACT OF OTHER RECENTLY ISSUED ACCOUNTING STANDARDS

In  June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No. 130, Reporting  Comprehensive  Income
("SFAS  NO.  130"),  which is effective for fiscal  years  beginning  after
December 15, 1997. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of general-
purpose financial ststements. Although SFAS No. 130 only impacts display as
opposed  to  actual amounts recorded, it represents a change  in  financial
reporting.  Management has not completed its review of SFAS  No.  130,  but
does  not  anticipate  that  the adoption of this  statement  will  have  a
significant impact on the Company's reported earnings.

<PAGE> 49

In  June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting Standards No. 131, Disclosures about Segments  of  an
Enterprise and Related Information ("SFAS No. 131"), which is effective for
years beginning after December 15, 1997. SFAS No. 131 establishes standards
for  the way public enterprises report information about operating segments
in  annual financial statements and requires that those enterprises  report
selected information about operating segments in interim financial reports.
It  also  establishes standards for related disclosures about products  and
services,  geographic  areas  and  major  customers.  Management  has   not
completed  its review of this statement, but does not anticipate  that  the
adoption  of the statement will have a significant effect on the  Company's
reported segments.


USE OF ESTIMATES

The process of preparing financial statements requires the use of estimates
and  assumptions  regarding certain types of assets, liabilities,  revenues
and expenses. Such estimates primarily relate to unsettled transactions and
events  as  of  the  date  of the financial statements.  Accordingly,  upon
settlement, actual results may differ from estimated amounts.

RECLASSIFICATIONS

Certain  amounts  in the 1994 consolidated financial statements  have  been
reclassified to conform to the 1996 and 1995 presentation.

<PAGE> 50

NOTE 3  GOING CONCERN

The accompanying financial statements have been prepared on a going concern
basis  which  contemplates  the realization of assets  and  liquidation  of
liabilities in the ordinary course of business. The Company incurred losses
(including losses from operations of discontinued businesses)of $19,256,668
and  $5,808,025  in  1996  and 1995, respectively, and  used  approximately
$4,194,000 and $1,761,000, respectively, of cash in operations. The Company
has  a  net working capital deficiency of approximately $6.5 million and  a
deficiency in assets of approximately $4 million at December 31,  1996  and
is  currently in default of certain of its obligations to trade  and  other
creditors (see Notes 7 and 14). Additionally, as discussed in Note 14,  the
Company  is obligated to provide or arrange for approximately $1.5  million
of   additional  working  capital  and  equipment  financing  for  acquired
companies (none of which financing has currently been arranged) and may  be
required  to  offer  purchasers of the Company's common  stock  in  certain
jurisdictions  the  right  to  rescind their stock  purchase  transactions.
Pursuant  to  a  consent order from the State of Michigan, the  Company  is
required to make a rescission offer to Michigan purchasers of the Company's
common  stock  no later than in December 1997, unless such  purchasers  are
afforded  an  opportunity  to  resell their shares  in  the  public  market
pursuant  to  an effective registration statement prior thereto  at  prices
higher  than  the  cost of such shares to the Michigan  purchasers.  It  is
unlikely  the  Company  will be able to satisfy  the  requirements  of  the
consent  order.  In  the  event  the  Company  is  unable  to  satisfy  the
requirements  of  the consent order, it is uncertain  whether  or  not  the
failure  by  the Company to satisfy the requirements of the  consent  order
will  have  a  material  adverse  impact on the  accompanying  consolidated
financial statements.

The Company is attempting to raise additional equity and debt financing  to
support  its business operations but, there is no assurance that sufficient
amounts of equity or debt financing will be available to the Company. As of
December  31,1996,  the Company had no financing facilities  available  for
working  capital  or  for  other purposes. The Company  is  awaiting  final
resolution  of the GECCS/News arbitration award (see Note 14)  which,  upon
collection  thereof,  would provide the Company with the  ability  to  meet
certain of its obligations to trade and other creditors.

Based  on the foregoing factors, it is uncertain whether or not the Company
can  generate  adequate  cash  flows from  operations,  or  from  financing
transactions, to meet its obligations as they become due.  In  that  event,
the  Company would be required to seek other alternatives, including  sale,
merger or discontinuance of operations.

Subsequent  to  December  31,  1996,  the  Company  entered  into   certain
transactions  which  relieved the Company of its financing  obligations  to
acquired  companies  (see Note 17); and, the award in the  GECCS  and  News
arbitration  was  confirmed by the U.S. District  Court  for  the  Northern
District of Georgia (see Note 14).

<PAGE> 51

NOTE 4  ACQUISITIONS AND DISPOSITIONS OF BUSINESSES

On August 29, 1994, the Company acquired, in two separate transactions, all
of  the  outstanding stock of ATI and CCI in exchange for an  aggregate  of
1,700,000  shares of the Company's Class A convertible preferred stock  and
an  aggregate  of  $550,000  principal amount  of  notes  payable.  Of  the
preferred  stock  issued  in connection with these acquisitions,  1,500,000
shares  were  issued to the former shareholders of ATI and  200,000  shares
were  issued  to  the former shareholders of CCI. Of the  notes  issued  in
connection  with  these acquisitions, $300,000 were issued  to  the  former
shareholders of CCI and $250,000 were issued to the former shareholders  of
ATI.  Each  share  of  preferred  stock issued  in  connection  with  these
acquisitions  is  convertible into one-half share of the  Company's  common
stock  at the election of the holder at any time prior to a public offering
of  the Company's common stock and are automatically converted at the  time
of  such public offering. The shares of Class A convertible preferred stock
issued to the former shareholders of ATI were converted into 750,000 shares
of  common  stock  in August 1996.  The shares of Class A  preferred  stock
issued  to  the former shareholders of CCI are subject to an administrative
proceeding between the Company and the former shareholders of CCI (See Note
14). The $550,000 of acquisition notes payable bear interest at the rate of
6%  per  annum and were originally due within 90 days of the date  of  such
acquisitions. Such notes have been extended from time to time and  are  now
due upon completion of a public offering of the Company's common stock. The
$300,000 of acquisition notes payable to the former shareholders of CCI are
also  subject to the administrative proceeding between the Company and  the
former shareholders of CCI (See Note 14). The Company identified ATI as the
accounting acquirer and accounted for the acquisition of ATI and CCI  as  a
purchase business combination. No goodwill was recorded in connection  with
these business acquisitions.

In  June  1995,  the  Company  completed the  acquisition  of  all  of  the
outstanding  stock  of  LCI from a Director and executive  officer  of  the
Company  (a person designated as a promoter/shareholder of the Company)  in
exchange for 1,075,000 shares of the Company's Class A preferred stock. The
net  assets acquired were recorded at the promoter/shareholder's historical
cost. The cost basis of the promoter/shareholder was de minimis.

<PAGE> 52

In  June 1995, the Company acquired all of the outstanding stock of Comstar
in  exchange  for 200,000 shares of the Company's common stock,  valued  at
$126,000,and  500,000  shares of its Class A convertible  preferred  stock,
valued  at $157,500. The total purchase price was $283,500.  Each share  of
preferred  stock issued in connection with this acquisition is  convertible
into  one-half share of the Company's common stock at the election  of  the
holder at any time prior to a public offering of the Company's common stock
and  are  automatically converted at the time of such public offering.  The
shares  of  Class A preferred stock issued to the former shareholder(s)  of
Comstar were converted into 250,000 shares of common stock in October 1996.
The excess of the purchase price over the fair value of net assets acquired
($273,250) was allocated to goodwill and assigned a useful life of 5 years.
The   unamortized  cost  of  goodwill  recorded  in  connection  with   the
acquisition of Comstar was written off as an impairment loss in  1996  with
no  associated  income  tax benefit (see Note 5).This  impairment  loss  is
included  in  the  loss from operations of discontinued  telecommunications
businesses for the year ended December 31, 1996.

In July 1995, the Company acquired all of the outstanding stock of TNI in
exchange  for  4,550,000  shares  of  the  Company's  Class  B  convertible
preferred   stock,  valued  at  $2,492,000,  $450,000  of  10%  convertible
debentures  and $50,000 in cash. Holders of the convertible debentures  are
also  entitled to receive an aggregate of 225,000 stock purchase  warrants,
valued  and recorded at $141,750, exercisable at any time prior to a public
offering  of the Company's common stock for an exercise price of $1.50  per
share.  Each  share  of  preferred stock issued  in  connection  with  this
acquisition is convertible into .36 shares of the Company's common stock at
the  election of the holder at any time prior to a public offering  of  the
Company's common stock and are automatically converted at the time of  such
public  offering. The 10% convertible debentures issued in connection  with
the  acquisition, plus accrued interest, are due at the time  of  a  public
offering of the Company's common stock and are convertible, at the election
of the holder, into the Company's common stock at the public offering price
in  such  public offering. The total purchase price for TNI was $3,138,195.
The  excess  of  the purchase price over the fair value of the  net  assets
acquired  was  $2,943,401. The unamortized cost  of  goodwill  recorded  in
connection  with the TNI acquisition was written off as an impairment  loss
in 1995 with no associated income tax benefit (see Note 5). This impairment
loss   is   included   in   the  loss  from  operations   of   discontinued
telecommunications businesses for the year ended December 31, 1995.  As  of
December 31,1996, there have been no conversions of the preferred stock  or
notes issued in connection with the acquisition.

<PAGE> 53

In  October 1995, the Company acquired all of the outstanding stock of  NSC
in  exchange for 2,000,000 shares of the Company's common stock  valued  at
$6,916,000, cash of $1,000,000 and $250,000 in notes payable. The purchase
price  also  included  shares  of the Company's  common  stock,  valued  at
$2,000,000, which were to be issued to the founders and management  of  NSC
no  later  than November 30, 1996. The dollar amount of the  shares  to  be
issued  ($2,000,000)  is  shown  as  common  stock  to  be  issued  in  the
accompanying  consolidated financial statements. The number  of  additional
shares to be issued was to be determined at the date of issuance based upon
a  formula  and  upon issuance valued at $2,000,000 in the  aggregate.  The
formula  to  determine the number of additional shares  which  were  to  be
issued  is $5,000,000 minus outstanding advances made to NSC by the Company
divided  by  the  quoted market value of the Company's  common  stock.  The
$250,000  in  notes payable are non-interest bearing and are due  in  equal
monthly installments of $20,000 (see Note 7). The total purchase price  for
NSC  was $10.5 million, including the $2,000,000 in additional shares which
were  to  have  been  issued in November 1996 pursuant to  the  acquisition
agreement. The excess of the purchase price over the fair value of the  net
assets  acquired  ($2,718,169) is being amortized over 20  years.  The  net
assets   acquired  also  included  $12,400,000  for  healthcare  management
decision  software technology that is being amortized over  20  years.  The
Company wrote off the unamortized cost of goodwill and intangibles recorded
in  connection with the acquisition of NSC as of December 31,  1996  as  an
impairment loss (see Note 5).

As  of  December 31,1996, the Company had not issued any of the  shares  of
common stock which were to be issued to the founders and management of  NSC
("Retiring  Management")  pursuant to the  NSC  acquisition  agreement.  In
connection  with  the  January  1997  agreement  between  the  Company  and
"Retiring Management"(see Note 17), Retiring Management waived the issuance
by  the Company of the $2,000,000 shares of common stock which were to have
been  issued in connection with the acquisition. As a result of the  waiver
by  Retiring  Management  of the issuance of the $2,000,000  of  additional
shares  of  common stock which were to have been issued, the  Company  will
remove  the  common  stock  to  be issued from the  Company's  consolidated
balance sheet and record a gain of $2,000,000 in the first quarter of 1997.

Effective March 12, 1996, the Company acquired all of the outstanding stock
of  Health Management Technologies, Inc. ("HMT"), whose principal  business
is  the  development,  sale and maintenance of medical management  computer
software, for 309,837 shares of its common stock valued at $2,000,000.  The
total  purchase  price  was $2,140,000, including costs  of  $140,000.  The
excess of the purchase price over the fair value of the net assets acquired
($1,373,984)  is  being amortized over 15 years. The  net  assets  acquired
included  $1,500,000 of medical computer software, which is being amortized
over 3 years.

<PAGE> 54

The  following unaudited pro forma summary operating results for  the  year
ended  December  31, 1996, include the results of operations  of  companies
acquired  in 1995 for the full year and the operating results of HMT  (with
pro  forma  adjustments for amortization of goodwill and intangible  assets
acquired)  as  if  HMT was acquired as of January 1, 1996.  The  pro  forma
operating  results  for  the  year ended  December  31,  1995  reflect  the
operating results of companies acquired in 1995 and, HMT acquired in  1996,
with pro forma adjustments (primarily goodwill and intangible amortization)
as  if  the acquisitions were consummated on January 1, 1995. The pro forma
summary operating results also separately reflect the results of operations
of  discontinued  telecommunications businesses. The pro forma  summary  is
provided   for  information  purposes  only.  It  is  based  on  historical
information and does not necessarily reflect the actual results that  would
have  occurred nor is it necessarily indicative of future operating results
of the combined companies.

<TABLE>
<CAPTION>
                                             Year Ended December 31,
                                         -------------------------------
                                           1996                   1995
                                       -----------          -----------
<S>                                         <C>                   <C>
Net revenues from continuing
  operations                         $  3,035,195          $ 2,384,874
                                      ------------          -----------
Loss from continuing operations      $(18,047,892)         $(4,085,486)
                                      ------------          -----------
Loss from operations of discontinued
  telecommunications businesses      $( 1,322,179)         $(3,794,890)
                                      ------------          -----------
Loss per share:
  Loss from continuing operations    $(      2.16)         $(     1.28)
  Loss from operations of
  discontinued telecommunications
  businesses                          (      0.16)          (     1.19)
                                      ------------          -----------
                                     $(      2.32)         $(     2.47)
                                      ============          ===========
</TABLE>

<PAGE> 55

As  more  fully discussed below, the Company has sold or otherwise disposed
of the businesses included in the Company's telecommunications segment. The
operations  of  those  businesses are shown as operations  of  discontinued
telecommunications businesses in the above pro forma summary.

All  of the acquisitions described above have been accounted for using  the
purchase  method of accounting. The results of operations of these acquired
businesses  have  been  included in the consolidated  financial  statements
since their respective dates of acquisition.

