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, 1997

                                   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__

The  aggregate  market value of the voting  stock  held  by  non-
affiliates  of  the registrant on March 31, 1998, (based  on  the
average of the high and low bid prices of such stock on the over-
the-counter securities market) was $3,023,000.

The  number of shares of the registrant's common stock, $.001 par
value, outstanding as of March 31, 1998 was 14,174,052.

<PAGE> 2

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"),  preferred
provider  organizations  ("PPO's") and  healthcare  benefit  plan
administrators. To date, the Company has not been  successful  in
marketing  its management information systems technology  due  to
numerous   factors,   including  large  operating   losses   from
businesses acquired and the effect of those losses on the ability
of the Company to continue to fund NSC's software development and
marketing efforts. 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  below,  the  Company's
acquisition of HMT was rescinded in June 1997.

<PAGE> 3

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.

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  stockholders  of
Coast Communications, Inc. ("CCI") that the Company was canceling
the  acquisition  of  CCI  and terminating  all  of  the  related
acquisition documents. The former stockholders of CCI filed  suit
to  enforce promissory notes in the aggregate principal amount of
$300,000  issued  by  the  Company in  connection  with  the  CCI
acquisition  and  the issuance by the Company  of  an  additional
200,000  shares  of  the Company's Class A preferred  stock  they
allege  are due them under the acquisition agreement. This matter
was referred by court order to mandatory arbitration in the State
of Florida. On February 3, 1998, the Arbitrators awarded in favor
of  the  former  shareholders of CCI. The award  requires,  among
other things, that the Company (i) convert 200,000 shares of  its
Class A Preferred Stock, held by the former shareholders of  CCI,
into  100,000  shares of its common stock and (ii) issue  another
200,000  shares  of  Class A Preferred Stock to  the  former  CCI
stockholders,  which is also convertible into 100,000  shares  of
the  Company's common stock, and gave the former shareholders  of
CCI  the  ability to seek a summary judgment against the  Company
for $500,000, without opposition, or accept 500,000 shares of the
Company's Class A Preferred Stock in lieu of a summary judgment.

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. 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. 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"). Pursuant to
the  Settlement  Agreement, GECCS\NEWS paid  $1,250,000  in  full
satisfaction of the arbitration award granted to the Company.  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 of  the  Company,
including $468,000 of notes and debentures payable.

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> 4

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  and the cancellation of (i) the 6%  notes  payable
issued  in  connection  with the acquisition  and  (ii)  warrants
issued  to the former ATI shareholders to purchase 168,668 shares
of  the  Company's  common  stock. See  Notes  4  and  7  to  the
accompanying consolidated financial statements.

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 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 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 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"  and  the consolidated financial statements  included
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 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.

<PAGE> 5

For  the past three fiscal years the Company has operated in  two
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, Comstar  and  LCI  from
their  respective dates of acquisition and the operations of  ATI
and  CCI for all periods presented. In 1996 and 1997, the Company
disposed   of   substantially  all   of   the   assets   of   its
telecommunications  businesses.  Consequently,   the   healthcare
segment  is  the only segment in which the Company has continuing
operations.  The  operations of the Company's  telecommunications
segment  are  classified  as  discontinued  operations   in   the
consolidated statements of operations for all periods presented.

Following  is a summary of segment information for  each  of  the
three years in the period ended December 31, 1997:

                                1997          1996          1995
                            -----------   ------------   ----------
Healthcare:
 Net revenues               $ 1,498,353   $  2,832,123   $   91,106
 Operating loss(1)           (1,502,336)   (17,104,177)    (363,857)

Telecommunications:
 Net revenues                   405,617      2,177,858    2,893,778
 Operating loss(2)              (91,768)    (1,932,649)  (4,036,371)


(1)  Includes impairment and other losses of $1,898,953  in  1997
and $14,233,953 in 1996. See Note 5 to the consolidated financial
statements.

(2)   Includes  impairment  and  other  losses  of  $194,901  and
$2,758,779  in  1996 and 1995, respectively. See Note  5  to  the
consolidated financial statements.

<PAGE> 6

HEALTHCARE MANAGEMENT.

The  Company's healthcare management segment consists of NSC  and
HMT.  The Company rescinded the acquisition of HMT in June  1997.
As  of  December  31,  1997,  the  operations  of  the  Company's
healthcare segment consists solely of NSC.

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 or license  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, healthcare  benefit
plan  administrators and large pharmaceutical companies that have
outcomes analysis needs. 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.  To  date,  the  Company has  not  been  successful  in
marketing  its management information systems technology  due  to
numerous   factors,   including  large  operating   losses   from
businesses acquired and the effect of those losses on the ability
of the Company to continue to fund NSC's software development and
marketing efforts.

CHAMPUS is a unique data-warehousing and outcomes analysis 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 right to use one  of  the  largest
healthcare  data  banks  in the world, NSC  has  the  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  30%  of  recovered
claims,  to be paid to HMS. HMS's portion of revenues derived  by
NSC typically approximates 50% of NSC's revenues.

<PAGE> 7

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.

In  September 1997, the Company 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.

The   Company  contemplates  that  the  HMG  alliance  and  other
potential healthcare alliances will allow the Company to  further
enhance   its  healthcare  outcomes  analysis,  data-mining   and
management   information   decision  product   capabilities   and
facilitate  the  sale or license of value added  decision  making
services to its targeted customer base.

NSC's initial software development activities have resulted in an
analytical    database   product   with   extensive   data-mining
capabilities  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 or generate any revenues from NSC's management information
systems technology. Also, as more fully discussed herein,  it  is
uncertain   whether  or  not  the  Company  will  have  available
sufficient   resources  to  continue  to  fund  NSC's   operating
activities  or  whether  or  not NSC will  be  able  to  generate
profitable operations in the future.

HMT  was  founded  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.  It  develops  and  markets  PC-based
software products for managing cases of work disability (absence)
that facilitate return to work and reduce healthcare costs. HMT's
market  consists  of  mid  to  large  U.S.  employers,  insurers,
hospitals,  TPA',  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 the
stockholders  of  HMT.  See  above regarding  rescission  of  HMT
acquisition.

<PAGE> 8

The  revenues  and  operating  loss  of  NSC  were  $187,478  and
$1,348,679,  respectively, in 1997, $1,574,825  and  $16,275,288,
respectively,  in  1996 and  $91,106 and $363,857,  respectively,
from the date of acquisition (October 1995) to December 31, 1995.
The  revenues  and  operating loss of  HMT  were  $1,311,054  and
$153,656,  respectively, for the period from January 1,  1997  to
the  date  of  its disposition by the Company and $1,257,298  and
$828,895,  respectively, for the period  from  the  date  of  its
acquisition by the Company (March 1996) to December 31, 1996.

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.

<PAGE> 9

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.  The  Company,  however,  has  not   been
successful  in  marketing  its  management  information   systems
technology  and  is  pursuing  strategic  alliances  with   other
healthcare  management companies in order to  sustain  operations
and  provide the funds required to further develop and market its
products. See "Item 1 - Business, Healthcare Management".

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

<PAGE> 10

CUSTOMERS.

NSC entered into a service agreement with Chrysler Corporation in
1993  which  accounted  for a majority of  NSC's  1995  and  1996
revenues.  As  discussed above, this agreement was terminated  in
September  1997, due to performance issues between  Chrysler  and
NSC's subcontractor, 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.

Net  revenues  recognized in 1997, 1996 and 1995  were  $107,102,
$1,334,495,  and  $91,106, respectively,  from  Chrysler  service
agreement  and  $80,376, $240,330, and $ -0-, respectively,  from
the Ford service agreement.

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; and,  the  Company
has  suspended software development due to its lack of  financial
resources.  These factors have adversely affected  the  Company's
competitive  position (see "Management's Discussion and  Analysis
of Financial Condition and Results of Operations").

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
operating  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, or abandoned,  in  May
1997 and May 1996, respectively.

<PAGE> 11

The   operating   results  of  the  Company's  telecommunications
businesses  are  classified as "Discontinued Operations"  in  the
consolidated statements of operations. The revenues and operating
loss of TNI were $1,481,317 and $1,792,795, respectively in 1996,
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. TNI had no revenues in 1997. Its operating
loss for 1997 was $52,307. The revenues and operating loss of ATI
were  $405,617  and $39,461, respectively, for  the  period  from
January  1,  1997  to the date of its disposition,  $673,995  and
$116,460,  respectively,  in  1996  and  $427,445  and  $631,391,
respectively,  in 1995; and, the revenues and operating  loss  of
CCI   were  $22,546  and  $23,394,  respectively,  in  1996   and
$92,842,and $282,356, respectively, in 1995.

EMPLOYEES.

As  of  December  31, 1997, the Company and its subsidiaries  had
four  employees. The Company makes extensive use  of  independent
contractors for accounting, legal, administration and  sales  and
marketing.

<PAGE> 12

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, 1997.

<TABLE>
<CAPTION>

                                    Square                Annual Lease
Entity           Location           Footage     Rental   Expiration Date
-----------  -------------------    -------    --------  --------------
<S>             <C>                  <C>        <C>          <C>
The Company  4707 140th Avenue N.
             Suite 107
             Clearwater, Florida    1,450      $19,478    05-31-98

NSC          4241 Piedras
             San Antonio,  TX (1)   4,429       47,832    11-30-00
</TABLE>

(1) As of December 31, 1997, the Company is in default of the lease
   agreement due to non-payment. The total amount of past due lease
   payments is approximately $40,000.

<PAGE> 13

ITEM 3.  LEGAL PROCEEDINGS.

The   Company  is  subject  to  various  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, (ii) actions
brought against the Company by certain former employees and persons
formerly under contract with the Company for payments allegedly due
them,  (iii)  an action by a shareholder seeking the rescission  of
the  sale  by  the Company of its common stock to the  shareholder,
(iv)  an  action  by  an  equipment  lessor  seeking  approximately
$500,000  in  lease payments and other charges due  under  a  lease
agreement  and  (v)  an action by the former stockholders  of  CCI.
These legal proceedings are more fully described in Note 14 to  the
consolidated financial statements included elsewhere herein.


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 1997.

<PAGE> 14

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 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. 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, 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

December 31, 1997     $  0.34375     $ 0.1875

The high and low bid quotations for the Company's common stock on
March  31, 1998 were $0.24 and $0.23 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  March 31, 1998, the Company had 558 registered owners  of
its common stock.

<PAGE> 15

ITEM 6.  SELECTED FINANCIAL DATA.

The  following table sets forth selected financial  data  of  the
Company  for each of the five years in the period ending December
31,  1997. This table should be reviewed in conjunction with  the
consolidated  financial statements of the Company and  the  notes
thereto appearing elsewhere herein.

<TABLE>
<CAPTION>

INCOME STATEMENT DATA:
                                          Year Ended December 31,
                        --------------------------------------------------------
                           1997        1996         1995        1994       1993
                        ---------    ----------   ---------    -------   -------
Net  revenues           $1,498,533  $ 2,832,123   $  91,106    $ --      $  --
Loss from
 continuing operations
 before income taxes(1) (1,789,310) (20,488,639) (2,004,228)   (78,233)     --
Loss from continuing
 operations             (1,306,310) (17,934,489) (1,989,104)   (78,233)     --
Income(loss) from
 operations of
 discontinued
 telecommunications
 businesses  (1)           391,752   (1,322,179) (3,818,921)   (50,769)     338,909
Gain from disposition
 of discontinued
 telecommunication
 businesses                397,392         --           --         --         --
                         ---------    ----------    ---------   ---------   -------
Net income (loss)        $(517,166) $(19,256,668) $(5,808,025)  $(129,002) $338,909
                         =========    ==========    =========   =========   =======
Basic earnings per share:
 Loss from continuing
   operations             $   (.12)  $     (2.15)  $     (0.58)  $   (0.06) $   --
 Income(loss) from
  operations of
  discontinued
  telecommunications
    businesses                 .03         (0.16)        (1.23)      (0.04)     0.41
Income(loss) from
 disposition of
 telecommunication
 discontinued businesses       .04          --            --         --         --
                          --------     ----------     ---------   --------   -------
Net income (loss)       $     (.05)  $     (2.31)   $    (1.81)  $   (0.10) $   0.41
                          ========     ==========     =========   ========   =======
Weighted average number
 of common shares
   outstanding          10,802,103     8,349,459      3,201,991   1,306,493  825,765
                        ==========    ===========     =========   =========  =======
<PAGE> 16

BALANCE SHEET DATA (2):
                                               December 31,
                         -----------------------------------------------------
                           1997        1996        1995      1994       1993
                         ---------  ----------  ----------  --------   -------
Current assets          $  256,883 $ 1,403,881 $ 4,156,868 $ 442,069  $492,216
Current liabilities      6,728,193   7,908,138   5,417,864   652,107    13,335
Total assets               388,194   5,847,300  21,545,654   780,222   578,549
Long-term liabilities(3)   310,794   1,207,488   4,597,671    77,750   553,750
Common stock subject
 to rescission(4)          674,124     709,124     789,624      --        --
Common stock to be
 issued(5)                    --     2,000,000   2,000,000      --        --
Stockholders' equity
 (deficiency in assets) (7,324,917) (5,977,450)  8,740,495    50,365    11,464


(1)  Includes  impairment  and other  losses  of  $1,898,953  and
$14,233,953  in  1997  and  1996,  respectively,  applicable   to
continuing  operations and $194,901 and $2,758,779  in  1996  and
1995,  respectively,  applicable to  operations  of  discontinued
telecommunications  businesses. See Note 5  to  the  consolidated
financial statements appearing elsewhere herein.

