UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K
         (Mark One)

(X)      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1996

                                       or

( )      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                    For the transition period from          to

Commission File Number: 0-26622

                       COMPUTER MANAGEMENT SCIENCES, INC.
              (Exact name of registrant as specified in its charter)

      Florida                                         59-2264633
(State or other jurisdiction            (I.R.S. Employer Identification Number)
 of incorporation or organization)

8133 Baymeadows Way, Jacksonville, Florida               32256
(Address of principal executive offices)               (Zip Code)


Registrant's telephone number, including area code: (904) 737-8955

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

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

                          Common Stock, $.01 par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                      Yes    X       No

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

The aggregate  market value of shares of the  registrant's  common stock held by
non-affiliates  of the  registrant as of February 28, 1997,  was  approximately
$157,553,000.

The number of shares of the registrant's  common stock issued and outstanding as
of February 28, 1997 was 12,998,451.

Documents  Incorporated by Reference:  Parts of the Company's  definitive  proxy
statement  for the Annual  Meeting of the Company's  Shareholders  to be held on
June 6, 1997 are incorporated by reference into Part III of this Form.



<PAGE>





                       COMPUTER MANAGEMENT SCIENCES, INC.
                Form 10-K For Fiscal Year Ended December 31, 1996







                                Table of Contents



     Item Number in

       Form 10-K                                                            Page



                                     PART I

        Item 1.  Business....................................................  1

        Item 2.  Properties.................................................. 11

        Item 3.  Legal Proceedings........................................... 11

        Item 4.  Submission of Matters to a Vote of Security Holders......... 11





                                     PART II

        Item 5.  Market For Registrant's Common Equity and Related Stockholder
                    Matters.................................................. 12

        Item 6.  Selected Financial Data..................................... 13

        Item 7.  Management's Discussion & Analysis of Financial Condition and
                    Results of Operations.................................... 15

        Item 8.  Financial Statements and Supplementary Data................. 20

        Item 9.  Changes in and Disagreements With Accountants on Accounting
                    and Financial Disclosure................................. 20





                                    PART III

        Item 10.  Directors and Executive Officers of the Registrant......... 21

        Item 11.  Executive Compensation..................................... 21

        Item 12.  Security Ownership of Certain Beneficial Owners and
                     Management.............................................. 21

        Item 13.  Certain Relationships and Related Transactions............. 21





                                     PART IV

        Item 14.  Exhibits, Financial Statements, Schedules, and Reports on
                     Form 8-K................................................ 22





<PAGE>

                       COMPUTER MANAGEMENT SCIENCES, INC.

                Form 10-K For Fiscal Year Ended December 31, 1996





                                     PART I

Item 1.  Business

General

      Computer  Management  Sciences,  Inc.  ("CMSI" or the "Company")  provides
information  technology consulting and custom software development services to a
diverse  group  of  clients,  primarily  Fortune  1000  companies,  other  large
organizations  and state and local  governments  located  throughout  the United
States. The Company's services are generally an outside resource supplementing a
client's  internal  information  technology ("IT")  capabilities,  and include a
broad range of technical  services,  such as  technology  support  services,  IT
solutions  services and strategic IT  consulting.  Technology  support  services
include  systems support and  maintenance  and contract  programming.  Solutions
services include software application design, development and implementation, as
well as systems integration.  Strategic consulting services include planning and
designing    enterprise-wide    information   systems   and   business   process
re-engineering  which allow clients to maximize the strategic  value of business
information.