In  May 1996, the Company gave notice to the principals of CCI that it  was
canceling  all  of  the  CCI  acquisition  agreements  and  abandoning  its
investment  in  CCI. Pursuant to the terms of the acquisition  and  related
pledge agreements, the effect of such cancellation and abandonment is  that
the  former  shareholders of CCI will receive the shares of  stock  in  CCI
acquired in 1994 by the Company in return for the shares of preferred stock
and debt securities issued by the Company to the former shareholders of CCI
in   connection  with  the  acquisition  (See  Note  14).  The  assets  and
liabilities  of CCI and the debt and preferred stock issued  in  connection
with  the  CCI  acquisition  were removed from the  Company's  consolidated
balance  sheet in May 1996 with no material effect on the Company's results
of operations.

In 1997, the Company sold or otherwise disposed of substantially all of the
remaining  assets  of  its Telecommunications segment,  consisting  of  TNI
(which  included  the operations of Comstar and LCI) and ATI,  and  entered
into  an  agreement to rescind the March 1996 acquisition of HMT (see  Note
17).  The  disposition  of TNI and ATI resulted in gains  of  approximately
$534,000, in the aggregate. The gains from the disposition of TNI  and  ATI
are  to  be  recognized,  as  gains  on  the  disposition  of  discontinued
businesses, in the first and second quarters of 1997. The rescission of the
HMT  acquisition  agreement resulted in a gain of  approximately  $281,000,
which  is to be recognized as a component of continuing operations  in  the
second quarter of 1997.

The  consolidated operating results of the Company for all years  presented
have been restated to segregate, as discontinued operations, the results of
operations of the Company's discontinued telecommunications businesses. The
assets  and liabilities, as of December 31, 1996, of the telecommunications
segment  included  in  the  accompanying  consolidated  balance  sheet  are
summarized as follows:

      Current assets                                 $  332,856
      Total assets                                      660,094
      Current liabilities                               886,206
      Total liabilities                               1,078,026

<PAGE> 56

The  revenues,  costs  and  expenses  of the  Company's  telecommunications
businesses,    included   in   loss   from   operations   of   discontinued
telecommunications  businesses in the accompanying consolidated  statements
of  operations for each of the three years in the period ended December 31,
1996, are summarized as follows:

                                            1996         1995        1994
                                         ----------  ----------    --------
Net revenues                             $2,177,858  $2,893,778    $807,669
Cost of revenues                          1,320,256   2,014,460     134,607
Selling and administrative expenses       2,304,059   1,845,775     649,036
Impairment losses                           194,901   2,758,779        --
Depreciation and amortization               291,291     311,135      72,374
Interest income                           (     971)       (627)       --
Interest expense                             38,713      20,466        --
Other expense, net                              832       4,288       2,421
Loss from operations of discontinued
    businesses, before income taxes       1,971,223   4,060,498      50,769
Income tax benefit                         (649,044)   (241,577)       --
Loss from operations of discontinued
    businesses                            1,322,179   3,818,921      50,769


NOTE 5  IMPAIRMENT LOSSES

Impairment  losses  included  in  the accompanying  consolidated  financial
statements are as follows:
                                                   Year Ended December 31,
                                              --------------------------------
                                                 1996        1995       1994
                                              ---------  ----------   --------
Impairment losses included in loss from
continuing operations:
  Write-off of NSC intangibles and goodwill  $14,233,953  $    --      $  --
Impairment losses included in loss from
operations of discontinued businesses:
  Write-off of TNI goodwill                         --     2,758,779      --
  Write-off of investment in Comstar             194,901       --         --

<PAGE> 57

At  December  31,  1995,  the Company recognized  a  charge  to  income  of
$2,758,779 to write off, with no associated income tax benefit, all of  the
goodwill  related  to its acquisition of TNI. This write-off  reflects  the
damages  caused to the business of TNI as a result of actions taken  by  GE
Capital  Communications Services Corporation ("GECCS") and  New  Enterprise
Wholesale  Services,  Ltd. ("News"), which actions  included,  among  other
things,  (i)  the failure of GECCS/News to provision customer accounts  for
telecommunications products and services offered by GECCS/News and sold  by
TNI pursuant to a contractual agreement among TNI, GECCS and News, (ii) the
cancellation  of  TNI  customers by GECCS/News and  (iii)  the  failure  of
GECCS/News  to properly bill and collect revenues due to TNI.  TNI  is  the
claimant   in  a  binding  arbitration  proceeding  involving  GE   Capital
Communications  Services Corporation("GECCS") and New Enterprise  Wholesale
Services, Ltd. ("News") seeking damages arising out of a breach of contract
for  the purchase and resale of telecommunications services. An arbitration
award  in  the amount of $1,250,000 in favor of TNI was entered on  October
10, 1996, and was subsequently appealed by GECCS to the U.S. District Court
for  the  Northern District of Georgia on the grounds that the  arbitrators
exceeded their powers by awarding TNI damages under the GECCS Agreement. On
September  30,  1997, the U.S. District Court confirmed  the  award  and  a
motion for summary judgment was entered on October 1, 1997. On December 24,
1997,  the  Company, GECCS and NEWS entered into a Confidential  Settlement
Agreement  and Mutual Full and Final Releases (the "Settlement  Agreement")
regarding  the arbitration award in favor of the Company. Pursuant  to  the
Settlement  Agreement, GECCS\NEWS paid $1,250,000 in full  satisfaction  of
the  arbitration award. Of that amount, the Company received  approximately
$750,000,  which  is  net of legal fees. The proceeds from  the  Settlement
Agreement  were  used  to  pay trade and other obligations,  including  the
obligations  to  Mr. Telford Walker and Mr. James Gary May referred  to  in
Note  14.  The accompanying consolidated financial statements do  not  give
effect  to  the amount awarded TNI. As a result of the disposition  of  the
Company's  telecommunications businesses, the impairment loss of $2,758,779
from  the write-off of TNI goodwill is included in loss from operations  of
discontinued telecommunications businesses in the accompanying consolidated
statement of operations for the year ended December 31, 1995.

Impairment losses recognized in 1996 reflect the write-off of the Company's
investment in Comstar, including goodwill recorded in connection  with  the
acquisition,  and  the write-off of the unamortized cost  of  goodwill  and
intangibles  recorded in connection with the Company's 1995 acquisition  of
NSC. The write-off of the Company's investment in Comstar is the result  of
the  Company's decision to sell substantially all of the assets of TNI  and
abandon its remaining Telecommunications businesses; and, the write-off  of
the  unamortized  cost of goodwill and intangibles recorded  in  connection
with the acquisition of NSC is the result of continued operating losses and
the failure of NSC, to date, to successfully market the software technology
acquired  by the Company in connection with the acquisition. The  write-off
of  the Company's investment in Comstar is included in loss from operations
of  discontinued telecommunications businesses for the year ended  December
31,  1996;  and,  the  write-off of the unamortized cost  of  goodwill  and
intangibles recorded in connection with the acquisition of NSC is reflected
in loss from continuing operations for the year ended December 31, 1996.
<PAGE> 58

NOTE 6  FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

<TABLE>
<CAPTION>
                                                  DECEMBER 31,
                                            ----------------------
                                               1996        1995
                                            ----------   ---------
<S>                                             <C>         <C>
Furniture and equipment                    $  917,869    $558,461
Equipment held under capital lease            880,163     120,188
Leasehold improvements                         14,835      14,397
                                            ----------   ---------
                                            1,812,867     693,046
Less: accumulated depreciation               (587,598)   (220,524)
                                            ----------   ---------
Net furniture and equipment                $1,225,269    $472,522
                                            ==========   =========
</TABLE>

Depreciation expense was $330,973, $122,471 and $72,374 in 1996,  1995  and
1994 respectively.

Included  in  furniture  and equipment, net, as of  December  31,  1996  is
$327,237, applicable to discontinued telecommunications businesses.

<PAGE> 59

NOTE 7  NOTES AND DEBENTURES PAYABLE

Notes and debentures payable consist of the following:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                                 ------------------------
                                                      1996         1995
                                                 -----------   ----------
<S>                                                   <C>           <C>
10% Cumulative convertible debentures
   due on various dates through
   November 1997                                $  1,279,000   $     --
10% Cumulative convertible debentures
   due on November 21, 1997                          300,000         --
10% Cumulative convertible debentures
   due on November 26, 1997                          200,000         --
Promissory note in default                           200,000         --
10% Convertible debentures payable to
   former shareholders of TNI                        450,000      450,000
6% Acquisition notes payable to former
   shareholders of ATI, secured by the
   stock of ATI                                      250,000      250,000
6% Acquisition notes payable to former
   shareholders of CCI, secured by the
   stock of CCI                                         --        300,000
Notes payable to former shareholders of
   NSC in equal monthly installments of
   $20,000, non-interest bearing                     149,994      210,000
8%-10% Notes payable to stockholders due
   on various dates through December 1997            162,741      290,400
10.75% demand note payable, secured by
   certain accounts receivable                       100,000      100,000
5% Note to former shareholder of CCI, due
   on demand, secured by certain equipment            75,000       75,000
10.50% Demand note payable to an officer,
   secured by certain accounts receivable               --         50,000
Other                                                 14,023         --
                                                   ----------  ----------
                                                   3,180,758    1,725,400
Less: current portion                             (3,180,758)  (1,679,395)
                                                   ----------  ----------
                                                 $      --     $   46,005
                                                   ==========  ==========
</TABLE>
<PAGE> 60

During  1996,  the  Company privately placed, in reliance  upon  exemptions
under Regulation D of the Securities Act of 1933, a series of one-year  10%
cumulative  convertible  debentures ($1,279,000 in  the  aggregate).  These
debentures  are  convertible into shares of the Company's common  stock  on
various  dates through November 1997 or at any time thereafter and  may  be
converted  earlier  if the Company has an effective registration  statement
under  the Securities Act of 1933 covering the sale of the shares of common
stock  issuable upon conversion of the debentures. As of February 16, 1998,
the  Company has not filed a registration statement covering the shares  of
common  stock  issuable upon conversion of the debentures.  The  number  of
shares  of  common stock issuable upon conversion of these  debentures,  in
either case, is generally to be determined by dividing the principal amount
of  the debentures, plus accrued and unpaid interest, by the lesser of  (a)
the  fixed conversion prices set forth in the debentures, which range  from
$1.50  to  $5.00 per share, or (b) a conversion price equal to 50%  of  the
average  closing bid and ask prices of the Company's common  stock  at  the
close of trading on the next day following the conversion date as set forth
in the respective debenture.

On  November 21, 1996 and November 26, 1996, the Company privately  placed,
in  reliance  upon exemptions under Regulation S of the Securities  Act  of
1933,  $300,000  and  $200,000, respectively, of  10%  one-year  cumulative
convertible debentures. These debentures are convertible into shares of the
Company's  common stock at any time after 45 days from the  date  of  their
issuance  and  prior  to  their  scheduled  one-year  maturity  dates.  The
conversion price of these debentures, plus accrued and unpaid interest,  is
equal  to  the  lesser of (a) 70% of the average closing bid price  of  the
Company's common stock for the five days preceding the conversion  date  or
(b)80%  of the average closing bid price of the Company's common stock  for
the  five days prior to issuance of the debentures. In connection with  the
issuance of these debentures, the Company incurred placement fees and other
costs  of  approximately $50,000 and received net proceeds of approximately
$450,000.  As  of  the date hereof, the Company has converted  $330,000  of
these  debentures into 93,301 shares of the Company's common stock and  has
outstanding unconverted debentures totaling $170,000.

On  or  about August 14, 1996, the Company issued a promissory  note  to  a
shareholder in the amount of $200,000. The promissory note was to be repaid
45  days  from  the date of its issuance and is currently in  default.  The
Company has entered into a settlement agreement, which requires the Company
to  pay  $238,220 in satisfaction of the note no later than  on  March  31,
1998, which amount is secured by a lien and encumbrance on the proceeds  of
the award in arbitration between and among TNI, GECCS and NEWS.

The  10% convertible debentures payable to the former shareholders of  TNI,
plus  accrued and unpaid interest, are due at the time of a public offering
of  the  Company's common stock and the filing of a registration statement.
These  debentures are convertible at a conversion price equal to the public
offering  price  in  such registration statement at  the  election  of  the
holder.

<PAGE> 61

The  6%  acquisition notes payable to the former shareholders of  ATI  were
originally  due  within 90 days of the date of acquisition  of  ATI.  These
notes were subsequently modified to delay their due date to the date  of  a
public offering of the Company's common stock or upon placement of a bridge
financing  facility to refinance the debt. These notes were  also  extended
from time to time. In consideration of these extensions, the Company issued
140,000  shares  of its Class B preferred stock and 166,668 stock  purchase
warrants  exercisable  at  $1.50  per  share  to  the  note  holders.   The
acquisition  notes payable and the stock purchase warrants  issued  to  the
former  shareholders of ATI are to be returned to the Company in connection
with the May 1997 rescission of the ATI acquisition agreement(see Note 17).

The  notes  payable  and  debentures associated with  the  acquisitions  of
subsidiaries,  described above, are collateralized  by  the  stock  of  the
respective subsidiaries.

The  notes payable to the former shareholders of NSC, due in equal  monthly
installments of $20,000, are currently in default. The Company has not made
any  payments on these notes since April 1996.  The holders of these  notes
have not initiated collection efforts for the amounts due to them under the
notes. The Company is currently accruing interest on these notes at 18% per
annum, the default rate of interest as called for by the notes.

As of December 31, 1996, the Company has $162,741 of 8-10% notes payable to
stockholders  due on various dates through December 1997. These  notes  are
generally  due one year after the date of issuance and provide  the  holder
with  the  right to convert the principal amount of the note, plus  accrued
and  unpaid  interest,  into  shares  of  the  Company's  common  stock  at
predetermined conversion prices at any time prior to maturity. Of the notes
outstanding  at  December 31,1996, $158,000, plus  accrued  interest,  were
converted in February 1997, into shares of the Company's common stock at  a
negotiated conversion price of $1.00 per share.

The  10.75%  demand note payable in the amount of $100,000  outstanding  at
December 31, 1996 and 1995 is currently in default. See Note 14.

The 5% note payable to a former shareholder of CCI in the amount of $75,000
at December 31, 1996 and 1995 is currently due in full. The obligations, if
any, of the Company under this note were relieved, in full, as a result  of
the rescission in May 1997 of the ATI acquisition (see Note 17).