(2)   Includes   the  assets  and  liabilities  of   discontinued
telecommunications  businesses. See Note 4  to  the  consolidated
financial statements appearing 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
appearing  elsewhere  herein for a description  of  common  stock
subject to rescission.

(5)  Consists  of  shares  issuable in connection  with  business
acquisitions. See Note 4 to the consolidated financial statements
appearing elsewhere herein.

<PAGE> 17

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,  1997.  The
results from continuing operations include the operations of NSC,
acquired  in  October 1995,and HMT, acquired in  March  1996  and
disposed of by a rescission of the acquisition agreement in  June
1997. 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. The following discussion
should  be  read  in conjunction with the consolidated  financial
statements and notes thereto appearing elsewhere herein.


                                                 Year Ended December 31,
                                       ------------------------------------
                                             1997       1996        1995
                                       -----------   ----------   ---------
Operations of continuing businesses:
 Net revenues                          $ 1,498,533  $ 2,832,123 $   91,106
 Cost of revenues                          109,563      827,063        --
 Selling and administrative
  expenses                               3,027,384    6,322,627  1,887,275
 Impairment and other losses             1,898,953   14,233,953        --
 Depreciation and amortization             497,377    1,459,436    148,192
 Gain  from sale of license agreement    2,695,214         --          --
 Gain from rescission of business
   acquisition                             259,352         --          --
 Interest income                             4,070        8,183      3,777
 Interest expense                          587,884      381,975     63,644
 Other income(expense), net               (125,318)    (103,891)       --
 Loss from continuing operations before
   income taxes                         (1,789,310) (20,488,639)(2,004,228)
Operations of discontinued
 telecommunications businesses:
  Net revenues                             405,617    2,177,858  2,893,778
  Cost of revenues                            --      1,320,256  2,014,460
  Selling and administrative expenses      449,925    2,304,059  1,845,775
  Impairment and other losses                 --        194,901  2,758,779
  Depreciation and amortization             47,460      291,291    311,135
  Interest income                             --            971        627
  Interest expense                          32,393       38,713     20,466
  Other income (expense), net              755,913          832      4,288
  Income (loss) from operations of
   discontinued businesses
   before income taxes                     631,752   (1,971,223)(4,060,498)


The operating results of acquired businesses are well below those
which   were   anticipated  at  the  time   of   the   respective
acquisitions. As more fully discussed below, the business of  TNI
was  severely damaged by the actions of GECCS and News; and,  the
revenues  and  results of operations of the Company's  healthcare
businesses  are  less  than anticipated  at  the  time  of  their
respective  acquisitions, principally due  to  higher  levels  of
spending  on  software and systems development and on  sales  and
marketing than originally anticipated  (and  limitations on the 
part  of  the  Company  to continue  to  fund  those  collective
efforts). 

<PAGE> 18

These  factors, combined,  have strained the financial resources
of  the  Company  and   required   the   Company  to   undertake 
restructuring  measures, which  included,  among  other  things, 
the sale of  the  operating  assets  of TNI in  January 1997 and
the rescission of the ATI and HMT  acquisition agreements in May
and June 1997,  respectively.  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 AND DISPOSED OF

The  Company  acquired various businesses in 1996  and  1995  and
disposed  of  various  businesses in  1996  and  1997.  The  more
significant  acquisitions were: TNI acquired in  July  1995;  NSC
acquired  in  October  1995; and, HMT  acquired  in  March  1996.
Disposals  of businesses included (i) the sale, in January  1997,
of the operating assets of TNI, (ii) the rescission, in May 1997,
of  the  ATI  acquisition agreement and (iii) the rescission,  in
June  1997, of the HMT acquisition agreement (see Note 4  to  the
consolidated financial statements appearing elsewhere herein). As
a  result  of the disposition of all businesses included  in  the
Company's  telecommunications  segment,  the  operations  of  the
Company's  telecommunications segment are shown  as  discontinued
operations   in  the  accompanying  consolidated  statements   of
operations for all periods presented.

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.

In  1997,  TNI  had no revenues and its loss from operations  was
$52,307.  The net revenues and loss from operations of  TNI  were
$1,481,317  and $1,792,795, respectively, in 1996 and  $2,373,491
and  $3,122,621  (including  impairment  losses  of  $2,758,779),
respectively, for the period from the date of its acquisition  by
the  Company (July 7, 1995) to December 31, 1995. TNI's operating
results  for  the periods 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

<PAGE> 19

Releases (the "Settlement Agreement"). 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  net
proceeds from the Settlement Agreement were used to pay trade and
other obligations. The net proceeds from the Settlement Agreement
are  reflected  in income (loss) from discontinued operations  in
the  accompanying  consolidated statement of operations  for  the
year ended December 31, 1997.

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
$1,481,317  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 $1,792,795 in 1996. The increase in TNI's  operating
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.

In 1997 NSC had net revenues of $187,478 and an operating loss of
$1,348,679. NSC's operating loss for the year ended December  31,
1997  reflects  impairment  and  other  losses  of  approximately
$892,000. Excluding these items, NSC's 1997 operating loss  would
have  been approximately $457,000. The net revenues and operating
loss  of  NSC were $1,574,825 and $16,275,288 , respectively,  in
1996  and $91,106 and $363,857 respectively, for the period  from
the date of its acquisition by the Company (October 27, 1995)  to
December  31,  1995.  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  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 decrease in NSC net revenues from 1996  to  1997
is  the  result  of  the  termination  of  the  Chrysler  service
agreement, effective in September 1997, due to performance issues
between Chrysler and HMS, NSC's subcontractor, the expiration  of
the Ford Motor Company services agreement by its terms, effective
March  31, 1997, and lower healthcare claim recoveries under  the
service  agreements from period to period. NSC's  operating  loss
decreased from 1996 to 1997 due principally to the elimination of
NSC' corporate offices, lower management compensation as a result
of  the  retirement of founding management and the suspension  of
software development activities due to cash flow constraints.

<PAGE> 20

The  net revenues and loss from operations of HMT were $1,311,055
and  $153,656, respectively, for the period from January 1,  1997
to  the  date of the rescission of the HMT acquisition  agreement
and  $1,257,298 and $828,895, respectively, for the  period  from
the  date of its acquisition by the Company to December 31, 1996.
HMT's  1997  net revenues reflect sales to one customer  totaling
approximately $800,000. HMT's operating losses during the periods
principally  reflect  amortization of  intangibles  and  goodwill
recorded in connection with the acquisition and spending for  new
product development.

The  revenues  and  operating losses of  ATI  were  $405,617  and
$39,461, respectively, for the period from January 1, 1997 to the
date  of  disposition,  $673,995 and $116,460,  respectively,  in
1996,  and  $427,445  and $289,791, respectively,  in  1995.  The
increasing trend in revenues reflects the introduction  of  ATI's
OSP  and  PPV  services,  beginning in  1996,  into  the  Mexican
hospitality  market. Similarly, operating losses  have  decreased
from  period  to period due to higher OSP and PPV  revenues  from
Mexico which carry higher profit margins when compared to margins
from domestic sales.


NET REVENUES

Net  revenues  for each of the three years in the  period  ending
December 31, 1997 are summarized as follows:

                                       1997       1996        1995
                                   ----------  ----------  ----------
  Net revenues from operations of
   continuing businesses          $ 1,498,533  $2,832,123  $   91,106
  Net revenues from discontinued
   telecommunications businesses      405,617   2,177,858   2,893,778
                                   ----------  ----------  ----------
                                  $ 1,904,150  $5,009,981  $2,984,884
                                   ==========  ==========  ==========

The   decrease  in  net  revenues  from  operations  of  continuing
businesses  from 1996 to 1997 is the result of lower NSC  revenues,
offset  by  higher  HMT  revenues. See  "Operations  of  Businesses
Acquired  and  Disposed  Of." The decrease  in  net  revenues  from
discontinued  telecommunications businesses is the  result  of  the
sale  of  the  operating  assets of TNI in  January  1997  and  the
disposition of ATI in May 1997.

The  increase  in  net  revenues from  operations  of  continuing
businesses from 1995 to 1996 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 PPV business, principally in Mexico.

<PAGE> 21

COST OF REVENUES

Cost  of  revenues  applicable  to continuing  operations  in  1997
declined  substantially  as  compared to  1996.  This  decrease  is
attributable  to  lower  healthcare  claim  recoveries  under   the
Chrysler  and  Ford  Motor  Company service  agreements  and  final
revenue  adjustments recorded in connection with the  Chrysler  and
Ford   Motor   Company  service  agreements.  See  "Operations   of
Businesses Acquired and Disposed Of."

Cost  of telecommunications revenues generally consists of the cost
of long-distance services sold by TNI under the GECCS Agreement. In
1997, no revenues were generated under that agreement. In addition,
the  operating  assets  of  TNI were  sold  in  January  1997.  See
"Operations of Businesses Acquired and Disposed Of."

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.

Cost  of revenues from discontinued telecommunications businesses
was  $2,014,460  in  1995  compared to  $134,607  in  1994.  This
increase  was principally due to the acquisition of TNI  and  the
inclusion  of the cost of long distance services sold by  TNI  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.

SELLING AND ADMINISTRATIVE EXPENSES

Selling  and administrative expenses applicable to operations  of
continuing  businesses  decreased  from  $6,322,627  in  1996  to
3,027,384  in  1997.  This  decrease  principally  reflects  cost
reduction  measures undertaken as a result of continued operating
losses and the effect from period to period of the disposition of
HMT. See "Operations of Businesses Acquired and Disposed Of".

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.

<PAGE> 22

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 were $449,925 in  1997,  $2,304,059
in 1996, $1,845,775 in 1995 and $649,036 in 1994. The decrease in
1997  as  compared to 1996 is due to the discontinuance of  TNI's
operations  and  the rescission of the ATI acquisition  agreement
and the increases in 1996 over 1995 and in 1995 over 1994 are due
to the acquisition of TNI. See "Operations of Businesses Acquired
and Disposed Of".

IMPAIRMENT AND OTHER LOSSES

Impairment  and other losses recognized in 1997 include  (i)  the
write-off equipment under capital lease and certain other  assets
related   to   equipment  under  lease  from   Boston   Financial
Corporation   totaling  $768,545,  (ii)   provisions   for   loss
contingencies  totaling $437,335 related to office  space,  which
has  been vacated, leased equipment that the Company is no longer
using  and  settlement of actions brought against the Company  by
Timboon,  LTD  and  (iii) the write-off of $625,728  of  deferred
compensation  assets.  See Note 5 to the  consolidated  financial
statements appearing elsewhere herein.

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  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").

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.

<PAGE> 23

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  the   operations   of
discontinued  telecommunications businesses in  the  consolidated
statement  of  operations for the year ended 1995,  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   more  fully  discussed  herein  and  in  the  Notes  to  the
consolidated  financial  statements,  the  Company  was   awarded
approximately $1,250,000 in a binding arbitration proceeding with
GECCS/News.  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").
Pursuant  to the Settlement Agreement, GECCS\NEWS paid $1,250,000
in  full  satisfaction of the arbitration award  granted  to  the
Company.  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
of  the  Company,  including $468,000  of  notes  and  debentures
payable.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization applicable to continuing operations
decreased  by $962,059 in 1997 as compared to 1996. The  decrease
principally reflects the write-off, effective as of December  31,
1996, of the goodwill and intangibles recorded in connection with
the acquisition of NSC.

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 $620,277, $420,688 and $84,110 in 1997,  1996
and  1995,  respectively. The increases from period-to-period  in
interest expense are principally due to higher levels of  average
borrowings outstanding during the periods and an increase in  the
average  effective rate on borrowings outstanding during 1997  as
compared to 1996.

OTHER ITEMS

In 1997, the Company recognized gains of approximately $2,695,000
and  $259,000, respectively, from the sale of a license agreement
to  the founding management of NSC and from the rescission of the
HMT  acquisition  agreement.  See  Note  4  to  the  consolidated
financial  statements.  The  Company also  incurred  $120,000  of
financing  fees  in  connection  with  the  issuance  of  its  4%
convertible debentures.