The $300,000 of 6% acquisition notes payable to the former shareholders  of
CCI  outstanding as of December 31, 1995 were eliminated in May 1996  as  a
result  of  the  Company's  decision  to  cancel  all  related  acquisition
agreements and abandon its investment in CCI. Pursuant to the terms of  the
acquisition  and related pledge agreements, the effect of such  abandonment
is  that the former shareholders of CCI will receive the shares of stock in
CCI  acquired in 1994 by the Company in return for the shares of  preferred
stock and notes issued by the Company to the former shareholders of CCI  in
connection with the acquisition (See Note 14).

<PAGE> 62

As  of  December  31,  1996,  all  of the Company's  notes  and  debentures
outstanding are classified as current in the accompanying balance sheet.


NOTE 8  BORROWINGS UNDER LINES OF CREDIT

The  Company,  through two of its subsidiaries, has lines of  credit  which
were fully utilized at December 31, 1996 and 1995.


NOTE 9  FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107 "Disclosures about Fair
Value  of Financial Instruments" requires disclosure of the estimated  fair
value of financial instruments. It is not practicable to estimate the  fair
value  of  the  Company's  debt  instruments  because  most  of  the   debt
instruments  that have been issued by the Company are unique due  to  their
terms  being  negotiated as a part of the acquisition of  companies  or  in
connection  with  private placements of its debt securities  and,  in  many
cases,  comparable  instruments do not exist. The carrying  amount  of  the
Company's  other  financial  instruments, cash  and  cash  equivalents  and
accounts receivable, are a reasonable estimate of their fair value.


NOTE 10  INCOME TAXES

Income  tax  benefits recorded in 1996 and 1995 consist of deferred  income
taxes. No provisions for taxes currently payable were made in 1996, 1995 or
1994  due  to  operating  losses in each of  those  years  for  income  tax
purposes.  Income  tax benefits applicable to continuing operations  differ
from  the amounts computed by applying the U.S. federal income tax rate  of
34 percent to loss before income taxes as a result of the following:

<TABLE>
<CAPTION>
                                            YEAR ENDED DECEMBER 31,
                                    ------------------------------------------
                                        1996            1995           1994
                                    ------------    ------------   -----------
<S>                                     <C>              <C>            <C>
Amount computed at statutory rate   $(6,966,137)    $(  681,438)   $  (26,599)
Increase (reduction) in taxes
resulting from:
State income taxes                     (819,546)      (  80,169)       (3,129)
Nondeductible goodwill amortization      80,158           9,490           --
Impairment losses                       971,769             --            --
Change in valuation allowance         4,011,702         732,893        29,728
Other                                   167,904           4,100           --
                                    ------------    ------------    ----------
                                    $(2,554,150)    $  ( 15,124)    $     --
                                    ============    ============    ==========

</TABLE>

<PAGE> 63

Income    tax    benefits   allocated   to   operations   of   discontinued
telecommunications businesses were $649,044 and $241,577 in 1996 and  1995,
respectively.  The  difference between income tax  benefits  applicable  to
discontinued operations, computed by applying the U.S. federal  income  tax
rate  of  34  percent  to loss from discontinued operations  before  income
taxes, is due primarily to amortization of goodwill, impairment losses  and
adjustments to the valuation allowance recorded as a reduction of  goodwill
in conjunction with the acquisition of NSC.

At December 31, 1994, the Company recorded a valuation allowance of $49,021
which  was equal to the net deferred tax assets of the Company as  of  that
date. In the first ten months of 1995, the Company recorded additional  net
deferred  tax  assets of approximately $930,000 with  an  addition  to  the
valuation allowance in the same amount. As part of the acquisition of  NSC,
the   Company   recorded  approximately  $3.8  million  of   deferred   tax
liabilities. Because the deferred tax liabilities after the NSC acquisition
exceeded  the  previously recorded gross deferred tax assets,  the  Company
reversed the valuation allowance (approximately $980,000 as of October  31,
1995,  approximately  $248,000  of which is  applicable  to  operations  of
discontinued  businesses). Because this occurred  as  part  of  a  business
combination rather than through operations, the adjustment was recorded  as
a  reduction in goodwill associated with the NSC acquisition rather than as
an adjustment to operations.
<PAGE> 64

The  Company  has temporary differences between the amounts of  assets  and
liabilities for financial reporting purposes and the amounts of such assets
and  liabilities as measured by enacted tax laws. The Company also has  net
operating  loss  carry forwards available to reduce future taxable  income.
The  significant  components  of  the Company's  deferred  tax  assets  and
liabilities as of December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                             1996         1995
                                         ----------   ----------
<S>                                          <C>          <C>
Deferred tax assets:
Net operating loss carryforwards         $3,999,122   $1,402,574
Allowance for doubtful accounts              10,668      193,728
Equipment inventory valuation reserves         --         55,395
Accrued compensation                        777,922      953,714
                                         ----------   ----------

Total deferred tax assets                 4,787,712    2,605,411
Less-valuation allowance                 (4,011,705)        --
                                         ----------   ----------
Net deferred tax assets                     776,007    2,605,411
                                         ----------   ----------
Deferred tax liabilities:
Intangible assets                           371,029    4,672,733
Deferred compensation                       389,401      596,050
Other                                        15,577        --
                                         ----------   ----------
Total deferred tax liabilities              776,007    5,268,783
                                         ----------   ----------
Net deferred income taxes                $    --      $2,663,372
                                         ==========   ==========
</TABLE>

At  December 31, 1996, the consolidated group of companies had  unused  net
operating  loss carryforwards of approximately $10.5 million,  expiring  on
various  dates through 2010. Of this amount approximately $9.3  million  is
not  restricted  as to use. The balance of the carryforwards  amounting  to
approximately  $1.2  million  is restricted to  offsetting  future  taxable
income,   if   any,  of  the  respective  companies  which  generated   the
carryforwards and may be further limited as to utilization in any one  year
by existing tax laws.

Prior to the acquisitions by the Company of ATI, CCI and HMT (See Note  4),
those companies were taxed under Subchapter S of the Internal Revenue  Code
and consequently, were not subject to Federal income tax.

<PAGE> 65

NOTE 11 - STOCKHOLDERS' EQUITY

CLASS A PREFERRED STOCK

The Company's Class A preferred stock is non-voting, has a stated value and
liquidation  preference  of $1.00 per share, is convertible  into  one-half
share  of the Company's common stock at the election of the holder  at  any
time  prior  to  a  public  offering of  the  Company's  common  stock  and
automatically  converts  into common stock  at  the  time  of  such  public
offering.

CLASS B PREFERRED STOCK

The Company's Class B preferred stock is non-voting, has a stated value and
liquidation  preference of $1.00 per share, is convertible into  shares  of
the Company's common stock (with such number of shares to be determined  as
of  the  date of issuance, based on the stated value divided by the  10-day
average closing bid price of the Company's common stock) at the election of
the  holder at any time prior to a public offering of the Company's  common
stock  and  automatically converts into common stock at the  time  of  such
public offering.

STOCK PURCHASE OPTIONS AND WARRANTS

The  Company has issued common stock purchase warrants in conjunction  with
the  sale  and  issuance of common stock, preferred stock  and  convertible
debentures.  Stock  options issued to certain officers  and  directors  are
exercisable at any time for two years from the date of grant. The  exercise
prices of warrants issued were determined based upon prices related to  the
issuance  of  the Company's other securities. Such warrants  are  generally
exercisable  at  any time within two years from the date  of  issuance  and
entitle  the holder to receive one share of common stock for each  warrant.
Options   outstanding  at  December  31,  1996  total  1,000,000  and   are
exercisable at $6.00 per share. Such options were issued in March 1996  and
expire  in  March  1998.  The exercise price of options  is  equal  to  the
estimated  fair market value of the Company's common stock at the  date  of
grant.
<PAGE> 66

Options and warrants outstanding are summarized as follows:

<TABLE>
<CAPTION>
                                                    Exercise       Weighted
                                                   Price Range      Average
                                           Shares     per Share    Exercise
Price
                                        ---------  -----------   ----------
----
<S>                                        <C>          <C>           <C>
Warrants outstanding
   at December 31, 1994                    ---          ---           ---
Issued during the year                  1,680,936  $1.50-$8.00       $2.73
                                        ---------
Warrants outstanding
   at December 31, 1995                 1,680,936  $1.50-$8.00       $2.73
Warrants issued during the year         1,822,098  $1.50-$10.00      $4.00
Options issued during the year          1,000,000  $6.00             $6.00
                                        ---------
Warrants and options
   outstanding at December 31, 1996     4,503,700  $1.50-$10.00      $3.78
                                        =========
</TABLE>

The  Company has elected to follow Accounting Principles Board Opinion  No.
25,  "Accounting  for  Stock  Issued to Employees"  (APB  25)  and  related
Interpretations  in accounting for its employee stock options  because,  as
discussed  below, the alternative fair value accounting provided for  under
FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires
use  of  option valuation models that were not developed for use in valuing
employee  stock options. Under APB 25, because the exercise  price  of  the
Company's  employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.

In  1996,  the  Company issued options to management personnel  to  acquire
1,000,000  shares  of the Company's common stock at an  exercise  price  of
$6.00  per share. Such options are exercisable, in full or in part, at  any
time over the two-year period following the date of grant.

Pro  forma  information  regarding net income and  earnings  per  share  is
required  by  Statement No. 123, and has been determined as if the  Company
had accounted for its employee stock options under the fair value method of
that  Statement. The fair value for these options was estimated at the date
of  grant  using  a Black-Scholes option pricing model with  the  following
assumptions:  risk-free  interest rate  of  6.66%;  no  dividend  yield;  a
volatility  factor  of  the expected market price of the  Company's  common
stock of 40.77%; and a weighted-average expected life of two years.
<PAGE> 67

The  Black-Scholes  option  valuation  model  was  developed  for  use   in
estimating the fair value of traded options which have no restrictions  and
are  fully  transferable. In addition, option valuation models require  the
input  of highly subjective assumptions including the expected stock  price
volatility.   Because   the   Company's   employee   stock   options   have
characteristics significantly different from those of traded  options,  and
because  changes in the subjective input assumptions can materially  affect
the  fair value estimate, the existing models, in management's opinion,  do
not  necessarily provide a reliable single measure of the fair value of its
employee stock options.

For  purposes of the pro forma disclosure, the estimated fair value of  the
options and warrants granted in 1996 have been expensed. The Company's 1996
pro forma loss and loss per share data after giving effect to the charge to
income  as  if the Company accounted for stock options under the provisions
of Statement No. 123 are summarized as follows:

     Loss from continuing operations                  $19,614,489
                                                       ----------
     Loss from operations of discontinued
      telecommunications businesses                   $ 1,322,179
                                                       ----------
     Loss per share:
      Loss from continuing operations                 $      2.35
      Loss from operations of discontinued
       telecommunications businesses                         0.16
                                                       ----------
      Net loss                                        $      2.51
                                                       ==========
<PAGE> 68

NOTE 12  LEASES

The  Company  leases  certain equipment under capital  leases  expiring  on
various dates through 2001. The amortization of assets under capital leases
is  included  in  depreciation expense. Minimum future lease  payments  for
assets under capital leases as of December 31, 1996 are as follows:

<TABLE>
          <S>                                                    <C>
          1997                                               $ 360,409
          1998                                                 357,446
          1999                                                 138,389
          2000                                                  41,293
          2001                                                   8,801
                                                             ---------
          Total minimum lease payments                         906,338
          Less: future amount representing interest           (205,207)
                                                             ----------
          Present value of future minimum lease payments       701,131
          Less: current portion                               (242,477)
                                                             ----------
                                                             $ 458,654
                                                             ==========
</TABLE>

The  Company also leases office space and equipment under operating  leases
expiring on various dates through 2001. Total minimum future rental payment
sunder non-cancelable operating leases having remaining terms in excess  of
one year as of December 31, 1996 are as follows:

<TABLE>
<CAPTION>
          <S>                                                     <C>
          1997                                               $  280,700
          1998                                                  170,353
          1999                                                  120,842
          2000                                                   57,226
          2001                                                    -0-
                                                             ----------
          Total minimum future rental payments               $  629,121
                                                             ==========
</TABLE>

Rental  expense  under  all  operating leases was  $359,474,  $94,961,  and
$22,000 in 1996, 1995, and 1994, respectively.

<PAGE> 69

NOTE 13 - EMPLOYMENT AGREEMENTS

Employment  agreements with certain key employees provide for, among  other
things,  the  payment  of  compensation over  5  years  from  the  date  of
employment regardless of whether or not the employee remains in the  employ
of  the  Company.  The  present  value of  future  obligations  under  such
agreements  was  $1,020,913  at December 31, 1996.  The  Company  also  has
deferred   compensation  assets  related  to  these  agreements.   Deferred
compensation  has  been reported on the basis that the related  employee(s)
continue  to  provide meaningful service to the Company. In the  event  the
employee(s) cease to provide such service, deferred compensation is reduced
accordingly. Following is a summary of amounts included in the accompanying
consolidated balance sheets for such agreements as of December 31, 1996 and
1995:

<TABLE>
<CAPTION>
<S>                                                  <C>            <C>
                                                    1996           1995
                                                  ---------     ----------
Deferred compensation assets included in:
   Other current assets                           $ 355,415     $  406,675
Deferred compensation (non-current)                 647,355      1,168,405
                                                  ---------     ----------
                                                 $1,002,770     $1,575,080
                                                  =========     ==========
</TABLE>

<TABLE>
<S>                                                  <C>            <C>
Deferred compensation liabilities included in:
Accrued compensation and employee benefits      $   344,652     $  458,948
Deferred compensation (non-current)                 676,261      1,150,827
                                                  ---------     ----------
                                                 $1,020,913     $1,609,775
                                                  =========     ==========
</TABLE>

<PAGE> 70

Effective  in  May  1994, the Company entered into a  letter  agreement  to
employ  its then current Chief Executive Officer. In connection  with  that
letter  agreement, the Company reserved 500,000 shares of its common stock,
valued  at  $15,000, and 1,375,000 shares of its Class A  preferred  stock,
valued   at   $20,625,  to  be  issued  as  additional  compensation   upon
satisfaction  of  certain conditions as set forth in the letter  agreement.
Such  conditions  were met during 1995 and the shares of common  stock  and
Class  A  preferred stock previously reserved for issuance were issued.  In
connection with the issuance of such shares, the Company recorded  deferred
compensation  of  $35,625 which is being amortized over  the  life  of  the
related employment agreement(5 years).