<PAGE> 24

INCOME TAXES

Income  tax  benefits  applicable to continuing  operations  were
30.0%, 12.5% and 0.75% of pre-tax loss from continuing operations
in  1997, 1996 and 1995, respectively. The principal reasons  for
the differences between the effective income tax rates during the
periods  and  the Federal statutory rate of 46% were the  changes
during  each  year  in  the  net deferred  income  tax  valuation
allowance,  the  tax  effects  from the  rescission  of  business
acquisitions  and  impairment  losses  recognized  in  1996.   No
provisions for taxes currently payable were made in 1997, 1996 or
1995. As of December 31, 1997, the Company's deferred income  tax
assets  exceeded its deferred tax liabilities by $3,967,200,  for
which the Company has provided a valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

Over the past three years the principal sources of liquidity have
been  derived from financing activities. In 1997, 1996 and  1995,
the Company received cash of approximately $232,000, $2.2 million
and  $4.1  million,  respectively, from the issuance  of  205,556
shares, 413,668 shares and 1,477,874 shares, respectively, of its
common  stock in reliance upon exemptions under Regulation  D  of
the  Securities Act of 1933 and approximately $1.6 million,  $2.4
million  and $475,000, respectively, from the issuance  of  notes
and  debentures payable. In 1997, the Company also received  cash
of approximately $371,000 from the disposition of businesses, net
of cash of businesses disposed of.

The  proceeds from financing activities were used principally  to
fund  operating losses. In 1997, 1996 and 1995, the Company  used
cash  of  approximately  $1.4  million,  $4.2  million  and  $1.8
million,   respectively,  in  operating   activities.   See   the
consolidated  statements of cash flows. The other principal  uses
of  cash  during  these  periods  were  capital  expenditures  of
approximately   $553,000  and  $132,000   in   1996   and   1995,
respectively,  and  cash of approximately $1.4  million  used  to
acquire NSC. In addition, during 1997, 1996 and 1995, the Company
made  payments  on notes and debentures payable of  approximately
$687,000, $638,000 and $263,000, respectively.

Significant  debt financing transactions during  1997,  1996  and
1995  were  the  issuance  in  February  1997  of  $1,120,000  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 and the  issuance  in
1996  of  (i)  a series of 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  (ii) $500,000 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.  During  1997,
1996  and  1995, the Company also received proceeds of  $286,743,
$562,735  and $475,349 from the issuance of notes and  debentures
payable to officers, directors and shareholders of the Company.

<PAGE> 25

The  4% cumulative convertible debentures due October 1, 1997 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  December  31,
1997,  converted $120,000 of the 4% Debentures issued to  Timboon
into 256,361 shares of the Company's common stock. As a result of
the  Company's refusal to convert additional debentures, Timboon,
LTD  filed  suit  against the Company seeking the  conversion  or
payment  of the debentures. The Company also filed a counterclaim
against    Timboon   alleging   that   Timboon    breached    the
representations and covenants it made in the Off-Shore Securities
Subscription Agreement. Effective March 2, 1998, the Company  and
Timboon  entered  into a Settlement Agreement  and  Release  (the
"Settlement  Agreement")  in settlement  of  all  claims  brought
against each other in connection with the 4% Debentures. Pursuant
to  the  Settlement  Agreement, the Company is  required  to  pay
Timboon $1,200,000, in cash, or by the liquidation by Timboon  of
shares of the Company's common stock into which the 4% Debentures
are convertible. The Settlement Agreemment also provided that the
Company  designate 4,000,000 shares of its common  stock,  to  be
held  in escrow, for liquidation by Timboon pursuant to the terms
of an escrow agreement.

The  10%  cumulative convertible debentures due  on  various  dates
through  November 1997 are convertible into shares of the Company's
common stock on their respective maturity dates or on the effective
date  of a registration statement under the Securities Act of 1993,
if  earlier.  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
maturity date as set forth in the respective debenture. The Company
has  been  informed  that $845,000 of these convertible  debentures
have  been  assigned to persons residing in the State of  Michigan.
The  Company believes the shares issuable to the assignees  of  the
Company's 10% cumulative convertible debentures upon conversion may
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). The Company  has  not  made  a
final  determination as to the conversion rights of such assignees.
As a result of the Company not having converted these debentures on
their  respective maturity dates, the Company is in default of  the
terms of the debentures.

The  10%  cumulative convertible debentures due in November  1997
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  December 31, 1997, 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. The Company is in default of the terms of the unconverted
debenture outstanding at December 31, 1997 by virtue of not having 
converted the debenture  on  its maturity date.

<PAGE> 26

The  terms  of  notes and debentures outstanding at December  31,
1997,  are  more  fully described in Note 7 to  the  consolidated
financial statements.

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. After the rescission of the ATI and  HMT
acquisitions  and the sale 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.

Other  factors that may affect the future liquidity needs of  the
Company, include (i) pending litigation, (ii) judgments currently
outstanding  against  the Company and its  subsidiaries  totaling
approximately  $173,000 at December 31, 1997, (iii)  the  summary
judgment  in  the  amount of $500,000 awarded in  arbitration  on
February  3,  1998  to  the  former  shareholders  of  CCI,  (iv)
outstanding guarantees by the Company of certain equipment  lease
obligations of ATI, and (v) the obligation of the Company to make
a  rescission  offer to Michigan purchasers of its  common  stock
pursuant to a consent order executed by the Company and the State
of  Michigan  in  December 1996. These  factors  are  more  fully
described in Note 14 to the consolidated financial statements.

As  of  December 31, 1997, the Company has a deficiency in assets
of  approximately  $7.3 million and current liabilities  exceeded
current assets by approximately $6.5 million. In addition, as  of
December  31, 1997, the Company does not have any used or  unused
lines  of  credit  or  any other committed and  unused  financing
facilities.  Consequently, it is uncertain  whether  or  not  the
Company   will  have  sufficient  cash  resources,  either   from
operations or from financing activities, to carry on its business
operations, in which case the Company would be required  to  seek
other  alternatives, including sale, merger or discontinuance  of
operations.

<PAGE> 27

IMPACT OF 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 statements. 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.

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> 28


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Independent Auditors' Report on the Consolidated Financial
   Statements for the year ended December 31, 1997            29

Independent Auditors' Report on the Consolidated Financial
   Statements for the year ended December 31, 1996 and 1995   30

Consolidated Balance Sheets as of December 31, 1997 and 1996  31

Consolidated Statements of Operations for each of the three
   years in the period ended December 31, 1997                33

Consolidated Statements of Changes in Stockholders' Deficit
   for each of the three years ended in the period 
   December 31, 1997                                          34

Consolidated Statements of Cash Flows for each of the three
   years ended in the period December 31, 1997                36

Notes to Consolidated Financial Statements                    37

<PAGE> 29

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Systems Communications, Inc.
Clearwater, Florida

We   have   audited  the  consolidated  balance  sheet  of  Systems
Communications, Inc. and Subsidiaries as of December 31, 1997,  and
the  related  consolidated  statement  of  operations,  changes  in
stockholders' deficit and cash flows for the year 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 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  consolidated
financial position of Systems Communications, Inc. and Subsidiaries
at  December  31,  1997,  and  the consolidated  results  of  their
operations  and  their cash flows for the year ended  December  31,
1997, 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,  1997,  and  has a working capital deficiency and stockholders'
equity  deficiency at December 31, 1997. In addition,  the  Company
has  not  complied with  certain repayment terms of loan agreements
and  currently has  no  source of  significant operating  revenues.
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/ Moore Stephens Lovelace, P.L.


Orlando, Florida
May 8, 1998

<PAGE> 30
                        REPORT OF INDEPENDENT AUDITORS


Board of Directors
Systems Communications, Inc.


We  have  audited  the accompanying consolidated balance  sheet  of
Systems  Communications, Inc. and Subsidiaries as of  December  31,
1996   and  the  related  consolidated  statements  of  operations,
stockholders' equity, and cash flows for each of the two  years  in
the  period ended December 31, 1996. 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 the consolidated results of their operations
and  their cash flows for each of the two years in the period ended
December 31, 1996, 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 two-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> 31

                          SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS

                                                              DECEMBER 31,
                                                     -------------------------
                                                       1997             1996
                                                     ---------       ---------
<S>                                                    <C>              <C>      
ASSETS

Current assets:
 Cash and cash equivalents                          $   65,556       $  61,039
 Accounts receivable, less allowance for
   doubtful accounts of $28,074 in 1996                   --           802,079
 Notes and accounts receivable from officers
  and employees                                         60,908         102,000
 Other current assets                                  130,419         438,763
                                                      ---------       --------
Total current assets                                   256,883       1,403,881
                                                      ---------      ---------
Furniture and equipment                                130,162       1,812,867
 Less accumulated depreciation                         (56,774)       (587,598)
                                                      ---------      ---------
Net furniture and equipment                             73,388       1,225,269
Note receivable from the sale of assets, less
 allowance of $500,000 in 1997                            --              --
Deferred compensation                                   52,941         662,199
Intangible assets, net of accumulated amortization
 of $566,666 in 1996                                      --         1,083,334
Excess of cost over fair value of net assets
 acquired, net of accumulated amortization of
 $75,034 in 1996                                          --         1,298,950
Other non-current assets                                 4,982         173,667
                                                      ---------      ---------
Total assets                                        $  388,194     $ 5,847,300
                                                      =========      =========

See Notes to Consolidated Financial Statements

<PAGE> 32

                SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS (Continued)



                                                            DECEMBER 31,
                                                      ----------------------
                                                          1997       1996
                                                      ----------  ----------
<S>                                                      <C>        <C>           
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
 Borrowings under lines of credit                     $     --    $  182,651
 Current portion of notes and debentures payable       3,361,700   3,180,758
 Current portion of obligations under capital lease         --       242,477
 Accounts payable                                        535,516   1,452,192
 Accrued compensation and employee benefits            1,176,578   1,528,153
 Accrued interest                                        497,514     286,312
 Liabilities and accruals for claims, assessments
  and other losses                                     1,129,823        --
 Other current liabilities                                27,062     595,363
 Deferred revenue                                           --       440,232
                                                      ----------  ----------
Total current liabilities                              6,728,193   7,908,138
                                                      ----------  ----------
Obligations under capital lease, less current portion       --       458,654
Deferred liabilities under employment agreements         310,794     676,261
Other liabilities                                           --        72,573
                                                      ----------  ----------
Total liabilities                                      7,038,987   9,115,626
                                                      ----------  ----------
Common stock subject to rescission                       674,124     709,124
                                                      ----------  ----------
Common stock to be issued                                   --     2,000,000
                                                      ----------  ----------
Commitments and contingencies

Stockholders' deficit:
 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                        --           630
 Class B convertible preferred stock, stated value
  and liquidation preference - $1.00 per share;
  authorized 10,000,000 shares, issued and
  outstanding 2,953,125 shares in 1997 and
  4,550,000 shares in 1996                            1,617,260    2,491,745
 Common stock - $.001 par value; authorized
  50,000,000 shares, issued and outstanding
  12,083,646 shares in 1997 and 10,626,874
  shares in 1996                                         12,084       10,627
 Additional paid in capital                          16,866,883   16,823,526
 Accumulated deficit                                (25,821,144) (25,303,978)
                                                     ----------   ----------
Total stockholders' deficit                          (7,324,917)  (5,977,450)
                                                     ----------   ----------
Total liabilities and stockholders' deficit          $  388,194  $ 5,847,300
                                                     ==========   ==========

See Notes to Consolidated Financial Statements

<PAGE> 33

                   SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                              Year Ended December 31,
                                        ---------------------------------------
                                            1997         1996          1995
                                        ----------    ----------    -----------
<S>                                        <C>          <C>             <C>         
Net revenues                           $ 1,498,533   $ 2,832,123    $    91,106
                                        ----------    ----------    -----------
Costs and expenses:
 Cost of revenues                          109,563       827,063           --
 Selling and administrative expenses     3,027,384     6,322,627      1,887,275
 Impairment and other losses             1,898,953    14,233,953           --
 Depreciation and amortization             497,377     1,459,436        148,192
                                        ----------    ----------     ----------
  Total operating costs and expenses     5,533,277    22,843,079      2,035,467
                                        ----------    ----------     ---------
                                        (4,034,744)  (20,010,956)    (1,944,361)
Gain from sale of license agreement      2,695,214         --              --
Gain from rescission of business
 acquisition                               259,352         --              --
Interest income                              4,070         8,183          3,777
Interest expense                          (587,884)     (381,975)       (63,644)
Other income (expense), net               (125,318)     (103,891)          --
                                        ----------    ----------      ---------
Loss from continuing operations before
 income taxes                           (1,789,310)  (20,488,639)    (2,004,228)
Income tax benefit                        (483,000)   (2,554,150)     (  15,124)
                                        ----------    ----------      ---------
Loss from continuing operations         (1,306,310)  (17,934,489)    (1,989,104)

Discontinued operations:
 Income (loss) from operations of
  discontinued telecommunications
  businesses, less income tax expense
  (benefit) of $240,000, ($649,044)
  and ($241,577) in 1997, 1996 and
  1995, respectively                       391,752   ( 1,322,179)    (3,818,921)
 Gain from disposition of
  telecommunication businesses, less
  income tax expense of $243,000           397,392          --             --
                                        ----------   -----------      ---------
Net loss                               $  (517,166) $(19,256,668)   $(5,808,025)
                                        ==========    ==========      =========
Basic earnings per share:
 Loss from continuing operations       $      (.12) $      (2.15)   $     (0.58)
 Income (loss) from operations of
  discontinued telecommunications
  businesses                                   .03         (0.16)         (1.23)
 Gain from disposition of
  telecommunications businesses                .04          --              --
                                        ----------   -----------       ----------
 Net loss                              $      (.05) $      (2.31)   $     (1.81)
                                        ==========    ==========       ==========
Weighted average number of
   common shares outstanding            10,802,103     8,349,459       3,201,991
                                        ==========    ==========      ==========