Subsequent to December 31, 1996, certain key employees subject to the above
described  employee agreements resigned resulting in charges to income,  in
the  aggregate, of approximately $644,000 in the first and second  quarters
of 1997.


NOTE 14  COMMITMENTS AND CONTINGENCIES

As  of  December 31, 1996, the Company was committed to provide  financing,
totaling   approximately  $1.5  million,  to  certain  of  its   subsidiary
companies. As a result of the disposition HMT in June 1997 and the  passage
of  time,  the  Company  is  not committed, by agreement,  to  provide  any
additional financing to subsidiary companies.

One  of  the  Company's subsidiaries ("TNI") is the claimant in  a  binding
arbitration   proceeding  involving  GE  Capital  Communications   Services
Corporation ("GECCS") and New Enterprise Wholesale Services, Ltd.  ("News")
seeking  damages arising out of a breach of contract for the  purchase  and
resale  of telecommunications services. An arbitration award in the  amount
of  $1,250,000 was entered in favor of TNI on October 10, 1996.  The  award
was  appealed by GECCS to the U.S. District Court for the Northern District
of  Georgia  on the grounds that the arbitrators exceeded their  powers  by
awarding TNI damages under the GECCS Agreement. On September 30, 1997,  the
U.S.  District Court confirmed the award and a motion for summary  judgment
was  entered  on October 1, 1997. On December 24, 1997, the Company,  GECCS
and  NEWS entered into a Confidential Settlement Agreement and Mutual  Full
and  Final  Releases (the "Settlement Agreement") regarding the arbitration
award  in  favor  of  the  Company. Pursuant to the  Settlement  Agreement,
GECCS\NEWS  paid $1,250,000 in full satisfaction of the arbitration  award.
Of  that amount, the Company received approximately $750,000, which is  net
of  legal fees. The proceeds from the Settlement Agreement were used to pay
trade  and  other  obligations, including the obligations  to  Mr.  Telford
Walker  and  Mr.  James  Gary  May  referred  to  below.  The  accompanying
consolidated  financial statements do not give effect to  the  award.  (See
Note 17 - Events Subsequent to December 31, 1996).

<PAGE> 71

The   Company   is  subject  to  various  other  legal  and  administrative
proceedings. These proceedings include (i) a consent order executed between
the Company and the State of Michigan requiring the Company to use its best
efforts  to  satisfy  the  prerequisites of  the  Securities  and  Exchange
Commission   and the Michigan Securities Bureau for registering the  common
stock  sold by the Company to purchasers of its securities in the State  of
Michigan,  for  resale by them in the public market,  (ii)  an  action,  in
arbitration, by the former shareholders of CCI to enforce promissory  notes
in  the  principal amount of $300,000 issued by the Company  in  connection
with  the  acquisition of CCI and canceled by the Company in  May  1996  in
connection  with  the Company's decision to cancel all of  the  acquisition
related  documents,  (iii)  actions on the part  of  certain  creditors  to
enforce  the  terms of certain promissory notes (see Note 7), (iv)  actions
brought  against  the  Company  by certain  former  employees  and  persons
formerly  under contract with the Company for payments allegedly due  them,
(v)  an  action by a shareholder seeking the rescission of the sale by  the
Company  of  its common stock to the shareholder and (vi) an  action  by  a
purchaser  ("Timboon") of the Company's convertible  debentures  issued  in
reliance  upon  exemptions  under Regulation S of  the  Securities  Act  of
seeking  performance of the terms of the related offering and  subscription
agreements.   These  legal  and  administrative  actions  are  more   fully
described below.

The  consent  order executed by the Company and the State  of  Michigan  in
December 1996, requires the Company  to use its best efforts to satisfy the
prerequisites  of  the Security and Exchange Commission  and  the  Michigan
Securities  Bureau  for  registering the  common  stock  sold  to  Michigan
purchasers  of  its common stock for resale by them in the  public  market.
This  action is the result of the sale by the Company of its securities  in
the  State  of  Michigan without an exemption from registration  under  the
Michigan  Uniform  Securities Act. In the event the Company  is  unable  to
effect  a  registration statement or such purchasers are unable  to  resell
their shares pursuant to such registration statement at a higher price than
their  cost, then the Company is required to use its best efforts, no later
than  in December 1997, to satisfy the prerequisites of the Securities  and
Exchange Commission and the State of Michigan for making a rescission offer
to  all  such purchasers. Also, pursuant to the consent order, the  Company
must  cease  the  unregistered sale of securities  in  Michigan,  has  been
censured  and  has paid costs to the state of $2,500. Upon satisfaction  of
the  consent order, all sanctions are terminated. As of December 31,  1996,
the  Company  estimates its maximum potential exposure as a result  of  any
rescission offer which may be required to be made in the State of  Michigan
to  be approximately $778,000, including interest of approximately $69,000.
The  number  of shares the Company believes may be subject to a  rescission
offer  in  the  State of Michigan, if such an offer were  to  be  made,  is
approximately 219,000 shares; and, the weighted average purchase  price  of
such  shares  is approximately $3.25 per share. It is unlikely the  Company
will  be  able to satisfy the requirements of the consent order within  the
time  required  by the consent order, if at all. Due to the "best  efforts"
nature  of  the Company's compliance obligation, the Company believes  that
its performance of the terms of the consent is deferred until such time  it
is able to both financially and functionally comply.

<PAGE> 72

In  May  1996, the Company informed the principals of Coast Communications,
Inc.  ("CCI")  that the Company was canceling the acquisition  of  CCI  and
terminating all of the related acquisition documents. The principals of CCI
filed suit to enforce promissory notes in the aggregate principal amount of
$300,000,  which  were  issued by the Company in connection  with  the  CCI
acquisition  (see  Note  7)  and the issuance  of  200,000  shares  of  the
Company's  Class  A  preferred stock they allege are  due  them  under  the
acquisition agreement. The notes and associated documentation  call  for  a
return of CCI shares in the event of non-payment of secured notes issued in
consideration for the acquisition agreement. This matter has been  referred
by  court order to mandatory arbitration in the State of Florida.   On  May
21,  1997,  the principals of CCI filed a demand for arbitration  with  the
American  Arbitration Association. Arbitration of this matter has been  set
for February 1998. The Company believes this action to be without merit and
intends to vigorously defend it. However, it is not possible to predict the
likely outcome of this matter or the financial statement effect, if any, in
the event of an unfavorable outcome.

On  January 21, 1997, Mr. Telford Walker, as Plaintiff, filed an action  in
the  Superior  Court in the State of California in and for  the  County  of
Orange  (Case No. 774312) against the Company, Mr. Stephen E. Williams  and
Mr. Edwin B. Salmon, as Defendants. This action arises from the  default by
the  Company  under a $200,000 loan agreement between the Company  and  Mr.
Walker.  This action is subject to a settlement agreement (the  "Settlement
Agreement") which requires the Company to pay Mr. Walker $238,220 no  later
than  on  March 31, 1998, which amount is secured by a lien and encumbrance
on  the  proceeds of the award in arbitration between and among TNI,  GECCS
and  NEWS.  Upon payment of the settlement amount, Mr. Walker is to  return
15,000  shares  of  the Company's common stock issued  by  the  Company  in
connection  with the loan agreement. The Company has accrued the settlement
liability  in  the  accompanying consolidated  financial  statements.  This
obligation  was  paid  on  December 31,  1997  from  the  proceeds  of  the
arbitration award.

On  January 10, 1997, Mr. James Gary May, as Plaintiff, filed an action  in
the  Circuit  Court of the Tenth Judicial Circuit in and for  Polk  County,
Florida  (Case No. GC-G-97-80-Section 07) against the Company and  NSC,  as
Defendants. This action arises out of a loan agreement entered into between
NSC and Mr. May (see Note 7). The principal amount of the loan agreement is
$100,000  and  is  in default. This action was settled by  the  payment  of
approximately  $116,000 to Mr. May on December 31, 1997  with  no  material
effect on the results of operations of the Company.
<PAGE> 73

On  April  15,  1997, Mr. Ken Lame, as Plaintiff, filed an  action  in  the
United  States  District  Court, District Court of Utah,  Central  Division
(Case  No.  2:97CV0292W) against the Company and NSC, as  Defendants.  This
action arises from a consulting agreement between Mr. Lame and the Company.
The  action  seeks approximately $250,000, plus interest for  payments  Mr.
Lame  alleges  are  due  under the consulting agreement.  The  Company  has
accrued all amounts it believes are due under the consulting agreement. The
resolution  of  this  matter  is  not expected  to  result  in  liabilities
materially in excess of those that have already been accrued by the Company
under the consulting agreement.

On May 21, 1997, Mr. Jeff Good, as Plaintiff, filed an action in the United
States District Court, Southern District of Iowa, Davenport Division  (Case
No. 3-97-CV-80085) against the Company for amounts Mr. Good alleges are due
under  an  employment agreement between Mr. Good and one of  the  Company's
subsidiaries  (which  subsidiary is no longer  conducting  business).  This
action  seeks  compensation and benefits under the employment agreement  in
excess  of  $200,000. The Company believes this action to be without  merit
and intends to vigorously defend it. However, it is not possible to predict
the likely outcome of this matter.

Mr. John Looney, a former principal and executive officer of NSC, filed  an
action with the Texas Employment Commission (Claim No. 97-004016-1) against
SCI  and  NSC  for  unpaid salary, bonuses and benefits.  This  action  was
decided in favor of Mr. Looney  in the amount of  approximately $71,000  in
October  1997,  which  amount has been provided  for  in  the  accompanying
consolidated financial statements. This decision has been appealed  by  the
Company.

On  May  1,  1997,  Mr. John Jassy, as Plaintiff, filed an  action  in  the
Circuit  Court  of  the Sixth Judicial Circuit in and for Pinellas  County,
Fl.,  Civil  Division  (Case No. 97-3103-CI-20) against  the  Company,  Mr.
Stephen  E.  Williams  and Mr. Edwin B. Salmon, Jr.,  as  Defendants.  This
action  alleges  that numerous misrepresentations and deceptive  statements
were  made  to Mr. Jassy and certain family members of Mr. Jassy to  induce
them  to purchase the Company's securities. The action seeks rescission  of
those security purchases, payment of compensation Mr. Jassy alleges is  due
to him from his employ by the Company as an executive officer and repayment
of   a  loan  made  to  Mr.  Williams  by  Mr.  Jassy.  This  action  seeks
approximately $500,000, plus interest and attorney's fees. Included in  the
amounts   claimed  by  plaintiff,  are  approximately  $450,000,  including
interest,  to  repurchase  approximately 100,000 shares  of  the  Company's
common  stock  purchased by plaintiff and his family members, approximately
$60,000,  plus  interest, Mr. Jassy alleges is payable  to  him  in  unpaid
salary and benefits and $2,500, plus interest, Mr. Jassy claims is owed  to
him  by Mr. Williams, a former President and Chief Executive Officer of the
Company.  The Company believes this action to be without merit and  intends
to  vigorously  defend it. In the event of an unfavorable  outcome,  it  is
unlikely that the Company would be able to repurchase the shares of  common
stock or pay other amounts subject to the action.

<PAGE> 74

On June 6, 1997, Timboon, LTD ("Timboon"), as Plaintiff, filed an action in
the United District Court,  Southern District of New York (Case No. 97 Civ.
4464  (JSR),  against the Company, as Defendant, seeking  the  delivery  of
163,438  shares of the Company's common stock to Plaintiff as a  result  of
the  conversion  of  $150,000 of the Company's 4%  Convertible  Debentures,
issued  to  Timboon  in  February 1997 in reliance  upon  exemptions  under
Regulation  S  of the Securities Act of 1933, and the payment  of  $970,000
(the principal amount of the Company's $4% Convertible Debentures that have
not  been  converted by Timboon) to Timboon, plus damages. The Company  has
filed  a  counterclaim against Timboon alleging that Timboon  breached  the
representations   and  covenants  it  made  in  the  Off-Shore   Securities
Subscription  Agreement. These representations and  covenants  related  to,
among  other things, Timboon's investment intent in acquiring the Company's
securities  and  its possible "shorting" of the Company's common  stock  in
contemplation of conversion. In addition, the Company alleges that  Timboon
participated   in  manipulative  market  activity  with   the   intent   to
artificially  depress the market price of the Company's common  stock.  The
Company  seeks  nullification  of  the  Off-Shore  Securities  Subscription
Agreement,  a declaration that it is not obligated to convert  any  of  the
securities  submitted  by Timboon and damages for the  injuries  caused  by
Timboon. The Company is unable to predict the likely outcome of this matter
and  does  not  expect to incur liabilities materially in excess  of  those
included  in  the  Company's consolidated financial  statements.  But,  the
Company may be required to issue shares of its common stock in satisfaction
of its obligations to Timboon at per share prices significantly below those
contemplated   at  the  time  of  the  Off-Shore  Securities   Subscription
Agreement.

In  October 1997, Boston Financial Corporation took possession  of  certain
computer  equipment leased by NSC from Boston Financial  Corporation  as  a
result  of the default by NSC of payments due under the lease. On  December
11,  1997,  Boston Financial Corporation filed an amended suit against  NSC
and  , as guarantors of the lease agreement, the Company, ATI and TNI. This
action seeks approximately $550,000 in lease payments and other charges due
under the lease agreement. It is not possible to predict the likely outcome
of  this  matter.  The  Company is currently in  negotiations  with  Boston
Financial Corporation to settle this dispute. Further, the Company may have
several  counterclaims  against  Boston Financial  Corporation  should  the
Company and Boston Financial Corporation fail to settle the dispute.

The  Company  is  also involved in numerous other legal and  administrative
actions  incurred  in the ordinary course of business, none  of  which  are
expected to have a material impact on the Company's results of operations.

<PAGE> 75

NOTE 15  SEGMENT INFORMATION

The  Company's  operations  are  classified  into  two  industry  segments:
healthcare   management   and  cost  containment  products   and   services
("Healthcare"); and telecommunications products and services, including pay-
per-view  related services ("Telecommunications"). In 1996  and  1997,  the
Company   disposed   of   substantially  all   of   the   assets   of   its
telecommunications  businesses.  Consequently,  the   operations   of   the
Company's  telecommunications  businesses are  classified  as  discontinued
operations  in  the accompanying consolidated statements of operations  for
all  years presented. Following is a summary of segmented information. Such
segmented  information  sets forth selected income  statement  and  balance
sheet  data  for each of the three years in the period ended  December  31,
1996,  including  the  results of operations  and  balance  sheet  data  of
discontinued  operations, and the separate operating  results  and  balance
sheet data of discontinued operations.