See Notes to Consolidated Financial Statements

<PAGE> 34

                   SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

                                           CLASS A             CLASS B
                                          PREFERRED            PREFERRED           COMMON STOCK
                                      ------------------  --------------------  ------------------
                                       SHARES    AMOUNT    SHARES     AMOUNT      SHARES    AMOUNT
                                      ---------  -------  ---------  ---------  ----------  ------
<S>                                     <C>        <C>       <C>        <C>         <C>        <C>      
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
Issuance of common stock and warrants
 for cash                                  --        --       --          --        205,556     206
Conversion of preferred stock           (192,000)    (630)(1,596,875)  (874,485)    676,682     677
Issuance of common stock as
 compensation                              --        --       --          --      1,000,857   1,001
Issuance of stock for debt                 --        --       --          --        577,421     577
Rescission of business acquisitions        --        --       --          --       (994,247)   (994)
Repayment of loan to officer               --        --       --          --         (9,497)    (10)
Net loss                                   --        --       --          --           --       --
                                        ---------  -------  ---------  ---------  ----------   -----
Balance at December 31, 1997               --   $    --    2,953,125 $1,617,260   12,083,646 $12,084
                                        =========  ======= =========  =========  ==========  =======

See Notes to Consolidated Financial Statements

<PAGE> 35

                        SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT(Continued)


                                               Additional
                                                Paid-In     Accumulated
                                                Capital       Deficit       Total
                                               ----------    ----------    ----------
<S>                                               <C>            <C>         <C>                        
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          7,731,935           --     10,383,519
Reclassification of common stock
 subject to rescission                           (789,382)          --       (789,624)
Net loss                                             --      (5,808,025)   (5,808,025)
                                               ----------    ----------    ----------
Balance at December 31, 1995                   11,873,909    (6,047,310)    8,740,495
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                   16,823,526   (25,303,978)  ( 5,977,450)
Issuance of common stock and warrants
 for cash                                         231,294          --         231,500
Conversion of preferred stock                     874,438          --           --
Issuance of common stock as
 compensation                                     383,234          --         384,235
Issuance of stock for debt                        715,741          --         716,318
Rescission of business acquisitions            (2,105,005)         --      (2,105,999)
Repayment of loan to officer                      (56,345)         --         (56,355)
Net loss                                             --        (517,166)     (517,166)
                                               ----------    ----------    ----------
Balance at December 31, 1997                  $16,866,883 $ (25,821,144) $ (7,324,917)
                                               ==========    ==========    ==========


See Notes to Consolidated Financial Statements

<PAGE> 36

                             SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                Year Ended December 31,
                                                         ---------------------------------------
                                                            1997        1996           1995
                                                         ----------   ----------     -----------
<S>                                                         <C>         <C>            <C>                
Cash flows from operating activities:
 Net loss                                              $   (517,166)  $(19,256,668)  $(5,808,025)
  Adjustments to reconcile net loss to
   net cash used in operations:
    Depreciation and amortization                           544,839      1,750,727       459,327
    Amortization of deferred compensation, net             (125,503)       (16,552)       61,819
    Provision for bad debts                                  39,816        522,687       181,753
    Provision for inventory obsolescence                       --             --         145,776
    Stock and warrants issued for compensation
     and as consideration for extension of debt             384,235        260,193       793,373
    Deferred income taxes                                      --       (3,203,194)     (256,699)
    Impairment losses                                     1,898,953     14,428,854     2,758,779
    Gain from sale of license agreement                  (2,695,214)         --            --
    Gain from rescission of business acquisition           (259,352)         --            --
    Gain from disposition of telecommunications
     businesses                                            (640,392)         --            --
    Increase (decrease) in cash from change
     in operating assets and liabilities:
      Accounts receivable                                   148,912        214,330       317,161
      Equipment inventories                                    --           73,211       (80,091)
      Deferred expenses                                        --          498,697       (92,130)
      Other assets                                           52,252         67,037       (42,702)
      Accounts payable                                     (484,304)       (39,308)     (430,448)
      Accrued expenses and other liabilities                401,166      1,060,019       224,948
      Deferred revenue                                     (109,957)      (553,982)        5,937
                                                         ----------      ----------     ---------
  Net cash used in operating activities                  (1,361,719)    (4,193,949)   (1,761,222)
                                                         ----------      ----------     ---------
Cash flows from investing activities:
 Acquisition of businesses, net of cash acquired               --          (46,854)   (1,428,312)
 Disposition of businesses, net of cash disposed of         370,844           --            --
 Expenditures for furniture and equipment                    (7,693)      (552,718)     (131,744)
 Notes receivable from officers and employees                  --          (50,000)      (52,000)
 Acquisition of other assets                                   --             --         (64,852)
                                                         ----------      ----------   -----------
  Net cash provided by (used in) investing activities       363,151       (649,572)   (1,676,908)
                                                         ----------      ----------   -----------
Cash flows from financing activities:
 Proceeds from issuance of common stock                     231,500      2,187,273     4,110,887
 Proceeds from notes and debentures payable               1,568,443      2,422,752       475,349
 Payments on notes payable and capital leases              (686,858)      (637,596)     (262,814)
 Payments on shares subject to rescission                   (35,000)       (80,500)         --
 Proceeds from (payments on) borrowings under line of
  credit                                                    (75,000)        47,917        (2,100)
                                                         ----------      ----------     ---------
  Net cash provided by financing activities               1,003,085      3,939,846     4,321,322
                                                         ----------      ----------     ---------
Net increase (decrease) in cash                               4,517       (903,675)      883,192
Cash and cash equivalents at beginning of the year           61,039        964,714        81,522
                                                         ----------      ----------     ---------
Cash and cash equivalents at end of the year          $      65,556    $    61,039   $   964,714
                                                         ==========      ==========     =========

See Notes to Consolidated Financial Statements

<PAGE> 37

                  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.  During  the  period  1994
through   1997,  the  Company  acquired  and  disposed  of  various
businesses  and currently has one operating subsidiary (  "National
Solutions   Corporation").  The  acquisition  and  disposition   of
businesses during this period are more fully described herein.

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.

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 using the services of subcontractors,  with
respect  to  which  the Company has received a  percentage  of  the
recovered savings.

<PAGE> 38

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. The abandonment  of  CCI  is
subject  to  an  arbitration proceeding initiated by  the  former
shareholders of CCI (see Notes 4 and 14).

In  January  1997,  the  Company  sold  substantially  all  of  the
operating  assets  of  TNI.  As of that date,  the  only  remaining
significant asset of TNI consisted of the arbitration award in  the
amount  of  $1,250,000  granted to TNI  in  a  binding  arbitration
proceeding   between  and  among  TNI,  GE  Capital  Communications
Services   Corporation  ("GECCS")  and  New  Enterprise   Wholesale
Services,  Limited Partnership ("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.

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 4).

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, and the operations of those  businesses
for   all   periods  presented  are  reflected  as  components   of
discontinued operations in the accompanying consolidated statements
of operations (See Note 4).

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.

<PAGE> 39

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  ($1,500,000)  and
acquired  customer  lists.  The useful  life  assigned  to  medical
computer  software  was  3  years. As of  December  31,  1996,  the
unamortized  cost  of medical computer software  was  approximately
$1,083,000  and  amortization for the year 1996  was  approximately
$416,700.  In  1997,  the  cost of medical  computer  software  and
related  accumulated amortization were removed from  the  Company's
consolidated balance sheet as a result of the rescission of the HMT
acquisition agreement. Amortization in 1997 for the period prior to
the  rescission of the HMT acquisition agreement was  approximately
$208,000. 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
successfully market the acquired technology (See Note 5).

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.

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 was assigned a useful life of 15 years.
In  1997,  the  excess of cost over the fair value  of  net  assets
acquired   associated   with  the  HMT  acquisition   and   related
accumulated   amortization   were  removed   from   the   Company's
consolidated balance sheet as a result of the rescission of the HMT
acquisition agreement (See Note 4).

In  1995, the Company recorded approximately $2,718,000 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 of NSC to successfully market the acquired  technology
(See Note 5).

<PAGE> 40

REVENUE RECOGNITION

The  Company 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.

EARNINGS PER SHARE

In  1997,  the  Company  adopted Statement of Financial  Accounting
Standards  No.  128 "Earnings Per Share" ("SFAS  No.  128"),  which
requires  the  presentation of both basic and diluted  earning  per
share.  Basic earnings per share is computed based on the  weighted
average  number  of  common shares outstanding  during  each  year.
Diluted  earnings per share is to be computed based on the  sum  of
the  weighted average number of common shares outstanding plus  the
additional number of shares that would have been outstanding if all
potentially  dilutive  common shares, pursuant  to  stock  purchase
warrants  and options, convertible preferred stock and  convertible
notes  and  debentures,  had  been  issued.  The  Company  has  not
presented  diluted  earnings per share  because  the  inclusion  of
potential  common shares, pursuant to stock purchase  warrants  and
options,  convertible  preferred stock and  convertible  notes  and
debentures,  would  be  antidilutive  due  to  the  Company  having
operating  losses for all periods presented. The adoption  of  SFAS
No. 128 did not have any impact on previously reported earnings per
share.

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  and  the  assets  and  liabilities  disposed  of   in
connection  with  the  rescission of the ATI  and  HMT  acquisition
agreements.  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, for all periods presented , 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", 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).

<PAGE> 41

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 statements. Although SFAS No. 130  only  impacts
display  as  opposed to actual amounts recorded,  it  represents  a
change in financial reporting. The adoption of this statement  will
not have an impact on the Company's reported earnings.

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.
The  adoption of this statement will not have a significant  effect
on the Company's reported segments and related disclosures.

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  1996  and  1995  consolidated  financial
statements   have  been  reclassified  to  conform  to   the   1997
presentation.

<PAGE> 42

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 net losses (including losses from  operations  of
discontinued businesses) of $517,166, $19,256,668 and $5,808,025 in
1997,   1996   and  1995,  respectively,  and  used   approximately
$1,362,000,  $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 $7.3 million at December 31, 1997 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  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,  unless  such
purchasers  are afforded an opportunity to resell their  shares  in
the  public market pursuant to an effective registration  statement
at  prices  higher  than the cost of such shares  to  the  Michigan
purchasers.  The  Company  has not been  be  able  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 (See Note 14).

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, 1997, the  Company
had  no  financing facilities available for working capital or  for
other purposes.

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.  The consolidated  financial  statements do not inclued 
any  adjustments  that  might  result  from  the  outcome  of  this 
uncertainty.

<PAGE> 43

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 arbitration 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  an  arbitration
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.

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.

<PAGE> 44

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 approximately .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, 1997, the
Company  has  converted  1,596,875 shares of  Class  B  convertible
preferred  stock  issued in connection with  the  acquisition  into
580,682  shares of common stock. There have been no conversions  of
the notes issued in connection with the acquisition. Subsequent  to
December  31,  1997,  the Company made a redemption  offer  to  the
holders  of  the  $450,000  10% convertible  debentures  issued  in
connection with the acquisition (see Notes 7 and 18).

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  have
been  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 balance sheet as of December  31,  1996.
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  have  been  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 $14.4 million, including the $2,000,000
in  additional  shares which were to have been issued  in  November
1996  pursuant to the acquisition agreement and approximately  $1.7
million  of  liabilities assumed in excess of assets  acquired  and
deferred income taxes of approximately $1.0 million. The excess  of
the  purchase  price  over the fair value of  the  assets  acquired
(approximately $2,718,000) was assigned a useful life of 20  years.
The  net  assets acquired also included $12,400,000 for  healthcare
management decision software technology that was assigned a  useful
life  of  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).

<PAGE> 45

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 pursuant to the NSC acquisition  agreement.  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
included  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  in  exchange  for  a  license
agreement  for  the exclusive use by Retiring Management  of  NSC's
software  and technology to service state governments west  of  the
Mississippi  River (excluding Utah), Mexico and Central  and  South
America.  The  license  agreement, subject to  minimum  performance
standards,  is  to  provide for a royalty fee of  one-half  of  one
percent  of all revenues derived by Retiring Management  from  such
license agreement and 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.
As  a  result  of the waiver by Retiring Management of accrued  and
unpaid  bonuses and common stock to be issued, the Company  removed
the  common  stock to be issued and the accrued and unpaid  bonuses
from its consolidated balance sheet and recognized a gain from  the
sale of the license agreement totaling approximately $2,695,000.

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)
was  assigned  a  useful life of 15 years. The net assets  acquired
included  $1,500,000  of  medical  computer  software,  which   was
assigned a useful life of 3 years.

<PAGE> 46

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  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.

                                           Year Ended December 31,
                                       ------------------------------
                                          1996               1995
                                       -----------        -----------
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)
                                      ------------        -----------
Basic earnings per share:
 Loss from continuing operations     $ (      2.16)       $(     1.28)
 Loss from operations of
  discontinued telecommunications
    businesses                         (      0.16)        (     1.19)
                                      ------------        -----------
   Net  loss                         $ (      2.32)       $(     2.47)
                                      ============        ===========

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.

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.

<PAGE> 47

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;  consequently,  the Company  removed  the  assets  and
liabilities  of  CCI and the debt and preferred stock  issued  in
connection   with   the  CCI  acquisition  from   the   Company's
consolidated balance sheet in May 1996 with no material effect on
the  Company's results of operations. 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 and the issuance of  200,000
shares  of the Company's Class A preferred stock they allege  are
due  them  under  the  acquisition  agreement.  This  matter  was
referred by court order to mandatory arbitration in the State  of
Florida.  On February 3, 1998, the Arbitrators' awarded in  favor
of  the  former  shareholders of CCI. The award  requires,  among
other things, that the Company (i) convert 200,000 shares of  its
Class A Preferred Stock, held by the former shareholders of  CCI,
into  100,000  shares of its common stock and (ii) issue  another
200,000  shares  of  Class A Preferred Stock to  the  former  CCI
stockholders,  which is also convertible into 100,000  shares  of
the  Company's common stock, and that the Company give the former
shareholders  of  CCI  the  ability to seek  a  summary  judgment
against  the Company for $500,000, without opposition, or  accept
500,000  shares of the Company's Class A Preferred Stock in  lieu
of a summary judgment (See Note 14).

As  more  fully discussed below, in January 1997 and May  1997,  the
Company disposed of substantially all of the remaining assets of its
telecommunications  segment, consisting of TNI  (which  include  the
operations  of  Comstar  and  LCI) and  ATI  and,  entered  into  an
agreement to rescind the March 1996 acquisition of HMT.

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  International  Teledata
Corporation   ("ITD").  No  value  was  assigned  to  the   $500,000
convertible  debenture (the "ITD Note") received by the Company.  By
its  terms,  the  ITD  Note 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 (See Note 18).

In  May  1997,  the  Company and ATI entered into  an  agreement  to
rescind  the  August  1994 acquisition of ATI.  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  issued  to  the  former  shareholders  of  ATI   and
unexercised  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  certain  of  its lease agreements (those  quaranteed  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).  However,  there  is   no
assurance that, upon an event of default by ATI, that ATI would have
sufficient funds to liquidate the promissory note.

The  disposition of TNI and ATI resulted in gains of  approximately
$392,000,  net  of  tax,  in  the aggregate.  The  gains  from  the
disposition  of  TNI  and  ATI  are reflected  as  a  component  of
discontinued operations in the accompanying consolidated  statement
of operations for the year ended December 31, 1997.

<PAGE> 48

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. In connection with the rescission of the  HMT
acquisition   agreement,   the  Company   recognized   a   gain   of
approximately  $259,000.  which  is  included  as  a  component   of
continuing  operations in the consolidated statement  of  operations
for the year ended December 31, 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  of  the
telecommunications   segment,   included   in   the    accompanying
consolidated balance sheets as of December 31, 1997 and  1996,  are
summarized as follows:
                                             1997          1996
                                          ---------      ---------
   Current assets                        $     539       $ 332,856
   Total assets                                539         660,094
   Current liabilities                     194,133         886,206
   Total liabilities                       194,133       1,078,026

The    revenues,    costs   and   expenses   of    the    Company's
telecommunications  businesses,  included  in   income(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, 1997, are  summarized
as follows:

                                       1997          1996        1995
                                    --------    ----------    ---------
Net revenues                        $405,617    $2,177,858   $2,893,778
Cost of revenues                        --       1,320,256    2,014,460
Selling and administrative expenses  449,925     2,304,059    1,845,775
Impairment and other losses             --         194,901    2,758,779
Depreciation and amortization         47,460       291,291      311,135
Interest income                         --            (971)        (627)
Interest expense                      32,393        38,713       20,466
Other income(expense), net           755,913           832        4,288
Income(loss) from operations of
  discontinued businesses, before
  income taxes                       631,752    (1,971,223)  (4,060,498)
Income tax expense(benefit)          240,000      (649,044)    (241,577)
Income(loss) from operations of
  discontinued businesses            391,752    (1,322,179)  (3,818,921)


<PAGE> 49

NOTE 5  IMPAIRMENT AND OTHER LOSSES

Impairment   and   other  losses  included  in   the   accompanying
consolidated statements of operations are summarized as follows:
                                             Year Ended December 31,
                                            ----------------------------------
                                                1997       1996       1995
                                            ---------   ----------  ----------
Impairment and other losses included
 in loss from continuing operations:
  Write-off of capital lease and related
     assets                                $ 768,545    $    --     $    --
  Provision for loss contingencies           437,335         --          --
  Write- off of deferred compensation
     assets                                  625,728         --          --
  Write-down of other assets                  67,345         --          --
  Write-off of NSC intangibles and goodwill      --     14,233,953       --
                                            ---------   ----------   ---------
                                            1,898,953   14,233,953       --
                                            ---------   ----------   ---------
Impairment and other losses included
 in loss from discontinued operations:
   Write-off  of TNI goodwill                    --           --      2,758,779
   Write-off of investment in Comstar                      194,901       --
                                             ---------  ----------   ----------
                                                 --        194,901    2,758,779
                                             ---------  ----------   ----------
                                            $1,898,953 $14,428,854   $2,758,779
                                             =========  ==========   ==========

In  1997, the Company removed, from its consolidated balance sheet,
the capital lease and other assets related to equipment under lease
from  Boston  Financial & Equity Corporation  ("BFC")  due  to  BFC
having taken possession of certain computer equipment leased by NSC
from  BFC and the initiation by BFC of an action filed in the State
of  Texas  against the Company seeking approximately $500,000,  due
under  the  lease agreement. The removal of the capital  lease  and
other assets related to equipment under lease resulted in a loss of
$768,545.   The  Company  also  recorded  a  loss  contingency   of
approximately  $500,000  and  removed  the  related  capital  lease
obligation  from  the Company's consolidated balance  sheet,  which
resulted  in  an  additional loss provision of $122,986,  which  is
included  in  the  provision for loss contingencies  in  the  above
table.

In  1997,  the Company also made various other provisions for  loss
contingencies  related  to  leased office  space,  which  has  been
vacated,  leased equipment that the Company is not presently  using
and  for the loss from the settlement of claims brought against the
Company  by Timboon, LTD. The total amount of these loss provisions
was $437,335, including $122,986 related to the BFC lease. Included
in  this  amount  is  $162,053 related to  the  Timboon  Settlement
Agreement (see Notes 7 and 14).

The write-off of deferred compensation assets in 1997 is the result
of  the  resignation  of  certain employees subject  to  employment
agreements (see Note 13).

<PAGE> 50

Impairment  and other losses 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 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.

At  December 31, 1995, the Company recognized a charge to  income
of  $2,758,779, which is reflected as a component of discontinued
operations   in  the  accompanying  consolidated   statement   of
operations  for the year ended December 31, 1995, 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
and  News  to  provision customer accounts for telecommunications
products and services offered by GECCS and News and sold  by  TNI
pursuant  to a contractual agreement among TNI, GECCS  and  News,
(ii)  the  cancellation of TNI customers by GECCS  and  News  and
(iii)  the failure of GECCS and News to properly bill and collect
revenues  due  to TNI. 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"). 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  net
proceeds   from  the  Settlement  Agreement  are   reflected   in
income(loss)  from  discontinued operations in  the  accompanying
consolidated statement of operations for the year ended  December
31, 1997.

<PAGE> 51

NOTE 6  FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

                                                  DECEMBER 31,
                                            ----------------------
                                             1997           1996
                                            -------      ---------
Furniture and equipment                    $130,162     $  917,869
Equipment held under capital lease            --           880,163
Leasehold improvements                        --            14,835
                                            -------      ---------
                                            130,162      1,812,867
Less: accumulated depreciation              (56,744)      (587,598)
                                            -------      ---------
Net furniture and equipment                $ 73,388     $1,225,269
                                            =======      =========

Depreciation expense was $174,545, $330,973 and $122,471  in  1997,
1996 and 1995 respectively.

In  1997, the Company removed, from its consolidated balance sheet,
capital lease assets with a net carrying amount of $579,681 related
to   equipment   under  lease  from  Boston  Financial   &   Equity
Corporation. See Notes 5 and 14.

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


<PAGE> 52

NOTE 7  NOTES AND DEBENTURES PAYABLE

Notes and debentures payable consist of the following:

                                                DECEMBER  31,
                                            ------------------------
                                                1997          1996
                                            -----------    ---------
4% Cumulative convertible debentures
  due October 1, 1998                       $ 1,200,000   $     --
10% Cumulative convertible debentures
 due on various dates through
    November 1997                             1,195,000    1,279,000
10% Cumulative convertible debentures
 due on November 21, 1997                          --        300,000
10% Cumulative convertible debentures
 due on November 26, 1997                       170,000      200,000
10% Convertible debentures payable to
 former shareholders of TNI                     450,000      450,000
Notes payable to former shareholders of
 NSC in equal monthly installments of
 $20,000, non-interest bearing                  150,000      150,000
6% Acquisition notes payable to former
 shareholders of ATI, secured by the
 stock of ATI                                      --        250,000
18% Cumulative Convertible Debenture
 Note due January 15, 1999                       80,000         --
12% Cumulative Convertible Debenture
 Notes due on various dates through
 November 1998                                   50,000         --
12% Convertible Promissory Note
 due March 28, 1997, in default                  30,000         --
10% Cumulative Convertible Debenture
 Note due September 1998                         30,000         --
8%-10% Notes payable to stockholders              1,700      162,741
Promissory note in default                          --       200,000
10.75% demand note payable, secured by
 certain accounts receivable                        --       100,000
5% Note to former shareholder of CCI, due                
 on demand, secured by certain equipment            --        75,000
Other                                             5,000       14,017
                                              ---------    ---------
                                              3,361,700    3,180,758
Less: current portion                        (3,361,700)  (3,180,758)
                                              ---------    ---------
Long-term  portion                           $     --     $     --
                                              =========    =========
<PAGE> 53

On  February  24,  1997,  the  Company  issued  $1,120,000  of  4%
cumulative  convertible debentures due October 1,  1998  (the  "4%
Debentures")  to  Timboon, LTD ("Timboon", a non U.S.  person)  in
reliance upon exemptions under Regulation S of the Securities  Act
of  1933.  The 4% 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 December 31, 1997, converted $120,000 of the 4% Debentures
issued  to  Timboon  into 256,361 shares of the  Company's  common
stock.  On  June 6, 1997, as a result of the Company's refusal  to
convert additional 4% Debentures, Timboon, as Plaintiff, filed  an
action  in  the  United District Court, Southern District  of  New
York,  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  an  additional  $150,000  of   4%
Debentures  and the payment of $970,000 (the principal  amount  of
the  4%  Debentures  that had not been converted  by  Timboon)  to
Timboon,  plus  damages. The Company 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  alleged that Timboon participated in manipulative  market
activity with the intent to artificially depress the market  price
of  the  Company's  common stock. Effective  March  2,  1998,  the
Company  and  Timboon  entered into  a  Settlement  Agreement  and
Release  (the "Settlement Agreement") in settlement of all  claims
brought  against each other in connection with the 4%  Debentures.
Pursuant  to the Settlement Agreement, the Company is required  to
pay  Timboon $1,200,000, in cash, or by the liquidation by Timboon
of  shares  of  the  Company's common  stock  into  which  the  4%
Debentures  are convertible. The Company has designated  4,000,000
shares  of its common stock, to be held in escrow, for liquidation
by  Timboon  pursuant  to the terms of an  escrow  agreement  (the
"Escrow  Agreement"). The terms of the Escrow Agreement  generally
provide  that  Timboon may liquidate during each four-week  period
("Trading Period")(i)up to 50% of the aggregate trading volume  of
the  Company's common stock on the NASDAQ Bulletin Board, or  such
other  trading  market  on  which the Company's  may  be  publicly
traded,  for the prior four-week period at no less than the  "bid"
price, or for the first eight weeks of trading, up to 37.5% of the
trading  volume for the previous four-week period at no less  than
the  "bid"  price,  provided a minimum "bid" price  of  $0.31  per
share,  or greater, is maintained or (ii) up to 200,000 shares  of
the  Company's common stock during any Trading Period at or  above
the  average  of  the "bid" and "ask" price. In either  case,  the
liquidation of shares of the Company's common stock by Timboon  is
not  to  exceed $200,000 of net proceeds, in the aggregate, during
any  Trading Period. The Escrow Agreement also provides that  when
Timboon receives cumulative net proceeds of $1,200,000, the escrow
agent is to return all remaining shares held in escrow, if any, to
the  Company  or,  in  the event Timboon receives  cumulative  net
proceeds of $1,200,000 from the liquidation of 600,000 shares,  or
less,  then  the  escrow agent is to return all remaining  shares,
less  100,000  shares  which are to be  retained  by  Timboon.  In
connection with the Settlement Agreement the Company increased the
principal  balance  of the 4% Debentures to equal  $1,200,000  and
recognized a loss of approximately $162,000. See Note 5.