Segmented information, including the results of operations and balance data
of discontinued operations, is summarized as follows:
<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31,
                                       --------------------------------------
                                            1996           1995       1994
                                       ------------    -----------  ---------
<S>                                         <C>              <C>       <C>
Net revenues from unaffiliated customers:
   Healthcare                          $  2,832,123    $   91,106   $    --
   Telecommunications                     2,177,858     2,893,778     807,669
                                        -----------    ----------    --------
                                          5,009,981     2,984,884     807,669
                                        -----------    ----------    --------
Income (loss) from operations:
   Healthcare                           (17,104,177)   (  363,857)       --
   Telecommunications                   ( 1,932,649)   (4,036,371)   ( 48,348)
   Corporate expenses                    (2,906,779)   (1,580,504)   ( 78,233)
                                        -----------    ----------    --------
                                        (21,943,605)   (5,980,732)   (126,581)

Interest income                               9,154         4,404        --
Interest expense                           (420,688)      (84,110)     (2,421)
Other expense                              (104,723)       (4,288)       --
                                        -----------    ----------    --------
Loss before income taxes               $ 22,459,862)  $(6,064,726)  $(129,002)
                                        ------------   ----------    --------
Depreciation and amortization expense:
Healthcare                             $  1,421,925   $   129,644   $    --
Telecommunications                          291,291       311,135      72,374
Corporate                                    37,511        18,548        --
                                        -----------    ----------    --------
                                       $  1,750,727   $   459,327   $  72,374
                                        -----------    ----------    --------
Capital Expenditures:
Healthcare                             $  1,062,612   $    41,999   $    --
Telecommunications                           12,561       208,503     253,394
Corporate                                    44,648        86,779        --
                                        -----------    ----------    --------
                                       $  1,119,821   $   337,281   $ 253,394
                                        ===========    ==========   =========
<PAGE> 76
                                                      DECEMBER 31,
                                      ----------------------------------------
                                          1996            1995         1994
                                      ------------     -----------  ----------
<S>                                       <C>              <C>         <C>
Identifiable Assets:
     Healthcare                        $ 3,698,484     $15,629,280   $    --
     Telecommunications                    660,094       2,596,619     704,397
     Corporate                           1,488,722       3,319,755      75,825
                                      ------------     -----------  ----------
                                       $ 5,847,300    $ 21,545,654   $ 780,222
                                      ============     ===========  ==========
</TABLE>

Included  in the above segmented information are the results of  operations
and selected balance sheet data of discontinued operations as follows:

<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                                       ---------------------------------------
                                          1996            1995         1994
                                       ------------    -----------  ----------
<S>                                        <C>             <C>         <C>

Net revenues from discontinued
   telecommunications businesses       $  2,177,858    $ 2,893,778   $ 807,669
                                       ------------    -----------  ----------
Loss from operations of discontinued
  telecommunications businesses, before
  income taxes, interest and other       (1,932,649)    (4,036,371)    (48,348)

Interest income                                 971            627        --
Interest expense                           ( 38,713)       (20,466)     (2,421)
Other expense                              (    832)       ( 4,288)       --
                                        -----------    -----------   ---------
Loss from operations of discontinued
   businesses, before income taxes      ( 1,971,223)    (4,060,498)   ( 50,769)
                                        -----------    -----------   ----------

Depreciation and amortization expense       291,291        311,135      72,374
                                        -----------    -----------   ---------

Capital Expenditures                    $    12,561    $   208,503   $ 253,394
                                        -----------    -----------   ---------


Identifiable Assets                     $   660,094    $ 2,596,619   $ 704,397
                                        ===========    ===========   =========
</TABLE>
The Company has no inter-segment revenues.

In  1996,  the  Company had one customer that accounted for  26.6%  of  the
Company's revenues. For each of the two years in the period ended  December
31, 1995, the Company had no customers that accounted for more than 10%  of
the Company's net revenues.

<PAGE> 77

NOTE 16  STATEMENTS OF CASH FLOWS SUPPLEMENTAL INFORMATION

<TABLE>
<CAPTION>

                                               YEAR ENDED DECEMBER 31,
                                        --------------------------------------
                                           1996            1995         1994
                                        ----------     -----------   ---------
<S>                                         <C>            <C>          <C>
Non-cash transactions:
    Equipment capital leases            $  703,215     $   112,308   $   7,880
                                        ==========      ==========   =========
   Common stock issued for
       compensation                     $  260,193     $   451,773   $    --
                                        ==========      =========   =========
   Stock and warrants issued in
      consideration for extension of
       related party indebtedness       $     --       $   341,600   $    --
                                        ==========      ==========   =========
    Employment agreements               $     --       $ 1,609,775   $    --
                                        ==========      ==========   =========
   Notes payable issued in
      connection with
      business acquisitions             $     --       $   700,000   $    --
                                        ==========      ==========   =========
Issuance of Stock for debt              $  264,150     $      --     $    --
                                        ==========      ==========   =========
Cash paid during the period for:
    Interest                            $     --       $    23,055   $   2,421
                                        ==========      ==========   =========
    Income taxes                        $     --       $      --     $   --
                                        ==========      ==========   =========

</TABLE>

<PAGE> 78

NOTE 17 EVENTS SUBSEQUENT TO DECEMBER 31, 1996

In  January  1997,  the  founders  and management  of  NSC  (the  "Retiring
Management")resigned  in  a negotiated agreement between  the  Company  and
Retiring Management. The material features of the agreement include (i) the
waiver  by  Retiring  Management  of (a) all  accrued  and  unpaid  bonuses
($695,214) and (b) $2,000,000 of the Company's common stock which was to be
issued to Retiring Management pursuant to the NSC acquisition agreement and
(ii)  an  undertaking by the Company to negotiate a license agreement  with
Retiring  Management for the exclusive use of NSC's software and technology
to service state governments west of the Mississippi River(excluding Utah),
Mexico  and  Central  and  South America, subject  to  minimum  performance
standards, in consideration for a royalty fee of one-half of one percent of
all  revenues  derived by Retiring Management from such license  agreement.
The  license agreement is to provide for (i) the sharing on a 50-50  basis,
of  the  net profits (to be defined) earned by NSC from the States  of  New
York  and  New  Jersey and by Retiring Management from Mexico  and  (ii)  a
requirement that Retiring Management use NSC, for a reasonable fee, as  its
sole supplier of data processing services to process work derived from  the
license agreement for a period of two years.

In  January 1997 and May 1997, the Company disposed of substantially all of
the  remaining  assets of its Telecommunications segment. In January  1997,
the  Company  sold,  in two separate transactions (i)  TNI's  long-distance
customer  base and existing customer receivables for $76,000  in  cash  and
(ii)  TNI's  utility audit division customer base, agreements and  work-in-
process for $25,000 in cash and a $500,000 convertible debenture issued  by
the  acquiring company; and, in May 1997, the Company and ATI entered  into
an  agreement to rescind the August 1994 acquisition of ATI by the Company.
The accompanying consolidated  financial statements include adjustments  to
reduce  the  carrying amount of the TNI assets sold to their net realizable
value. No value was assigned to the $500,000 convertible debenture received
from  the  sale  of  TNI's  utility  audit  division.  By  its  terms,  the
convertible debenture is due on January 31, 1999 and bears interest  at  8%
per  annum  beginning on April 2, 1997 and through the date of  conversion.
Such  conversion  is  at the average bid and ask prices  of  the  acquiring
company's  common  stock on the effective date of a registration  statement
covering  the shares issuable upon conversion of the convertible debenture.
The  ATI  rescission agreement provides for the return of all  of  the  ATI
stock  acquired by the Company to the former ATI shareholders  in  exchange
for 684,410 shares of  the Company's common stock, the 6% acquisition notes
payable  to  the  former shareholders of ATI (see Note 7) and  warrants  to
purchase  168,668 shares of the Company's common stock. In connection  with
the  rescission of the ATI acquisition, ATI issued a promissory note to the
Company  in  the  amount of $180,000, payable upon the default  by  ATI  of
payments due under lease agreements guaranteed by the Company. Payments due
the  Company  under the promissory note are to be equal to the  amount,  if
any,  the  Company  may  be  required  to  pay  under  the  lease  guaranty
agreement(s)   entered  into  between  the  Company  and  ATI's   equipment
lessor(s).

<PAGE> 79

On  February  24,  1997, the Company issued $1,120,000  of  4%  convertible
debentures due October 1, 1998 in reliance upon exemptions under Regulation
S  of  the Securities Act of 1993. These debentures are convertible at  any
time after 45 days from the date of their issuance until maturity into  the
Company's common stock at a conversion price equal to the lessor of (a) 80%
of  the average closing bid price of the Company's common stock for  the  5
days  preceding  the issuance of the debentures or (b) 70% of  the  average
closing  bid  price of the Company's common stock for the 5 days  preceding
the  conversion  date. The Company incurred costs in connection  with  this
financing  of $120,000 and received net proceeds of $1,000,000.  Conversion
of  these  debentures is subject to a legal proceeding between the  Company
and the purchaser of the debentures (see Note 14).

In  June  1997,  the  Company  entered into an agreement  with  the  former
shareholders  of  HMT to rescind the Company's  March 1996  acquisition  of
HMT. The HMT rescission agreement provides for the return of all of the HMT
stock acquired by the Company to the former shareholders of HMT in exchange
for  $450,000  in cash (in payment of inter-company loans to HMT  from  the
Company)  and  the 309,837 shares of the Company's common stock  issued  in
connection   with  the  acquisition.  In  connection  with  the  rescission
agreement,  the  Company  and  HMT  entered  into  a  separate  Cooperative
Marketing  and  Option  Agreement.  The Cooperative  Marketing  and  Option
Agreement provides both the Company and HMT the non-exclusive right, for  a
five (5) year period, to market each other's products, on a fee basis,  and
granted the Company a non-transferable option, exercisable at any time  for
eighteen  months  after  the  date of grant  (June  9,  1997),  to  acquire
approximately  10%  of  HMT, adjusted for stock  splits,  stock  dividends,
reclassifications,   reorganizations,  consolidations   or   mergers,   for
approximately $45,000 in cash. The HMT rescission agreement  also  had  the
effect of relieving the Company of its obligation to provide  financing  to
HMT under the terms of  the acquisition agreement.

<PAGE> 80

On  November 14, 1997, the Company and the stockholders of HMG Health  Care
Claims Auditing, Inc.("HMG") entered into an agreement to exchange stock  (
the  "Agreement to Exchange Stock"). Pursuant to the Agreement to  Exchange
Stock,  the Company is to acquire all of the outstanding stock  of  HMG  in
exchange  for  shares of the Company's common stock ( the "HMG  Acquisition
Shares).  The  number  of HMG Acquisition Shares is  to  be  determined  at
closing and are to be equal to 30% of the then outstanding common stock  of
the  Company  after  giving effect to the issuance of  the  HMG  Acuisition
Shares.  The  acquisition  of HMG is subject to, among  other  things,  the
Company obtaining debt financing to refinance the existing indebtedness  of
HMG ($850,000) and pay other costs and expenses related to the acquisition.
The  Agreement to Exchange Stock contemplates a December 31,  1997  closing
but,  it is unlikely that that all conditions contemplated in the Agreement
to Exchange Stock will be met by December 31, 1997.

On  December  24,  1997,  the  Company,  GECCS  and  NEWS  entered  into  a
Confidential  Settlement Agreement and Mutual Full and Final Releases  (the
"Settlement  Agreement") regarding the arbitration award in  favor  of  the
Company  (see  Note  14). Pursuant to the Settlement Agreement,  GECCS\NEWS
paid  $1,250,000  in full satisfaction of the arbitration  award.  Of  that
amount, the Company received approximately $750,000, which is net of  legal
fees. The proceeds from the Settlement Agreement were used to pay trade and
other obligations, including the obligations to Mr. Telford Walker and  Mr.
James Gary May referred to in Note 14.


NOTE 18 - Valuation and Qualifying Accounts

Valuation  and qualifying accounts (which are deducted from the  assets  to
which  they apply) consist of an allowance for doubtful accounts ($  28,074
and $510,000 at December 31, 1996 and 1995, respectively) and a reserve for
obsolete  equipment  inventories at December 31,  1995  of  $145,776.  This
reserve  was  provided  in  1995  and was  eliminated  from  the  Company's
consolidated  financial  statements  in  1996  in  conjunction   with   the
abandonment of the CCI investment (See Notes 4 and 14).

<PAGE> 81

Following is a summary of the allowance for doubtful accounts:

     Balance, December 31, 1994               $    --
     Additions:
     Acquisition of businesses                  328,247
     Provision for bad debts charged
      to operations                             181,753
     Deductions                                    --
                                              ----------
     Balance, December 31, 1995                 510,000

     Additions:
     Provision for bad debts charged
      to operations                             522,687
     Deductions:
       Write-offs                              (985,254)
       CCI Elimination                          (19,359)
                                              ----------
     Balance, December 31, 1996               $  28,074
                                              ==========

The  provision  for  bad  debts charged to operations  in  1996  and  1995,
applicable   to  discontinued  operations,  were  $475,711  and   $159,346,
respectively.


Item  9.   CHANGES  IN  AND  DISAGREEMENTS WITH  ACCOUNTANTS  ON  FINANCIAL
DISCLOSURE.

Not Applicable

<PAGE> 82

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  names and ages of directors(including the year in which each became  a
director)  and executive officers of the Company as of the date hereof  are
set forth in the following table:

<TABLE>
<CAPTION>


Director
Name                      Age     Positions  With  Co.  and  Subsidiaries Since
----------------------    ---     --------------------------------------- --------
<S>                       <C>                            <C>               <C>
Edwin B. Salmon, Jr.      59      Chairman of the  Board  of  Directors   1991
                                  and Chief Financial Officer

James T. Kowalczyk        57      Director and President                  1997

Richard A. Sweet          64      Director                                1997

Larry R. Snapp            52      Director                                1997

Hugh M. Gibbons           57      Executive Vice President                N\A


</TABLE>

N/A means the named executive officer is not a director.

Each  director is elected by holders of a majority of the Common  Stock  to
serve for a term of one year ending on the next following annual meeting of
stockholders  and  until his successor is elected and  qualified.  Officers
serve  at  the will of the board. Directors are not compensated  for  their
services  apart from their executive officer salaries, if the  Director  is
also an executive officer, and stock options that may be granted from time-
to-time   for   their  services  as  Directors  (see  Item  11   "Executive
Compensation" and Item 12 "Security Ownership of Certain Beneficial  Owners
and  Management"). In the event the Company has directors who are not  also
officers,  the  Company may reimburse such directors  for  travel  expenses
related to Company business. The directors and officers of the Company  are
indemnified  against  liabilities which  they  incur  by  virtue  of  being
directors  and officers under the corporate laws of the State  of  Florida.
The  articles of incorporation and bylaws of the Company do not contain any
provisions  with respect to indemnification of directors and officers.  The
Company has been advised that in the opinion of the Securities and Exchange
Commission,  indemnification  for liabilities  arising  under  the  federal
securities  laws  is  against public policy and may be  unenforceable.  The
Company  would  seek approval of any such indemnification  by  a  court  of
competent jurisdiction.
<PAGE> 83

Messrs.  Kowalcsyk, Sweet and Snapp were elected to the Board of  Directors
at  various times during 1997 by remaining Directors to fill vacancies. The
Company  did  not hold an annual meeting of shareholders in  1997  due  its
inability  to  comply with the information requirements of Rule  14a-3,  as
promulgated  by the Securities and Exchange Commission for the solicitation
of  proxies.  Rule  14a-3 requires registrants to furnish security  holders
with  an annual report which includes audited balance sheets as of the  end
of  the  two  most recent fiscal years and audited statements of operations
and  cash flows for each of the three most recent fiscal years. The Company
was  unable  to  comply with such requirements due the Company  not  having
timely  filed  its Annual Report on Form 10-K for the year  ended  December
31,1996. The Company did not timely file its Annual Report on Form 10-K for
the year ended December 31, 1996 due to its inability to timely pay for the
services of its independent auditors and the time required by management to
complete  its  assessment of the carrying value of  intangible  assets  and
goodwill  recorded in connection with the acquisition of NSC.  The  Company
contemplates  holding an annual meeting of shareholders in 1998  subsequent
to  the  completion of its Annual Report on Form 10-K for  the  year  ended
December  31,  1997. It is uncertain, however, whether or not  the  Company
will  be  able  to  obtain  a  timely audit of its  consolidated  financial
statements, timely file its Annual Report on Form 10-K for the  year  ended
December 31, 1997 and prepare and mail proxy solicitation materials to  its
shareholders  due to limitations on the part of the Company to  fund  those
collective efforts. See "Management's Discussion and Analysis of  Financial
Condition and Results of Operations".

Mr.  Edwin  B. Salmon, Jr. has been associated with the Company in  various
capacities  since its formation. Mr. Salmon is currently  Chairman  of  the
Board of Directors and the Company's Chief Financial Officer and previously
held  the position of the Company's Executive Vice President. In 1991,  Mr.
Salmon  became  President  and  a  controlling  stockholder  of  Associated
Healthcare   Industries,  Inc.  ("Associated"),  a  publicly  owned   shell
corporation, which changed its name to Contour Medical, Inc. in  connection
with  the  acquisition  of  a  disposable  medical  products  manufacturing
business. In 1993, Mr. Salmon left Associated to resume his efforts in  the
Company's  acquisition of operating businesses.  Mr. Salmon  was  also  the
founder  of LCI Communications, Inc., which was acquired by the Company  in
June of 1995.

Mr. James T. Kowalczyk became a Director and was appointed President of the
Company  in  July  1997. For the past 30 years, Mr.  Kowalczyk  was  a  co-
founder,  director and franchiser in Pittsburgh, Pennsylvania  with  Budget
Marketing,  Inc. and was a co-founder and senior officer of 2001/VIP  Clubs
of America.
     
Mr.  Richard A. Sweet became a Director of the Company in April  1997.  For
the  past  five  years, Mr. Sweet has been a Branch Manager  for  Insurance
Adjustors and Services Corporation of Tampa, Florida and from 1960 to  1986
was Branch Manager and Supervisor of Claims for Indiana Insurance Co.

Mr.  Larry R. Snapp became a Director of the Company in May 1997. Mr. Snapp
has  over  30 years of banking industry experience and, for the  last  five
years  was  Vice President of National City Bank of Indiana, a position  he
recently retired from.
<PAGE> 84
     
Mr. Hugh M. Gibbons was appointed as the Company's Executive Vice President
in  July  1977. For the past five years Mr. Gibbons has served as President
of  Gibbons'  Health Plan Recoveries, Inc., President of and  Principal  of
Health  Plan  Audit Services, Inc., President of H.M. Gibbons & Associates,
Inc.  and  Executive Vice President of HMG Health Care Auditing, Inc.   Mr.
Gibbons has over 34 years of healthcare cost containment experience and has
a Doctor of Jurisprudence Degree from the University of Baltimore School of
Law.


ITEM 11. EXECUTIVE COMPENSATION

The  following  table sets forth the compensation paid or  accrued  to  the
chief  executive officer of the Registrant or person discharging comparable
duties  and to the three most highly compensated officers of the registrant
whose  compensation exceeded $100,000 for each of the three  years  in  the
period ended December 31, 1996.

<TABLE>
<CAPTION>
                                              Annual Compensation
                               -----------------------------------------------
Long-Term
Name & Principal Positions     Year      Salary    Bonus      Other   Compensation
--------------------------     ------    ------    -----      -----   -----------
<S>                             <C>        <C>      <C>        <C>       <C>

Stephen E. Williams             1996    $177,500   None       $7,500    None
Chief Executive                 1995     190,625   None        7,500    None
Officer   (1)(2)(3)(4)          1994       N/A      N/A          N/A    N/A

Edwin B. Salmon, Jr.            1996    $177,000   None       $7,500    None
Executive Vice                  1995      99,630   None        9,000    None
President and                   1994        None   None         None    None
Treasurer (1)(3)(4)
Robert L. Alexander             1996    $129,000   None       $6,750    None
Chief  Operating                1995      52,000   None         None    None
Officer   (1)(4)                1994        N/A     N/A          N/A     N/A
</TABLE>

(1) Each of the executive officers named above have entered into employment
agreements with the Company. These agreements provide, among other  things,
for  the  payment of compensation over 5 years from the date of employment,
regardless of whether or not these executive officers remain in the  employ
of  the  Company. See Note 13 to the Consolidated Financial Statements  and
Note  4  below. Effective December 1, 1996, the annual salaries of  Messrs.
Salmon  and  Williams were reduced to $150,000, each and Mr.  Alexander  to
$96,000.

(2) The Company issued, as additional compensation to Mr. Williams, 500,000
shares of Common Stock, valued at $15,000, and 1,375,000 shares of Class  A
preferred  stock, valued at $20,625, in connection with the performance  of
certain conditions set forth in a 1994 letter agreement. See Note 13 to the
Consolidated Financial Statements.
<PAGE> 85

(3)  Each  of Messrs. Salmon and Williams have options to purchase  500,000
shares  of  the Company's Common Stock at an exercise price  of  $6.00  per
share. Such options were issued in March 1996 at an exercise price equal to
the  then  estimated fair market value and are exercisable at any time  for
two years from the date of grant. As of December 31, 1996, no other options
are  held  by  management.  See  Item 12  "Security  Ownership  of  Certain
Beneficial  Owners  and Management" for information on options  granted  to
officers and directors in 1997.

(4) In February 1997, the Company discontinued the employ of Mr. Alexander;
in  April  and June 1997, Mr. Willliams resigned as the Company's President
and  CEO  and  as Director, respectively; and, Mr. Salmon resigned  as  the
Company's Executive Vice President but retained his position as Chairman of
the Board.

N/A  means  the  respective officer was not employed by the Company  during
that period.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets forth certain information regarding  beneficial
ownership  of  the Company's Common Stock as of November 30, 1997  by  each
shareholder known by the Company to be a beneficial owner of more than five
percent  of  the Company's common stock, by each of the Registrant's  named
directors  and  executive  officers, and by  all  directors  and  executive
officers of the Registrant as a group. Except as indicated in the footnotes
to  this  table, the Company believes that the persons named in  the  table
have  sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them.

<TABLE>

<S>                                               <C>               <C>
   Name of                                    Amount and Nature    Percent
Beneficial  Owner                     of  Beneficial  Interest(1)  of Class(1)
----------------------                -------------------------    -----------
Edwin B. Salmon, Jr.                            625,762 (2a)          2.10
                                                200,000 (2b)          0.67
                                                261,533 (2c)          0.88
                                                224,418 (2d)          0.75
                                                 40,000 (2e)          0.13
                                                 40,000 (2f)          0.13
                                                 70,000 (2g)          0.24
All Directors and Executive Officers
  as a Group(5 persons)                       2,382,082 (3)           8.33
NIDAN Corporation                             7,721,853 (4) (5)      25.90
NIDAN Corporation                             6,798,537 (6)          22.80
Timboon LTD                                   2,240,000 (7)           7.51
</TABLE>
<PAGE> 86

(1)Based   on  information  available  to  the  Company,  unless  otherwise
indicated such shares are owned of record by the named beneficial owner  or
the  named  beneficial  owner and spouse, and  represent  sole  voting  and
investment  power. Such person's percentage ownership has  been  calculated
assuming that all warrants, options and convertible debentures held by such
person  that are exercisable within 6 months have been exercised, but  that
no  other outstanding warrants, options or convertible debentures have been
exercised.

(2a)Includes options for 500,000 shares exercisable at an exercise price of
$0.10  per share at any time through August 15, 2002. Mr. Salmon  has  sole
voting  and  investment power over these shares. The address of Mr.  Salmon
is the address of the Company.

(2b) These shares are owned by the SBE Trust. Mr. Salmon is the grantor and
beneficiary of this revocable trust; but, his two  adult daughters  who  do
not  reside with him are the co-trustees. The address of the trust  is  the
address of the Company.

(2c)  These  shares are owned by Brittany Leigh, Inc. Mr. Salmon  disclaims
beneficial ownership of these shares. David Salmon, Mr. Salmon's adult son,
is  the Director and President and Winfred Russell is a former President of
this corporation. Mr. Salmon was reported to be one of two directors on the
annual  report  for the corporation filed with the State of  Florida;  but,
David  Salmon and Mr. Salmon maintain that the annual report was  filed  in
error  and  Mr.  Salmon neither is nor in the past two  years  has  been  a
director or officer of this corporation. Mr. Salmon is a creditor  of  this
corporation  and has received partial repayment of his loans from  proceeds
realized by the corporation from the sale of the Registrant's common stock.
Mr.  Russell,  in his capacity as the former President of this corporation,
also  authorized Mr. Salmon, in Mr. Russell's absence, to approve purchases
and  sales  of  the  Registrant's  common stock  by  the  corporation  when
unsolicited offers are received from brokers. Mr. Salmon currently  has  no
such  authority. No purchases or sales of the Registrant's common stock  by
this  corporation have been initiated by the corporation.  The  address  of
Brittany Leigh, Inc. is 1520 San Charles Drive, Dunedin, Florida 34698.

<PAGE> 87

(2d)  These shares are owned by American First Equipment Leasing, Inc.  Mr.
Salmon  disclaims beneficial ownership of these shares. David  Salmon,  Mr.
Salmon's adult son is the Director and President and Winfred Russell  is  a
former President of this corporation. Mr. Salmon was reported to be one  of
two directors on the annual report for the corporation filed with the State
of  Florida;  but,  David Salmon and Mr. Salmon maintain  that  the  annual
report  was  filed in error and Mr. Salmon neither is nor in the  past  two
years  has been a director or officer of the corporation. Mr. Salmon  is  a
creditor  of  this  corporation and has received partial repayment  of  his
loans  from  proceeds  realized by the corporation from  the  sale  of  the
Registrant's  common  stock. Mr. Russell, in his  capacity  as  the  former
President of this corporation, also authorized Mr. Salmon, in Mr. Russell's
absence, to approve purchases and sales of the Registrant's common stock by
the  corporation  when unsolicited offers are received  from  brokers.  Mr.
Salmon  currently  has  no such authority. No purchases  or  sales  of  the
Registrant's  common stock by this corporation have been initiated  by  the
corporation. The address of American First Equipment Leasing, Inc. is  1520
San Charles Drive, Dunedin, Florida 34698.

(2e)  These shares are owned by the Paige Irrevocable Trust. Mr. Salmon  is
the  grantor  of  this  irrevocable trust; but, his three  adult  children,
including  David Salmon, none of whom reside with him, are the  co-trustees
and  one  of  Mr. Salmon's daughters is the sole beneficiary.   Mr.  Salmon
disclaims  any beneficial interest in this trust. The address of the  trust
is the address of the Company.

(2f)  These shares are owned by the Jennifer Irrevocable Trust. Mr.  Salmon
is  the  grantor of this irrevocable trust; but, his three adult  children,
including  David Salmon, none of whom reside with him, are the  co-trustees
and  one  of  Mr. Salmon's daughters is the sole beneficiary.   Mr.  Salmon
disclaims  any beneficial interest in this trust. The address of the  trust
is 700 S.W. 66 nd Blvd. ,Gainesville, Fla. 32607.

(2g)  These  shares are owned by Managerial Advisory Services,  Inc.  David
Salmon is a director and the President of this corporation. Mr. Salmon  has
no interest of any nature in and is not a creditor of this corporation. The
address of the corporation is 2205 Web Avenue, Dunedin, Florida 34698.

(3)Includes  the  shares and options referred to in (2a)-(2g)  above,  plus
options for 700,000 shares issued in 1997 to officers and directors,  other
than to Mr. Edwin B. Salmon, exercisable at an exercise price of $0.10  per
share  at any time through August 15, 2002. Mr. Salmon disclaims beneficial
ownership of the shares referred to in (2c)-(2g) above. The address of each
director  and  executive  officer of the Company  is  the  address  of  the
Company.

<PAGE> 88

(4)Includes 7,478,391 of shares issuable upon the conversion of  $1,195,000
of  outstanding 10% cumulative convertible debentures issued by the Company
to  NIDAN Corporation ("NIDAN") , assuming such convertible debentures were
converted on November 30, 1997, and 243,462 shares of common stock owned by
the  persons referred to in (5) below. NIDAN is a Florida corporation whose
address is 13015 S.W. 89 Place, Suite 212, Miami, FL 33176.