<PAGE> 54

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  in  the
aggregate  principal  amount of $1,279,000.  These  debentures  are
convertible  into shares of the Company's common stock  on  various
dates  through  November  1997  or  on  the  effective  date  of  a
registration  statement  under  the  Securities  Act  of  1993,  if
earlier.  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
maturity date as set forth in the respective debenture. The Company
has  been  informed  that $845,000 of these convertible  debentures
have been assigned to persons residing in the State of Michigan. On
September 24, 1997 the persons to whom these convertible debentures
were  assigned  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. The Company believes the shares issuable to the assignees  of
the Company's 10% cumulative convertible debentures upon conversion
may  violate the terms and conditions of the consent order  entered
into  between the Company and the State of Michigan (see Note  14).
The Company has not made a final determination as to the conversion
rights  of  such assignees. During 1997, the Company issued  19,033
shares  upon  conversion  of $84,000 in principal  amount  of  such
debentures,  plus accrued interest. As a result of the Company  not
having  converted  these  debentures on their  respective  maturity
dates, the Company is in default of the terms of the debentures.

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 December
31,  1997,  the Company has converted $330,000 of these  debentures
into  122,000  shares  of  the  Company's  common  stock  and   has
outstanding  unconverted debentures totaling $170,000. The  Company
is in default of the terms of the debenture outstanding at December
31,  1997  by virtue of not having converted the debenture  on  its
maturity date.

<PAGE> 55

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.  In  March
1997,  the  Company made an offer to each of the holders  of  these
convertible debentures to redeem the debentures in return  for  1.5
shares  of the Company's common stock for each dollar of principal,
plus  accrued interest, due to each of the debenture holders,  plus
common stock purchase warrants exercisable at any time over a  five
year period at an exercise price of $0.20 per share. The number  of
common stock purchase warrants to be issued upon acceptance of  the
offer to redeem the debentures is to be determined by dividing  the
principal amount of each debenture by two(2). As of March 31,  1998
(the  expiration  date  of  the offer), the  Company  received  the
acceptance of all of the holders of the debentures. Pursuant to the
redemption  offer, the Company is to issue 893,278  shares  of  its
common stock and 450,000 stock purchase warrants (225,000 of  which
are  exercisable at $1.50 per share by the terms of the  respective
debenture  note and 225,000 of which are exercisable at  $0.20  per
share pursuant to the redemption offer).

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.

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
140,000  shares  of  Class B preferred stock  were  converted  into
50,910 shares of the Company's common stock in September 1996.  The
acquisition notes payable, the stock purchase warrants and  684,410
shares   of  the  Company's  common  stock  issued  to  the  former
shareholders  of  ATI  in connection with the  acquisition  and  as
consideration for extension of indebtedness are to be  returned  to
the  Company in connection with the May 1997 rescission of the  ATI
acquisition agreement(see Note 4).

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

The  18% Cumulative Convertible Debenture Note due January 15, 1999
is  convertible into the Company's common stock, at the election of
the holder, at a conversion price of $2.50 per share, is guaranteed
by  the  Company's  Chairman of the Board and is collateralized  by
500,000  shares  of the Company's common stock, which  is  held  in
escrow pursuant to an escrow agreement.

<PAGE> 56

The  12%  Cumulative Debenture Notes consist of two  notes  in  the
principal  amount  of $25,000, each, and are  due  in  October  and
November  1998, respectively. These notes are convertible,  at  the
election  of the holder, into shares of the Company's common  stock
at  an exercise price of $.10 per share. Interest accrued may  also
be  converted into shares of the Company's common stock at a  price
equal  to  the  average of the bid and ask prices of the  Company's
common stock on the next day following conversion. Upon conversion,
the  holders of the notes are also entitled to receive common stock
purchase  warrants.  The  number of  warrants  to  be  issued  upon
conversion of these notes is equal to the principal amount  of  the
notes divided by 0.1 and are exercisable at $0.10 per share.

The  12%  Convertible  Promissory Note due March  28,  1997  is  in
default.  The Note is convertible, at the election of  the  holder,
into  the  Company's common stock at $2.00 per  share,  plus  3,000
common stock purchase warrants, exercisable at $2.00 per share  for
a  two  year period. The common stock purchase warrants are  to  be
issued either upon conversion or payment of the Note.

The  10%  Convertible Debenture Note due September 1998 is payable,
at  the election of the holder, from the proceeds of the GECCS\News
arbitration award, from the proceeds of the $500,000 note  received
by  the  Company from the sale of certain of TNI assets  (the  "ITD
Note")  or  by  the issuance of the Company's common stock  at  the
average of the bid and ask prices of the Company's common stock  as
of  the  date of the note. This note was not paid from the proceeds
of the GECCS\News arbitration award and, in March 1998, the Company
canceled  the ITD Note pursuant to an agreement between  and  among
the  Company, ITD and certain former employees of the  Company  and
TNI  (see Note 18). After these events, the note is either  payable
in  cash  or by the issuance of the Company's common stock  at  the
election of the holder.

As  of  December 31, 1996, the Company had $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. During 1997, these stockholders loaned
the  Company  an additional $91,443, the Company made  payments  of
$84,484  and  $168,000 of such notes, plus accrued  interest,  were
converted into shares of the Company's common stock at a negotiated
conversion prices ranging from $0.90 to $1.00 per share.

The  $200,000 promissory note in default outstanding as of December
31,  1996  was  paid  in December 1997 from  the  proceeds  of  the
Settlement Agreement with GECCS and News (see Note 4).

The   10.75%  demand  note  payable  in  the  amount  of   $100,000
outstanding at December 31, 1996 was paid in December 1997 from the
proceeds of the Settlement Agreement with GECCS and News (see  Note
4).

The 5% note payable to a former shareholder of CCI in the amount of
$75,000 at December 31, 1996 was relieved, in full, as a result  of
the rescission in May 1997 of the ATI acquisition (see Note 4).

As  of  December 31, 1997 and 1996, all of the Company's notes  and
debentures   outstanding  are  classified   as   current   in   the
accompanying balance sheet.

<PAGE> 57

NOTE 8  BORROWINGS UNDER LINES OF CREDIT

As of December 31, 1997, the Company had no used or unused lines of
credit. The Company, through two of its subsidiaries, had lines  of
credit which were fully utilized at December 31, 1996.

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 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  expense (benefit) for each of the three years  in  the
period  ended  December 31, 1997 consists of deferred income  taxes
and  is  allocated  among (i) continuing operations  and  (ii)  the
components  of  discontinued  operations  in  proportion  to  their
individual  effects on income tax expense (benefit)  for  the  year
after the allocation of income tax expense (benefit) applicable  to
continuing  operations.  No provisions for income  taxes  currently
payable were made in 1997, 1996 or 1995.

The  allocation  of income tax expense (benefit) for  each  of  the
three  years in the period ended December 31, 1997 among continuing
operations  and  the  components  of  discontinued  operations   is
summarized as follows:

                                         YEAR ENDED DECEMBER 31,
                                    ----------------------------------
                                      1997          1996        1995
                                    --------     ----------   --------
Loss from continuing operations    $(483,000)  $(2,554,150)   $(15,124)
Discontinued operations:
 Income(loss) from operations of
  discontinued telecommunications
  businesses                         240,000    (  649,044)   (241,577)
 Gain from disposition of
  telecommunications businesses      243,000          --          --
                                     -------     ----------   --------
Income tax expense (benefit)       $     --     $(3,203,194) $(256,701)
                                     =======     ==========   ========
<PAGE> 58

Income  tax  expense (benefit) applicable to continuing  operations
differs  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:


                                           YEAR ENDED DECEMBER 31,
                                     ----------------------------------
                                        1997        1996        1995
                                     ---------   ----------   ---------
Amount computed at statutory rate    $(608,400) $(6,966,137)  $(681,438)
Increase (reduction) in taxes
 resulting from:
State income taxes                    ( 46,200)    (819,546)    (80,169)
Amortization of goodwill                38,900       80,158       9,490
Rescission  of business acquisitions   176,900         --          --
Impairment losses                         --        971,769        --
Change in valuation allowance         ( 44,500)   4,011,702     732,893
Other                                      300      167,904       4,100
                                      --------    ---------   ---------
                                     $(483,000) $(2,554,150)  $( 15,124)
                                      ========    =========   =========

The  principal  reasons for the difference between the  amounts  of
income  tax  benefit allocated to loss from discontinued operations
in  1996  and  1995 and the amounts 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 Company's 1995 acquisition of NSC.

In  the first ten months of 1995, the Company recorded 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, $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> 59

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 carryforwards  available  to
reduce  future  taxable income. The significant components  of  the
Company's  deferred tax assets and liabilities as of  December  31,
1997 and 1996 are as follows:

                                                   1997         1996
                                                 ---------    ---------
Deferred tax assets:
Net operating loss carryforwards                $3,337,500   $3,999,122
Allowance for doubtful accounts                    190,000       10,668
Accrued compensation and liabilities under
 employment agreements                             257,000      777,922
Accrued expenses and other current liabilities     250,800         --
                                                 ---------    ---------
Total deferred tax assets                        4,035,300    4,787,712
Less-valuation allowance                        (3,967,200)  (4,011,705)
                                                 ---------    ---------
Net deferred tax assets                             68,100      776,007
                                                 ---------    ---------
Deferred tax liabilities:
Intangible assets                                     --        371,029
Deferred compensation                               68,100      389,401
Other                                                 --         15,577
                                                 ---------    ---------
Total deferred tax liabilities                      68,100      776,007
                                                 ---------    ---------
Net deferred income taxes                       $    --      $    --
                                                 =========    =========

At  December 31, 1997, the Company and its subsidiaries had  unused
net  operating  loss carryforwards of approximately  $8.8  million,
expiring   on   various  dates  through  2011.  Of   this   amount,
approximately $7.7 million is not restricted as to use. The balance
of  the  carryforwards amounting to approximately $1.1  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 acquisition of HMT (See Note 4), it was taxed  under
Subchapter S of the Internal Revenue Code and consequently, was not
subject to Federal income tax.

<PAGE> 60

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. As of December 31, 1997,  no
shares of Class A preferred stock were outstanding.

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. As of December 31, 1997, the Company had 2,953,125 shares
of Class B preferred stock outstanding.

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. 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. In August 1997, the Company, by written  consent  of
the  Board of Directors, extended the exercise date of all warrants
with expiration dates in 1997 and 1998 to December 31, 1998.

The  Company  has  also issued stock options to  certain  officers,
employees  and directors. Options granted in 1996 totaled 1,000,000
and are exercisable at $6.00 per share. These options were canceled
effective as of December 31, 1997. Options granted in 1997  totaled
1,417,500. Of the total number of options granted in 1997,  117,500
are  exercisable at any time over a two year period at an  exercise
price of $1.50 per share and 1,300,000 are exercisable at any  time
over a five year period at an exercise price of $0.10 per share.

<PAGE> 61

Options and warrants outstanding are summarized as follows:

                                                 Exercise      Weighted
                                               Price Range      Average
                                      Shares     per Share   Exercise Price
                                    ---------  ------------  --------------
Warrants outstanding
 at December 31, 1995               1,680,936   $1.50-$8.00      $2.73
Warrants issued                     1,822,098   $1.50-$10.00     $4.00
Options issued                      1,000,000   $6.00            $6.00
                                    ---------
Warrants and options
 outstanding at December 31, 1996   4,503,700   $1.50-$10.00     $3.78
Warrants issued                       697,805   $0.10-$4.50      $1.06
Warrants canceled                    (166,668)  $1.50            $1.50
Options issued                      1,417,500   $.010-$1.50      $0.22
Option canceled                    (1,000,000)  $6.00            $6.00
                                    ---------
Warrants and options
 outstanding at December 31, 1997   5,452,337   $0.10-$10.00     $1.93
                                    =========


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.

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  the  options
granted  in 1997 was estimated at the date of grant using a  Black-
Scholes option pricing model with the following assumptions:  risk-
free interest rate of 6.50%; no dividend yield; a volatility factor
of the expected market price of the Company's common stock of 173%;
and a weighted-average expected life of 4.75 years. The assumptions
used  in 1996 to estimate the fair value of options granted in that
year  were: 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.

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.