(5)The  Company has been informed that NIDAN has assigned to other  persons
$845,000   of  the  Company's  $1,195,000  of  outstanding  10%  cumulative
convertible  debentures.  To  the best of the  Company's  knowledge,  these
persons are not stockholders of NIDAN. On September 24, 1997, those persons
filed  a  Schedule 13D under the Securities and Exchange Act of  1934.  The
Schedule 13D filed by those persons discloses that the persons to whom  the
debentures were assigned beneficially own 5,045,102 shares of the Company's
common  stock,  including 4,801,640 shares of the  Company's  common  stock
which  are  to  be issued upon conversion of the debentures. All  of  these
persons share voting power in the shares beneficially owned by them.

Following are the names and addresses of these persons:

        Name                                    Address
-------------------                      ----------------------
Harold Meyering                          235 S. Pine St.
                                         McBain, Michigan 49657
Kenneth Edward Gilde                     1630 W. Blue Road
                                         Mc Bain Michigan 49657
Kenneth Earl Gulde                       570 W. Blue Road
                                         Falmouth, Michigan 49632
David E. Gulde                           4565 Forward Road
                                         Falmouth, Michigan 49632
Phillip S. Gulde                         8200 S.McGee Road
                                         Mc Bain, Michigan 49657
Dale Meyering                            9525 W. Watergate Road
                                         McBain, Michigan 49657
Charles O. Helsel                        9321 N. Burkett Road
                                         Lake City, Michigan 49651
Edwin L. Helsel                          5981 N. Edwards Rd.
                                         Lake City, Michigan 49651

The Company believes the issuance of shares to the above named persons upon
conversion  of the 10% cumulative convertible debentures, which  debentures
were  originally  issued to NIDAN and subsequently assigned  to  the  above
named  persons  by NIDAN, violate the terms and conditions of  the  consent
order entered into between the Company and the State of Michigan (see "Note
14  to  the Consolidated Financial Statements" and "Management's Discussion
and  Analysis  of  Financial  Condition and Results  of  Operations").  The
Company  has not made a final determination as to the conversion rights  of
the above named persons.
<PAGE> 89

(6)Includes  6,798,537  shares issuable upon exercise  of  warrants  to  be
issued  to  NIDAN  at the time of the conversion of convertible  debentures
issued to NIDAN, assuming (i) conversion of the debentures on November  30,
1997  and  (ii)  exercise  on  that date  of  the  warrants  issuable  upon
conversion.

(7)Includes  2,240,000  shares issuable upon conversion  of  $1,000,000  of
outstanding 4% convertible debentures issued to Timboon LTD, assuming  such
debentures  were  converted  on November 30,  1997.  See  Note  17  to  the
Consolidated Financial Statements included elsewhere herein. The address of
Timboon LTD is 28 Hagvura Street, Karni Shomron, Israel.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


During  1996,  Mr.  Salmon  loaned  the Company  $25,000  at  8%  interest.
Borrowings  outstanding to Mr. Salmon ($25,000 at December 31, 1996),  plus
accrued interest, were converted into 25,762 shares of the Company's common
stock in February 1997.

As  of  December  31, 1995, the Company had outstanding  notes  payable  to
Brittany  Leigh, Inc. and American First Equipment Leasing,  Inc.  totaling
$270,400.  During 1996, (i) American First Equipment Leasing,  Inc.  loaned
the  Company  $62,735  at  8% interest and (ii) the  Company  repaid  notes
payable to Brittany Leigh, Inc. and American First Equipment Leasing,  Inc.
totaling  $100,000, plus accrued interest, and converted $170,400  of  such
notes,  plus accrued interest, into 193,207 shares of the Company's  common
stock.  As  of  December  31, 1996, the Company had  notes  outstanding  to
American  First Equipment Leasing totaling $62,735. Subsequent to  December
31,  1996,  the Company repaid $4,735 of such notes, plus accrued interest,
converted $58,000 of such notes, plus accrued interest, into shares of  the
Company's  common  stock  at a conversion price  of  $1.00  per  share  and
borrowed  an  additional $10,000 from Brittany Leigh, Inc. at 8%  interest.
See  Notes  2(c)  and  2(d)  to  Item 12  "Security  Ownership  of  Certain
Beneficial Owners and Management".

As  of December 31, 1995, the Company had outstanding notes payable to  Mr.
Richard A. Sweet, a Director of the Company, totaling $20,000. During 1996,
(i)  Mr. Sweet loaned the Company an additional $40,000, at interest  rates
ranging  from  8%  to 10% and (ii) the Company converted  $20,000  of  such
notes,  plus  accrued interest, into 14,345 shares of the Company's  common
stock. Subsequent to December 31, 1996, the Company converted the remaining
outstanding  notes  payable to Mr. Sweet in the  amount  of  $40,000,  plus
accrued interest, into 41,565 shares of the Company's common stock.

As  of December 31, 1995, the Company had outstanding notes payable to  the
former  shareholders of TNI totaling $450,000, $250,000 outstanding to  the
former   shareholders  of  ATI  and  $300,000  outstanding  to  the  former
shareholders of CCI.

<PAGE> 90

In  May 1996, the Company gave notice to the principals of CCI that it  was
canceling  all  of  the  CCI  acquisition  agreements  and  abandoning  its
investment  in  CCI. Pursuant to the terms of the acquisition  and  related
pledge agreements, the effect of such cancellation and abandonment is  that
the  former  shareholders of CCI will receive the shares of  stock  in  CCI
acquired in 1994 by the Company in return for the shares of preferred stock
and debt securities issued by the Company to the former shareholders of CCI
in  connection  with  the  acquisition (See Note  14  to  the  Consolidated
Financial Statements included elsewhere herein).

Subsequent to December 31, 1997, the Company and the former shareholders of
ATI  entered  into an agreement to rescind the acquisition of  ATI  by  the
Company  (see  Note  17 to the Consolidated Financial  Statements  included
elsewhere herein). The ATI rescission agreement provides for the return  of
all of the ATI stock acquired by the Company to the former shareholders  of
ATI  in  exchange  for 684,410 shares of the Company's  common  stock,  the
$250,000 of 6% acquisition notes payable to the former shareholders of  ATI
and  warrants  held by the former shareholders of ATI to  purchase  168,668
shares of the Company's common stock.

During  1996, certain shareholders of the Company (other than  Mr.  Salmon,
Brittany Leigh, Inc., American First Equipment Leasing, Inc. and Mr. Sweet)
loaned the Company an aggregate amount of $435,000; and, the Company repaid
$200,000  of these notes, plus accrued interest. At December 31, 1996,  the
Company  had  outstanding  notes  to these shareholders  totaling  $235,000
bearing  interest  at 8% to 10%. Amounts outstanding to these  shareholders
include  a  $200,000 note which is in default and subject to  a  settlement
agreement in the amount of $238,220, payable in March 1997 (see Note  7  to
the   Consolidated   Financial  Statements  included   elsewhere   herein).
Subsequent to December 31, 1997, the Company borrowed an additional $10,000
and  converted  $45,000 of such notes, plus accrued interest,  into  51,296
shares of the Company's common stock.

During 1996, the Company issued $1,195,000 of 10% convertible debentures to
NIDAN.  Subsequent  to the issuance of these debentures,  the  Company  and
NIDAN  entered  into  addendum  agreements to  revise  the  terms  of  such
convertible debentures to provide for (i) the conversion of such debentures
into  shares of the Company's common stock at the lesser of 50% the bid-ask
price  of  the Company's common stock at the close of trading on the  first
day  next  following the conversion date, defined as the earlier of  either
the  maturity date of the respective debenture or the date of an  effective
registration statement covering the shares issuable upon conversion, or  at
the per share conversion price as set forth in the respective debenture and
(ii)  reset  the  exercise price of warrants which are to  be  issued  upon
conversion of the debentures to the lesser of 50% the bid-ask price of  the
Company's  common  stock at the close of trading  on  the  first  day  next
following  the  conversion  date, defined as  the  earlier  of  either  the
maturity  date or the date of an effective registration statement  covering
the shares issuable upon conversion, or the per share exercise price as set
forth in the respective warrant agreement.
<PAGE> 91

As  of December 31, 1995, the Company had an outstanding note payable to  a
former shareholder of NSC (and a current shareholder of the Company) in the
amount of $50,000. This note, plus accrued interest, was paid during 1996.

<PAGE> 92

PART IV

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

(a) 1. Financial Statements

Independent Auditors' Report on the Consolidated Financial
    Statements for the year ended December 31, 1996 and 1995      36

Independent Auditors' Report on the Consolidated Financial
    Statements for the year ended December 31, 1994               37

Consolidated Balance Sheets as of December 31, 1996 and 1995      38

Consolidated Statements of Operations for each of the three
    years in the period ended December 31, 1996                   40

Consolidated Statements of Stockholders' Equity for each of
    the three years ended in the period December 31, 1996         41

Consolidated Statements of Cash Flows for each of the three
    years ended in the period December 31, 1996                   43

Notes to Consolidated Financial Statements                        44


(a) 2. Financial Statement Schedules

No  schedules  are being filed as a part of this registration statement  as
such  schedules  are  not  applicable, are not  required  or  the  required
information is included in the consolidated financial statements  or  notes
thereto.

<PAGE> 93

(a) 3. Exhibits
    (3)i. *Articles of Incorporation, as amended
    (3)ii.*By-laws, as amended
    (4)Convertible Debentures
       P 1.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Telcom United North, Inc.
       P 2.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Donald T. McAllister, M.D
       P 3.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and David Fisk.
       P 4.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Leonard F. D'Innocenzo
       P 5.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Dean Charles Colantino
       P 6.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Donald P. Dugan.
       P 7.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Comgi Retirement Trust,
                 John R. Lang, M.D./Sharon B. Lang: Trustees
       P 8.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and John R. Lang, M.D./Sharon B. Lang.
       P 9.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Dale D. Higgins
       P 10.*    Convertible Debenture Note dated December 5, 1995,
                 between the Company and R. Thomas Jannarone.
         11.#    Form of Offshore Offering Distribution agreement by and
                 between Systems Communications, Inc. and Victory
                 Investments, LLC.
         12.#    Form of 10% cumulative Convertible Debentures due November
                 21, 1997 in the aggregate amount of $500,000.
         13.#    Form of Offshore Securities Subscription Agreement for
                 $500,000 10% Cumulative Convertible Debentures.
         14.#    Form of Offshore Securities Subscription Agreement for
                 $1,120,000 4% Convertible Debentures.
         15.#### Form of 10% Cumulative Convertible Debenture Note.

<PAGE> 94

(10) Material Contracts
     P 1.*     Ameristar Stock Acquisition Agreement
     P 2.*     HMT Stock Purchase Agreement (March 12, 1996)
     P 3.*     NSC Agreement to Exchange Stock (August 24, 1995)
     P 4.*     NSC Restated Agreement to Exchange Stock (October 13, 1995)
     P 5.*     NSC Assignment and Amendment of Restated Agreement to
               Exchange Stock (October 20, 1995)
     P 6.*     Telcom Restated Stock Purchase Agreement (June 16, 1995)
       7.      Employment Contracts
      P (a)*   Robert L. Alexander
      P (b)*   Russell H. Armstrong
      P (c)*   Edwin B. Salmon
      P (d)*   Stephen E. Williams
      P (e)*   Mark Woodward
      P (f)*   John D. Looney
      P (g)*   John A. Paolicelli
      P (h)*   James L. Tolley
      P (i)*   David J. Olivet
        (j)##  Karen Wolfe
        (k)##  James W. Wolfe
        (l)##  Eric R. Wolfe
    P  8.*     HMT Trademark Registration for "RETURN" Software Program
               (December 8, 1992)
    P  9.*     HMT - Medicode Value-Added Reseller Software Development,
               Marketing, and Maintenance Agreement (March 9, 1995)
    P 10.*     NSC Cooperative Research and Development Agreement Between
               NSC and the U.S. Army (June 2, 1994)
    P 11.*     Services and Marketing Agreement By and Among GE Capital
               Communication Services Corporation and Telcom
               (March 31,1995)
    P 12.*     Joint Venture Agreement Between Universal Network
               Services, Inc. and Telcom (February 13, 1995).
    P 13.*     Comstar Acquisition Agreement
    P 14.*     Coast Communications Acquisition Agreement
    P 15.*     Teaming Agreement with Health Management Systems, Inc.
    P 16.**    Authorized sales agent agreement between MCI
               Telecommunications Corporation and Ameristar, dated June 12,
               1995
    P 17.**    Zero Plus-Zero Minus billing and information management
               agreement between Zero Plus Dialing, Inc. and Ameristar,
               dated May 16, 1996
    P 18.**    Telecommunications Agreement between U.S. Long Distance,
               Inc. and Ameristar
<PAGE> 95

    P 19.**   Tri-Party Agreement among Ameristar, U.S. Long Distance,
              Inc. and Zero Plus Dialing, Inc.
    P 20.**   Telephone Agreement between Ameristar and U.S. Long
              Distance, Inc., dated July 10, 1996
    P 21.**   License Agreement between Ameristar and VCA Pictures, dated
              February 13, 1996
    P 22.**   Agreement between Ameristar and United International
              Pictures, dated April 1, 1996
    P 23.**   Marketing Agreement, dated October 2, 1995, between
              Ameristar and U.S. Osiris Corporation
    P 24.**   Operator Service Agreement dated April 15, 1995, between
              Opticom and Ameristar
    P 25.**   Mitel OSS Servicing Agreement, dated September 1, 1993
              between MasterCorp, Inc. and Ameristar
    P 26.**   Telecommunications Agreement, dated January 15, 1996
              between Long Distance Exchange Corp. and Ameristar
    P 27.**   Agreement, dated January 1995, between LDOS
              Communications, Inc. and Ameristar
    P 28.**   Agreement, dated February 28, 1994, between L.D.
              Communications, Inc. and Ameristar
    P 29.**   Contract Operator Services Agreement for Public Pay Phones
              and Letters of Agency, dated January 7, 1992, between Fone
              America, Inc. and Ameristar
    P 30.**   Payphone Aggregator Agreement, dated July 22, 1993,
              between Communication TeleSystems International and
              Ameristar
    P 31.**   Operator Service Agreements between Capital Network
              System, Inc. and Ameristar
    P 32.**   Agreements between Ameristar Network Exchange, Inc. and
              Ameristar
    P 33.**   Agreement dated November 11, 1991 between Ameristar and
              Access Telecommunications, Inc.
    P 34.**   Agreement dated September 16, 1991 between Conquest
              Operator Services Corporation and Ameristar
      35.##   Heads of Agreement for change in Management of National
              Solutions Corporation.
      36.##   Rescission Agreement, dated May 21, 1997 by and between the
              Company, Ameristar Telecommunications, Inc., Mark Woodward
              and Russell Armstrong.
        37.##    Promissory note dated May 21, 1997 between ATI and the
                 Company.