<PAGE> 62

For  purposes of the following pro forma disclosure, the  estimated
fair value of options granted to employees have been expensed.  The
Company's  pro  forma net loss and basic earnings  per  share  data
after  giving  effect to the charges to income, as if  the  Company
accounted  for stock options under the provisions of Statement  No.
123,  for the years ended December 31, 1997 and 1996 are summarized
as follows:

                                                 1997          1996
                                               ---------     ----------
Loss from continuing operations              $(1,292,600)  $(19,614,489)
                                               ---------     ----------
Income (loss) from operations of discontinued
 telecommunications businesses                   238,300     (1,322,179)
Gain from disposition of discontinued
 telecommunications businesses                   241,600           --
                                               ---------      ---------
Net income (loss)                            $  (812,700)  $(20,936,668)
                                               =========     ==========

Basic earnings per share:
 Loss from continuing operations             $      (.12)        $(2.35)
 Income (loss) from operations of 
  discontinued telecommunications businesses         .02          (0.16)
 Gain from disposition of discontinued
  telecommunications businesses                      .02            --
                                               ---------      ---------
      Net loss                               $      (.08)   $     (2.51)
                                               =========      =========
<PAGE> 63

NOTE 12  LEASES

The  capital lease obligations outstanding as of December 31,  1996
were  removed from the Company's consolidated balance sheet in 1997
as a result of the rescission of the ATI acquisition agreement (see
Note  4)  and  the  taking of possession by the lessor  of  certain
computer equipment leased by NSC (see Notes 5 and 14).

The  Company  leases  office  space and equipment  under  operating
leases  expiring on various dates through November 31, 2000.  Total
minimum  future  rental  payments  under  non-cancelable  operating
leases  having remaining terms in excess of one year as of December
31, 1997 are as follows:

              1998                                    $  55,949
              1999                                       47,833
              2000                                       43,847
              2001                                         --
              2002                                         --
                                                        -------
              Total minimum future rental payments    $ 147,629
                                                        =======

Rental  expense under all operating leases was $167,354,  $359,474,
and $94,961 in 1997, 1996, and 1995, respectively. During 1997, the
Company  vacated certain leased premises and is subject to  certain
additional  lease payments and other charges under the leases,  all
which have been recorded as of December 31, 1997. In addition,  the
Company is in default of the lease agreement on its San Antonio, TX
location.

<PAGE> 64

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 $675,966  at  December  31,
1997. 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,
1997 and 1996:

                                                  1997       1996
                                                ---------  ---------
Deferred compensation assets included in:
  Other  current assets                        $  126,627  $  355,415
  Deferred  compensation (non-current)             52,941     647,355
                                                ---------  ----------
                                               $  179,568  $1,002,770
                                                =========  ==========


Deferred compensation liabilities included in:
  Accrued  expenses and other current 
    liabilities                                $  365,172  $  344,652
  Deferred  liabilities under employment 
    agreements                                    310,794     676,261
                                                ---------  ----------
                                               $  675,966  $1,020,913
                                                =========  ==========

During  1997,  certain  employees subject to  the  above  described
employee agreements resigned resulting in charges to income, in the
aggregate,  of approximately $626,000, to write-off the unamortized
portion of the related deferred compensation asset (see Note 5).

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). The unamortized deferred
compensation asset recorded in 1995 was written-off in 1997 due  to
the resignation of that Chief Executive Officer.

<PAGE> 65

NOTE 14  COMMITMENTS AND CONTINGENCIES

The   Company  is  subject  to  various  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, (ii) actions
brought against the Company by certain former employees and persons
formerly under contract with the Company for payments allegedly due
them,  (iii)  an action by a shareholder seeking the rescission  of
the  sale  by  the Company of its common stock to the  shareholder,
(iv)  an  action  by  an  equipment  lessor  seeking  approximately
$500,000  in  lease payments and other charges due  under  a  lease
agreement and (v) an action by the former stockholders of CCI.

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 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, 1997, 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 $795,739,
including interest of approximately $121,615. 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. The Company
has not satisfied the requirements of the consent order. Due to the
"best  efforts" nature of the Company's compliance obligation,  the
Company  believes that its performance of the terms of the  consent
order  is  deferred until such time it is able to both  financially
and functionally comply with the consent order.

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.

<PAGE> 66

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, as
Defendant, 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.

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.

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  and
the  issuance of 200,000 shares of the Company's Class A  preferred
stock  they  allege  are due them under the acquisition  agreement.
This matter was referred by court order to mandatory arbitration in
the State of Florida. On February 3, 1998, the Arbitrators' awarded
in  favor  of  the former shareholders of CCI. The award  requires,
among other things, that the Company (i) convert 200,000 shares  of
its  Class  A  Preferred Stock, held by the former shareholders  of
CCI, into 100,000 shares of its common stock and (ii) issue another
200,000  shares  of  Class  A Preferred Stock  to  the  former  CCI
stockholders, which is also convertible into 100,000 shares of  the
Company's common stock, and gave the former shareholders of CCI the
ability  to  seek  a  summary  judgment  against  the  Company  for
$500,000,  without  opposition, or accept  500,000  shares  of  the
Company's Class A Preferred Stock in lieu of a summary judgment. As
of  December  31, 1997, the Company has recorded a loss contingency
of $111,000, related to this action. It is highly unlikely that the
Company  would  be  able to satisfy a summary judgment  should  the
former  shareholders  of CCI decide to seek a summary  judgment  in
lieu of preferred stock.

<PAGE> 67

In   October  1997,  Boston  Financial  Corporation  ("BFC")   took
possession of certain computer equipment leased by NSC from BFC  as
a  result of the default by NSC of payments due under the lease. On
December  11,  1997, BFC filed an amended suit in  District  Court,
45th  Judicial District, Bexar County, Texas (Case No.  97CI-14567)
against NSC and, as guarantors of the lease agreement, the Company,
ATI  and  TNI.  This action seeks approximately $500,000  in  lease
payments  and  other  charges due under the  lease  agreement.  The
Company is attempting to negotiate a settlement of this matter  and
may  have several counterclaims against BFC should the Company  and
BFC  fail  to  settle. However, it is not possible to  predict  the
likely  outcome  of  such  negotiations or  any  counterclaims  the
Company  may have against BFC. As of December 31, 1997, the Company
has  recorded a loss contingency reserve of approximately  $500,000
related to this action.

On  June 6, 1997, Timboon, LTD ("Timboon"), as Plaintiff, filed  an
action  in the United States 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
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  alleged   that   Timboon
participated  in manipulative market activity with  the  intent  to
artificially  depress  the market price  of  the  Company's  common
stock.  Effective  March  2, 1998, the  Company  and  Timboon  Ltd.
entered  into  a Settlement Agreement and Release (the  "Settlement
Agreement") in settlement of all claims brought against each  other
in connection with the debentures issued to Timboon. See Note 7.

Prior  to  the  rescission  of the ATI acquisition  agreement,  the
Company  obtained  and  guaranteed  an  equipment  lease  financing
facility  for  ATI's use. The financing facility  was  subsequently
terminated by the lessor due to non-payment by ATI of payments  due
under  the  related  lease  agreements.  In  connection  with   the
rescission  of  the  ATI  acquisition  agreement,  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 lease 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. In the event of a  default
by  ATI under the lease financing facility, it is uncertain whether
or  not  the  Company would be able to satisfy  the  terms  of  the
guaranty  agreement or whether or not ATI would be able to  satisfy
the terms of the promissory note.

As  of  December  31, 1997, the Company and its  subsidiaries  have
pending  outstanding  judgments  totaling  approximately  $170,000,
exclusive  of  the CCI judgment referred to above. These  judgments
arose from cancellation of office and equipment leases and from non-
payment of obligations due to trade creditors.

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> 68

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
healthcare  segment is the only segment in which  the  Company  has
continuing   operations.   The   operations   of   the    Company's
telecommunications   segment   are   classified   as   discontinued
operations   in   the  accompanying  consolidated   statements   of
operations for all periods presented. For summary operating results
of  the Company's discontinued telecommunications segment, see Note
4.

Capital     expenditures    of    the    Company's     discontinued
telecommunications segment were $-0-, $12,561 and $208,503 in 1997,
1996  and 1995, respectively; and, the identifiable assets  of  the
Company's discontinued telecommunications segment included  in  the
consolidated  balance sheets as of December 31, 1997 and  1996  are
$539 and $660,094, respectively.

In 1997, HMT had one customer that counted for approximately 50% of
the Company's consolidated net revenues from continuing operations.
In  1996  and  1995,  the NSC had one customer that  accounted  for
approximately  47%  and  100.0% of the Company's  consolidated  net
revenues  from  continuing operations. The Company  has  no  inter-
segment revenues.

<PAGE> 69

NOTE 16  STATEMENTS OF CASH FLOWS SUPPLEMENTAL INFORMATION


                                                 YEAR ENDED DECEMBER 31,
                                             ------------------------------
                                               1997       1996       1995
                                             --------   --------  ---------
Non-cash investing and financing activities:
 Equipment capital leases                    $ 73,184   $703,215  $ 112,308
                                             ========   ========  =========
 Notes payable issued in
  connection with
  business acquisitions                      $  --      $  --     $ 700,000
                                             ========   ========  =========
  Issuance of stock for debt                 $716,318   $199,150  $   --
                                             ========   ========  =========

Cash paid during the period for:
 Interest                                    $131,635   $  --     $  23,055
                                             ========   ========  =========
 Income taxes                                $  --      $  --     $   --
                                             ========   ========  =========
<PAGE> 70

NOTE 17 EVENTS SUBSEQUENT TO DECEMBER 31, 1997

In  March 1998, the Company made an offer to each of the holders of
its  10%  convertible debentures payable to the former shareholders
of  TNI  to redeem the debentures in return for 1.5 shares  of  the
Company's  common stock for each dollar of principal, plus  accrued
interest,  due to each of the debenture holders, plus common  stock
purchase  warrants exercisable at any time over a five year  period
at an exercise price of $0.20 per share. The number of common stock
purchase  warrants to be issued upon acceptance  of  the  offer  to
redeem the debentures is to be determined by dividing the principal
amount  of  each  debenture by two(2). As of March  31,  1998  (the
expiration  date of the offer), the Company received the acceptance
of all of the holders of the debentures. Pursuant to the redemption
offer,  the Company is to issue 893,278 shares of its common  stock
and   450,000  stock  purchase  warrants  (225,000  of  which   are
exercisable  at  $1.50  per share by the terms  of  the  respective
debenture  note and 225,000 of which are exercisable at  $0.20  per
share pursuant to the redemption offer).

In March 1998, the Company, TNI, International Teledata Corporation
("ITD")   and   certain  former  employees  of  the  Company   (the
"Employees")  entered  into an agreement  (the  "Agreement")  which
provided  for the transfer of certain ITD assets to the  Employees.
The  assets transferred pursuant to the Agreement were sold to  ITD
by  TNI  pursuant to the Purchase and Sale Agreement, dated  as  of
January  31,  1997,  between TNI and ITD. In  connection  with  the
transfer  of assets pursuant to the Agreement, the Company canceled
the  $500,000  convertible debenture note issued by ITD  (the  "ITD
Note")  in  conjunction  with the Purchase and  Sale  Agreement  in
exchange   for  496,902  shares  of  the  Company's  common   stock
beneficially owned by the Employees and the waiver by the Employees
of  accrued and unpaid compensation due to them and cancellation of
their employment agreements with the Company.

<PAGE> 71

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.

Following is a summary of the allowance for doubtful accounts:

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
 Additions:
  Provision for bad debts charged
    to operations                                39,816
 Deductions:
  Write-offs                                    (63,214)
  Discontinued operations                        (4,676)
                                                -------
Balance, December 31, 1997                     $   --
                                                =======


The  provision  for bad debts charged to operations  applicable  to
discontinued operations was $475,711 in 1996.

NOTE 19 - PROPOSED ACQUISITION

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 Acquisition Shares.
The  acquisition  of  HMG is subject to, among  other  things,  the
Company  obtaining  equity  or  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 contemplated a December 31, 1997 closing. Subsequent thereto,
the  Agreement  to  Exchange Stock was  terminated  by  the  mutual
consent of the parties.

<PAGE> 72

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

Effective  February  20,  1998, Ernst  &  Young  LLP  resigned  as
independent  auditor of the Registrant. The  reports  of  Ernst  &
Young  LLP  on the Registrant's consolidated financial  statements
for  the  past two fiscal years did not contain an adverse opinion
or  a disclaimer of opinion and were not qualified or modified  as
to  audit scope or accounting principles. The reports of  Ernst  &
Young LLP included an explanatory paragraph expressing substantial
doubt  about  the  Registrant's ability to  continue  as  a  going
concern.

In  connection  with  the audits of the Registrant's  consolidated
financial statements for each of the two years ended December  31,
1996,  and  in  the  subsequent interim  periods,  there  were  no
disagreements with Ernst & Young LLP on any matters of  accounting
principles  or  practices,  financial  statement  disclosure,   or
auditing  scope  and  procedures which, if  not  resolved  to  the
satisfaction of Ernst & Young LLP, would have caused Ernst & Young
LLP to make reference to the matter in their report.

Ernst  &  Young  LLP  has  furnished a  letter  addressed  to  the
Commission  stating  that it agrees with the statements  contained
herein.  A copy of that letter, dated February 25, 1998, is  filed
as an exhibit to the Company's Form 8-K dated February 25, 1998.

Effective  March  4, 1998, the Registrant engaged  Moore  Stephens
Lovelace,   P.L.   to   audit  its  1997  consolidated   financial
statements.   The   decision  to  cease   the   registrant-auditor
relationship  between Registrant and Ernst &  Young  LLP  and  the
engagement of Moore Stephens Lovelace, P.L. was not recommended or
approved by the Registrant's Board of Directors.

<PAGE> 73

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:


                                                                Director
Name                  Age  Positions With Co. and Subsidiaries   Since
--------------------  ---  -----------------------------------  --------
Edwin B. Salmon, Jr.  60   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

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> 74

Messrs.  Kowalczyk, 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 after the filing of this 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 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> 75

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.

<PAGE> 76

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 executive officers of the  registrant
whose  compensation exceeded $100,000 for the year ending  December
31, 1997.

                                          Annual Compensation
                            --------------------------------------------
Name & Principal Positions                                    Long-Term
--------------------------   Year    Salary  Bonus   Other  Compensation
                             ----    ------  ------  -----  ------------
Stephen E. Williams          1997  $150,000  $ --   $  --   $  --
Chief Executive              1996   177,500    --    7,500     --
Officer (1)(2)(3)            1995   190,625    --    7,500     --

James T. Kowalczyk           1997    32,500    --      --      --
President  and Director (4)  1996      N\A     N\A     N\A     N\A
                             1995      N\A     N\A     N\A     N\A

Edwin B. Salmon, Jr.         1997   150,000    --      --      --
Chief Financial Officer,     1996   177,000    --    7,500     --
 Treasurer and Chairman of   1995    99,630    --    9,000     --
 the Board(1)(4)

(1) The  named  executive  officers  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. Effective December 1, 1996,  the
annual  salaries  of Messrs. Salmon and Williams  were  reduced  to
$150,000, each.

(2)  In 1995, 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.

(3)In  April and June 1997, Mr. Willliams resigned as the Company's
President and CEO and Director, respectively.

(4)In  August  1997,  each  of Messrs. Kowalczyk  and  Salmon  were
granted  options  to  purchase 500,000 shares of  the  Registrant's
common stock, exercisable at $0.10 per share at any time over  five
years.

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

<PAGE> 77

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  February
28,  1998  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.



  Name of                        Amount and Nature           Percent
Beneficial Owner              of Beneficial Interest(1)   of Class(1)
----------------------        -------------------------   -----------
Edwin B. Salmon, Jr.              625,762   (2a)             1.89
                                  200,000   (2b)             0.60
                                  261,533   (2c)             0.79
                                  224,418   (2d)             0.68
                                   40,000   (2e)             0.12
                                   40,000   (2f)             0.12
James T. Kowalczyk                571,709   (3)              1.72
Richard A. Sweet                  226,410   (4)              0.68
Larry R. Snapp                    127,250   (4)              0.38
Hugh M. Gibbons                   400,000                    1.21
All Directors and Executive 
 Officers as a Group(5 persons) 2,717,082   (5)              8.19
                                4,000,000   (6)             12.06
NIDAN Corporation               7,746,389   (7)(8)          23.35
NIDAN Corporation               7,042,172   (9)             21.23


(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.

<PAGE> 78

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

(2d)  These  shares are owned by American First Equipment  Leasing,
Inc.  Mr.  Edwin B.Salmon disclaims beneficial ownership  of  these
shares.  Mr.  David Salmon, Mr. Edwin B. Salmon's adult  son  is  a
Director  and  President  and   Mr. Winfred  Russell  is  a  former
President of this corporation. Mr. Edwin B. Salmon was reported  to
be  one  of  two directors on the annual report for the corporation
filed  with  the  State of Florida; but, Mr. David Salmon  and  Mr.
Edwin  B. Salmon maintain that the annual report was filed in error
and  Mr.  Edwin B. 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 repayment  of  his
loans  to the corporation 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.  Edwin  B.  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.
Edwin  B.  Salmon currently has no such authority. No purchases  or
sales  of  the  registrant's common stock by this corporation  have
been  initiated  by the registrant. 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.
Edwin B. Salmon is the grantor of this irrevocable trust; but,  his
three  adult  children, including Mr. David Salmon,  none  of  whom
reside  with  him,  are the co-trustees and one  of  Mr.  Edwin  B.
Salmon's  daughters is the sole beneficiary. Mr. Edwin  B.   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.
Edwin B. Salmon is the grantor of this irrevocable trust; but,  his
three  adult  children, including Mr. David Salmon,  none  of  whom
reside  with  him,  are the co-trustees and one  of  Mr.  Edwin  B.
Salmon's  daughters is the sole beneficiary. Mr.  Edwin  B.  Salmon
disclaims any beneficial interest in this trust. The address of the
trust is 700 S.W. 66 nd Blvd. ,Gainesville, Fla. 32607.

(3)  Includes options for 500,000 shares exercisable at an exercise
price  of $0.10 per share at any time through August 15, 2002.  The
address of Mr. Kowalczyk is the address of the Company.

<PAGE> 79


(4)  Includes options for 100,000 shares exercisable at an exercise
price  of $0.10 per share at any time through August 15, 2002.  The
address of Mr. Sweet and Mr. Snapp is the addresses of the Company.

(5)   Includes  the  shares and options referred  to  in  (2a)-(2g)
above,  plus the options referred to in (3) and (4). Mr.  Edwin  B.
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.

(6)  Includes  4,000,000 shares issued in escrow  pursuant  to  the
terms  of  a Settlement Agreement and Release dated as of March  2,
1998  between the Company and Timboon LTD. These shares are  to  be
liquidated by Timboon LTD in payment of $1,200,000 of 4% cumulative
convertible  debentures. Timboon LTD has  appointed  the  Board  of
Directors  ex-officio  as  proxy of  Timboon  with  full  power  of
substitution  to  vote the number of shares Timboon  LTD  would  be
entitled  to  cast if personally present at any annual  meeting  or
special meeting of stockholders of the Company at any time prior to
January  31, 1999. The address of Timboon LTD is 28 Hagvura Street,
Karni Shomron, Israel.

(7)Includes  7,746,389 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 as of February 28, 1998,
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.

(8)  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
                                         McBain, Michigan 49657
Kenneth Earl Gilde                       570 W. Blue Road
                                         Falmouth, Michigan 49632
David E. Gilde                           4565 Forward Road
                                         Falmouth, Michigan 49632
Phillip S. Gilde                         8200 S.McGee Road
                                         McBain, 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

<PAGE> 80

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,  may
violate the terms and conditions of the consent order entered  into
between the Company and the State of Michigan. The Company has  not
yet  made  a final determination as to conversion of the debentures
without a violation of Michigan law and the consent order.

(9) Includes 7,042,172 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)   such   convertible
debentures were converted as of February 28, 1998 and (ii) exercise
of warrants issuable upon conversion.

<PAGE> 81

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

At  December 31, 1996, the Company had an outstanding $25,000  note
payable  to Mr. Edwin B. Salmon bearing interest at 8%. This  note,
plus  accrued  interest, was converted into 25,762  shares  of  the
Company's  common stock in February 1997. During 1997,  Mr.  Salmon
loaned  the Company $40,243 without interest and the Company repaid
Mr. Salmon $40,243.

At December 31, 1996, the Company had notes outstanding to American
First  Equipment Leasing totaling $62,741. During 1997, the Company
borrowed  $39,500  from  American First Equipment  Leasing,  repaid
$44,241 of such notes, plus accrued interest, and 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.  See  Note
2(d)  to  Item 12 "Security Ownership of Certain Beneficial  Owners
and Management."

During 1997, the Company borrowed $65,000 from Brittany Leigh, Inc.
and repaid $65,000, plus accrued interest. See Note 2(c) to Item 12
"Security Ownership of Certain Beneficial Owners and Management."

At  December 31, 1996, the Company had outstanding notes payable to
Mr.  Richard  A. Sweet, a Director and shareholder of the  Company,
totaling  $40,000.  During 1997, the Company  converted  the  notes
payable  outstanding  to  Mr. Sweet, plus  accrued  interest,  into
41,565 shares of the Company's common stock.

As  of December 31, 1996, the Company had outstanding notes payable
to  the  former  shareholders  of TNI  totaling  $450,000,  bearing
interest  at 10% per annum, and $250,000 outstanding to the  former
shareholders  of ATI, bearing interest at 6% per annum.  Subsequent
to  December  31, 1997, the Company issued 893,278  shares  of  its
common stock and 450,000 stock purchase warrants (225,000 of  which
are  exercisable at $1.50 per share by the terms of the  respective
debenture  note and 225,000 of which are exercisable at  $0.20  per
share  pursuant to a redemption offer) in satisfaction of the notes
payable to the former shareholders of TNI. The notes payable to the
former  shareholders  of  ATI were removed  from  the  consolidated
balance sheet in 1997 in connection with the rescission of the  ATI
acquisition.

At  December 31, 1996, the Company had outstanding notes to certain
shareholders  (other  than  to Mr. Salmon,  Brittany  Leigh,  Inc.,
American  First  Equipment Leasing, Inc. and  Mr.  Sweet)  totaling
$235,000  bearing  interest at 8% to 10% per  annum.  During  1997,
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 $135,000  at
10%  interest. Of these notes, $170,000, plus accrued interest, was
converted during the year into shares of the Company's common stock
at  prices ranging from $0.90 to $1.00 per share and $200,000, plus
accrued interest, was paid in cash.

<PAGE> 82

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. During 1997, the
Company  converted $84,000  of  these  convertible debentures, plus
accrued interest, into 19,033 shares of the Company's common stock.

During  1997, the Company issued an aggregate of 142,857 shares  of
its  common stock to American First Equipment Leasing and  Brittany
Leigh, valued at $61,829, for services rendered to the Company.

<PAGE> 83

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, 1997                 29

Independent Auditors' Report on the Consolidated Financial
  Statements for the years ended December 31, 1996 and 1995       30

Consolidated Balance Sheets as of December 31, 1997 and 1996      31

Consolidated Statements of Operations for each of the three
  years in the period ended December 31, 1997                     33

Consolidated Statements of Stockholders' Equity for each of
  the three years ended in the period December 31, 1997           34

Consolidated Statements of Cash Flows for each of the three
  years ended in the period December 31, 1997                     36

Notes to Consolidated Financial Statements                        37


(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.

(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.
<PAGE> 84

        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.
        16.++   Form of Settlement Agreement dated as of March  2,1998 
                between the Company and Timboon LTD, including Joint Escrow
                Instructions and Revocable Proxy.
(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.
<PAGE> 85

    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.
      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
     (16) 1.+  Letter re change in certifying accountant

<PAGE> 86

     (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)
   (27.4)****  Financial Data Schedule (Three months ended March 31, 1997)
   (27.5)****  Financial Data Schedule (Six months ended  June  30, 1997)
   (27.6)****  Financial Data Schedule (Nine months ended September 30, 1997)
   (27.7)+++   Financial Data Schedule (Year ended December 31, 1997)

   (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 respective quarterly period.

#     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.

####  Incorporated by reference to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1996.

 +    Incorporated by reference to the Company's Current Report on Form
      8-K, as filed on November 25, 1998.

 ++   Incorporated  by reference to the Company's Current  Report  on
      Form 8-K, as filed on March 10, 1998.

 +++  Filed herewith.

<PAGE> 87

(b) Reports on Form 8-K

The  following reports were filed on Form 8-K for the three  months
ended December 31, 1997 and prior to the filing date hereof:


1.  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.

2.    On November 25, 1997, the Company filed a Form 8-K. The  date
of  the  event  reported was November 20, 1997. The event  reported
was the resignation of Ernst & Young LLP as independent auditor  of
the Registrant.

3. On March 10, 1998, the Company filed a Form 8-K. The date of the
event  reported  was  March 2, 1998. The  event  reported  was  the
agreement  between  the Company and Timboon  LTD  (the  "Settlement
Agreement and Release") in settlement of all claims brought against
each   other  in  connection  with  the  Company's  $1,120,000   4%
cumulative convertible debentures.

<PAGE> 88

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: May 8, 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> 89   INDEX TO 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
       P10.*    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.
        16.++   Form of Settlement Agreement dated as of March 2, 1998
                between the Company and Timboon LTD, including Joint Escrow
                Instructions and Revocable Proxy.
(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

<PAGE> 90

      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<PAGE> 85
      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.

<PAGE> 91

      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
    (16)1.+     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)
    (27.4)****  Financial Data Schedule (Three months ended March 31, 1997)
    (27.5)****  Financial Data Schedule (Six months ended June 30, 1997)
    (27.6)****  Financial Data Schedule (Nine months ended September 30, 1997)
    (27.7)+++   Financial Data Schedule (Year ended December 31, 1997)
    (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")

<PAGE> 92

*     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 respective quarterly period.

#     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.

####  Incorporated by reference to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1996.

+     Incorporated by reference to the Company's Current Report on Form
      8-K, as filed on November 25, 1998.

++    Incorporated  by reference to the Company's Current  Report  on
      Form 8-K, as filed on March 10, 1998.

+++   Filed herewith.




</TABLE>