<PAGE> 96

        38.##   Agreement dated as of June 9,1997 by and among the Company,
                Karen Wolfe and Eric Wolfe, Eric Wolfe, on behalf of his
                infant son, Tyler Wolfe, and Lori Wolfe, wife of Eric
                Wolfe, on behalf of herself and her infant son Tyler Wolfe.
     39.##   Cooperative Marketing and Option Agreement dated June 9, 1997
               between HMT and the Company.
     40.##   Purchase and Sale Agreement between TNI and International
             TeleData Corporation dated January 31, 1997.
     41.##   Form of Convertible Debenture in the amount of $500,000
             between International TeleData Corporation and TNI.
     42.##   Memorandum dated June 16, 1997 from the Department of the Army
             regarding renewal of the Cooperative Research and Development
             Agreement between the Company and the Department of the Army.
     43.### Agreement  to Exchange Stock, dated November 14, 1997,  by  and
             between  Grant  Kolb and Patrick Loeprich (as  "Sellers")  and
             the Company
 (16) *      Letter re change in certifying accountant
 (17) 1.##   Resignation Letter of Stephen Williams.
 (17) 2.##   Resignation Letter of David J. Olivet
P(21) *      List of Subsidiaries of Registrant
 (27.1) *    Financial Data Schedule (Year ended December 31, 1995)
 (27.2) **** Financial Data Schedule (Nine months ended September 30, 1996)
 (27.3)####  Financial Data Schedule (Year ended December 31, 1996)
 (99) Additional Exhibits
      1.***  Arbitration award in the matter of the Arbitration between
             Telcom Network, Inc. and GE Capital Communication Services
             ("GECCS") and New Enterprise Wholesale Services, Ltd.
             (News")

(b) Reports on Form 8-K

The  following  reports were filed on Form 8-K for the three  months  ended
December 31, 1996 and prior to the filing date hereof:

1.   The  date of the event reported on Form 8-K was October 10, 1986.   On
that  date  the  Company  was  notified of a  decision  and  award  in  the
arbitration  of  the  Company's  claim  against  GE  Capital  Communication
Services  Corp.  ("GECCS")  and  New Enterprise  Wholesale  Services,  Ltd.
("News")  for compensatory damages in the amount of $1,253,364 (See  "Legal
Proceedings").

2.  The  Company  filed  a Form 8-K on March 27, 1997.   The  date  of  the
earliest  event reported was November 21, 1996.  On November 21,  1996  and
November  26, 1996, the Company issued $300,000 and $200,000, respectively,
of  10% Cumulative Convertible Debentures to RIC Investment Fund, Ltd.  and
RANA  Investment Company, respectively.  Each of these debentures  are  due
one  year  from  the date of issuance.  On February 28, 1997,  the  Company
issued a $1,120,000 4% Cumulative Convertible Debenture due October 1, 1998
to  Timboon,  Ltd.  The issuance of all of these Debentures  were  made  in
reliance  on Regulation S pursuant to an Offshore Offering and Distribution
Agreement  between the Company and Victory Investments, LLC,  as  placement
agent.

<PAGE> 97

3.  The  Company filed a Form 8-K on July 28,1997. The date of the earliest
event  reported was the sale, on January 31,1997, of substantially  all  of
the operating assets of TNI. Other events reported in the Form 8-K were the
rescission of the ATI and HMT acquisition agreements in May and June, 1997,
respectively, disclosure regarding the late filings of reports required  to
be  filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
and  certain  other  events, including recent management  and  directorship
changes, and the status of certain legal and administrative proceedings  in
which the Company is involved.

4.  The  Company  filed a Form 8-K on November 21, 1997. The  date  of  the
earliest  event reported was November 14, 1997. On November 14,  1997,  the
Company   and  the  stockholders  of  HMG  Health  Care  Claims   Auditing,
Inc.("HMG") entered into an agreement to exchange stock ( the "Agreement to
Exchange Stock"). Pursuant to the Agreement to Exchange Stock, the  Company
is to acquire all of the outstanding stock of HMG in exchange for shares of
the  Company's common stock ( the "HMG Acquisition Shares). The  number  of
HMG  Acquisition Shares is to be determined at closing and are to be  equal
to  30%  of  the then outstanding common stock of the Company after  giving
effect to the issuance of the HMG Acuisition Shares. The acquisition of HMG
is  subject to, among other things, the Company obtaining debt financing to
refinance  the existing indebtedness of HMG ($850,000) and pay other  costs
and  expenses  related to the acquisition. The Agreement to Exchange  Stock
contemplates a December 31, 1997 closing.


*    Incorporated by reference to the Company's Registration Statement on
     Form 10 as filed with the Commission on July 23, 1996

**   Incorporated by reference to the Company's Registration Statement on
     Form 10/A as filed with the Commission on September 17, 1996

***  Incorporated by reference to the Company's Current Report on Form 8-K
     dated October 29, 1996

**** Incorporated by reference to the Company's Quarterly report on Form
     10-Q for the quarterly period ended September 30, 1996

#    Incorporated by reference to the Company's Current Report on Form 8-K
     as filed on March 27, 1997.

##   Incorporated by reference to the Company's Current Report on Form 8-K,
     as filed on July 28,1997.

### Incorporated by reference to the Company's Current Report on Form 8-K,
     as filed on November 21,1997.

#### Filed herewith


<PAGE> 98


SIGNATURES

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

SYSTEMS COMMUNICATIONS, INC.                  Date:  February 19, 1998

/s/ James T. Kowalczyk
---------------------------------
JAMES T. KOWALCZYK
President, Principal Executive Officer
and Director

/s/ Richard A. Sweet
---------------------------------
RICHARD A. SWEET
Director

/s/ Larry R. Snapp
---------------------------------
LARRY R. SNAPP
Director


/s/EDWIN B. SALMON, JR.
---------------------------------
EDWIN B. SALMON, JR.
Principal Accounting Officer and Director




<PAGE> 99

                                INDEX TO EXHIBITS

Exhibit number               Description of Exhibits

(3)i. *Articles of Incorporation, as amended
    (3)ii.*By-laws, as amended
    (4)Convertible Debentures
       P 1.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Telcom United North, Inc.
       P 2.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Donald T. McAllister, M.D
       P 3.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and David Fisk.
       P 4.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Leonard F. D'Innocenzo
       P 5.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Dean Charles Colantino
       P 6.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Donald P. Dugan.
       P 7.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Comgi Retirement Trust,
                 John R. Lang, M.D./Sharon B. Lang: Trustees
       P 8.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and John R. Lang, M.D./Sharon B. Lang.
       P 9.*     Convertible Debenture Note, dated December 5, 1995,
                 between the Company and Dale D. Higgins
       P 10.*    Convertible Debenture Note dated December 5, 1995,
                 between the Company and R. Thomas Jannarone.
         11.#    Form of Offshore Offering Distribution agreement by and
                 between Systems Communications, Inc. and Victory
                 Investments, LLC.
         12.#    Form of 10% cumulative Convertible Debentures due November
                 21, 1997 in the aggregate amount of $500,000.
         13.#    Form of Offshore Securities Subscription Agreement for
                 $500,000 10% Cumulative Convertible Debentures.
         14.#    Form of Offshore Securities Subscription Agreement for
                 $1,120,000 4% Convertible Debentures.
         15.#### Form of 10% Cumulative Convertible Debenture Note.

<PAGE> 100

(10) Material Contracts
     P 1.*     Ameristar Stock Acquisition Agreement
     P 2.*     HMT Stock Purchase Agreement (March 12, 1996)
     P 3.*     NSC Agreement to Exchange Stock (August 24, 1995)
     P 4.*     NSC Restated Agreement to Exchange Stock (October 13, 1995)
     P 5.*     NSC Assignment and Amendment of Restated Agreement to
               Exchange Stock (October 20, 1995)
     P 6.*     Telcom Restated Stock Purchase Agreement (June 16, 1995)
       7.      Employment Contracts
      P (a)*   Robert L. Alexander
      P (b)*   Russell H. Armstrong
      P (c)*   Edwin B. Salmon
      P (d)*   Stephen E. Williams
      P (e)*   Mark Woodward
      P (f)*   John D. Looney
      P (g)*   John A. Paolicelli
      P (h)*   James L. Tolley
      P (i)*   David J. Olivet
        (j)##  Karen Wolfe
        (k)##  James W. Wolfe
        (l)##  Eric R. Wolfe
    P  8.*     HMT Trademark Registration for "RETURN" Software Program
               (December 8, 1992)
    P  9.*     HMT - Medicode Value-Added Reseller Software Development,
               Marketing, and Maintenance Agreement (March 9, 1995)
    P 10.*     NSC Cooperative Research and Development Agreement Between
               NSC and the U.S. Army (June 2, 1994)
    P 11.*     Services and Marketing Agreement By and Among GE Capital
               Communication Services Corporation and Telcom
               (March 31,1995)
    P 12.*     Joint Venture Agreement Between Universal Network
               Services, Inc. and Telcom (February 13, 1995).
    P 13.*     Comstar Acquisition Agreement
    P 14.*     Coast Communications Acquisition Agreement
    P 15.*     Teaming Agreement with Health Management Systems, Inc.
    P 16.**    Authorized sales agent agreement between MCI
               Telecommunications Corporation and Ameristar, dated June 12,
               1995
    P 17.**    Zero Plus-Zero Minus billing and information management
               agreement between Zero Plus Dialing, Inc. and Ameristar,
               dated May 16, 1996
    P 18.**    Telecommunications Agreement between U.S. Long Distance,
               Inc. and Ameristar
    P 19.**    Tri-Party Agreement among Ameristar, U.S. Long Distance,
               Inc. and Zero Plus Dialing, Inc.
    P 20.**    Telephone Agreement between Ameristar and U.S. Long
               Distance, Inc., dated July 10, 1996
    P 21.**    License Agreement between Ameristar and VCA Pictures, dated
               February 13, 1996
    P 22.**    Agreement between Ameristar and United International
               Pictures, dated April 1, 1996
<PAGE> 101

    P 23.**   Marketing Agreement, dated October 2, 1995, between
              Ameristar and U.S. Osiris Corporation
    P 24.**   Operator Service Agreement dated April 15, 1995, between
              Opticom and Ameristar
    P 25.**   Mitel OSS Servicing Agreement, dated September 1, 1993
              between MasterCorp, Inc. and Ameristar
    P 26.**   Telecommunications Agreement, dated January 15, 1996
              between Long Distance Exchange Corp. and Ameristar
    P 27.**   Agreement, dated January 1995, between LDOS
              Communications, Inc. and Ameristar
    P 28.**   Agreement, dated February 28, 1994, between L.D.
              Communications, Inc. and Ameristar
    P 29.**   Contract Operator Services Agreement for Public Pay Phones
              and Letters of Agency, dated January 7, 1992, between Fone
              America, Inc. and Ameristar
    P 30.**   Payphone Aggregator Agreement, dated July 22, 1993,
              between Communication TeleSystems International and
              Ameristar
    P 31.**   Operator Service Agreements between Capital Network
              System, Inc. and Ameristar
    P 32.**   Agreements between Ameristar Network Exchange, Inc. and
              Ameristar
    P 33.**   Agreement dated November 11, 1991 between Ameristar and
              Access Telecommunications, Inc.
    P 34.**   Agreement dated September 16, 1991 between Conquest
              Operator Services Corporation and Ameristar
      35.##   Heads of Agreement for change in Management of National
              Solutions Corporation.
      36.##   Rescission Agreement, dated May 21, 1997 by and between the
              Company, Ameristar Telecommunications, Inc., Mark Woodward
              and Russell Armstrong.
        37.##    Promissory note dated May 21, 1997 between ATI and the
                 Company.
         38.##     Agreement  dated  as of June 9,1997  by  and  among  the 
                   Company,
                Karen Wolfe and Eric Wolfe, Eric Wolfe, on behalf of his
                infant son, Tyler Wolfe, and Lori Wolfe, wife of Eric
                Wolfe, on behalf of herself and her infant son Tyler Wolfe.
     39.##   Cooperative Marketing and Option Agreement dated June 9, 1997
               between HMT and the Company.
     40.##   Purchase and Sale Agreement between TNI and International
             TeleData Corporation dated January 31, 1997.
     41.##   Form of Convertible Debenture in the amount of $500,000
             between International TeleData Corporation and TNI.
     42.##   Memorandum dated June 16, 1997 from the Department of the Army
             regarding renewal of the Cooperative Research and Development
             Agreement between the Company and the Department of the Army.
     43.###  Agreement to Exchange Stock, dated November 14, 1997,  by  and
             between  Grant  Kolb and Patrick Loeprich (as  "Sellers")  and
             the Company
 (16) *      Letter re change in certifying accountant
 (17) 1.##   Resignation Letter of Stephen Williams.
<PAGE> 102

 (17) 2.##   Resignation Letter of David J. Olivet
P(21) *      List of Subsidiaries of Registrant
 (27.1) *    Financial Data Schedule (Year ended December 31, 1995)
 (27.2) **** Financial Data Schedule (Nine months ended September 30, 1996)
 (27.3)####  Financial Data Schedule (Year ended December 31, 1996)
 (99) Additional Exhibits
      1.***  Arbitration award in the matter of the Arbitration between
             Telcom Network, Inc. and GE Capital Communication Services
             ("GECCS") and New Enterprise Wholesale Services, Ltd.
             (News")


*    Incorporated by reference to the Company's Registration Statement on
     Form 10 as filed with the Commission on July 23, 1996

**   Incorporated by reference to the Company's Registration Statement on
     Form 10/A as filed with the Commission on September 17, 1996

***  Incorporated by reference to the Company's Current Report on Form 8-K
     dated October 29, 1996

**** Incorporated by reference to the Company's Quarterly report on Form
     10-Q for the quarterly period ended September 30, 1996

#    Incorporated by reference to the Company's Current Report on Form 8-K
     as filed on March 27, 1997.

##   Incorporated by reference to the Company's Current Report on Form 8-K,
     as filed on July 28,1997.

### Incorporated by reference to the Company's Current Report on Form 8-K,
     as filed on November 21,1997.

#### Filed herewith