      The Company was  founded in 1983 as a provider of  technology  support and
contract  programming.  In late 1992 and early  1993,  in  response  to industry
trends,  the  Company  decided to seek more  profitable  and higher  value-added
engagements,  particularly  client/server solutions engagements and strategic IT
consulting. Today, CMSI's services typically are delivered by a "Solutions Team"
consisting  of technical  professionals  having an  appropriate  combination  of
support, solutions and strategic consulting expertise. The Company believes this
Solutions  Team  approach   differentiates   CMSI  from   competitors   offering
conventional  contract staffing services because this service delivery structure
allows  CMSI to  cross-market  a broader  range of skills to  existing  clients.
Solutions  Teams are often  organized  within the Company's  System  Outsourcing
Centers  and  employ  the  "Software  Factory  Process"  ("SFP"),   which  is  a
standardized   process,   developed  by  the   Company,   for  the  creation  of
documentation  and the  development  of custom  software.  The SFP  utilizes the
Company's  proprietary   Evolution(R)   methodology,   which  is  a  structured,
step-by-step  approach to  application  development  that  facilitates  both the
design  of  systems  and  the  integration  of  these  systems  with a  client's
organizational  objectives.  Also,  the Company has strategic  alliances  with a
number of major technology  companies,  including Logic Works,  Inc.,  Microsoft
Corp., PowerSoft  Corporation,  Inc. and Texas Instruments  Incorporated,  which
provide access to technical and marketing information,  specialized training and
cooperative marketing efforts.

      The Company provides services through its corporate  headquarters  located
in  Jacksonville,  Florida  and its  network  of ten branch  offices  located in
Hartford,  Atlanta,  Greenville,  Boston, Portland (Oregon), Chicago, Cleveland,
Tallahassee,   Charlotte  and  Detroit.   Through  February  1997,  the  Company
established  three  additional  branches in Denver,  Washington,  D.C. (both the
Denver and Washington  branches were  established  through the Company's  merger
with Miaco Corporation) and Winston-Salem, North Carolina. At December 31, 1996,
the  Jacksonville  office,  which serves as the prototype for the branches,  was
staffed  by   approximately   155  professional   consultants.   The  number  of
professional consultants at the other branches ranged from 2 to 62, and averaged
approximately 31. The Company believes that its branch network of branch offices
provides  clients  with the  local  contact  and a broad  range  of  skill  sets
necessary to establish and maintain long-term client relationships.  Each branch
office is managed by a branch  manager  who reports  directly to a Company  vice
president.

      In October 1995,  the Company opened its first System  Outsourcing  Center
("SOC") in Jacksonville.  The Company  subsequently  opened two additional SOCs;
Atlanta in December 1996 and  Tallahassee  in February  1997. A SOC is a modern,
highly secure facility  equipped with a variety of advanced  computer  hardware,
software,  and  networking  technologies  (Windows  N/T) and  systems.  A SOC is
designed  to enable  the  Company to provide  its full  range of  services  in a
state-of-the-art  Company facility rather than on-site at the client's facility.
The Company believes that the SOC architecture is a major  differentiation among
its  competitors  and will be an  important  factor  in  attracting  outsourcing
engagements  and marketing its IT consulting  services.  The Company  intends to
open three additional SOCs, in Charlotte,  Denver,  and Greenville,  by year-end
1997.

                                       1
<PAGE>


Forward Looking Statements

      This Annual Report on Form 10-K  contains  certain  information  and trend
statements that constitute  "forward-looking  statements"  within the meaning of
the  Private   Securities   Litigation  Reform  Act,  which  involve  risks  and
uncertainties.  Actual results may differ  materially from the results described
in the  forward-looking  statements.  When  used in  this  document,  the  words
"anticipate", "believe", "estimate", "expect", "intend", "project", "target" and
other  similar  expressions,  as they  relate to the  Company,  are  intended to
identify forward-looking  statements.  Such statements reflect the current views
of the Company with respect to future  events and are subject to certain  risks,
uncertainties  and  assumptions  that  include,  but are not limited to,  growth
through business  combinations and internal expansion,  the Company's ability to
attract   and  retain   qualified   consultants,   dependence   on   significant
relationships  and  the  absence  of  long-term  contracts,  project  risk,  the
Company's ability to effectively  manage a large and rapidly changing  business,
pricing and margin  pressures,  and competition.  Please refer to discussions of
these and other  factors in this Annual  Report and other  Company forms on file
with the Securities and Exchange Commission. The Company disclaims any intent or
obligation to update  publicly these  forward-looking  statements,  whether as a
result of new information, future events or otherwise.

Acquisitions

      CMSI is  actively  pursuing  the  acquisitions  of  companies  that  offer
synergistic  technological  capabilities  not  currently  possessed  by  CMSI or
similar companies in desirable geographic markets.

      In December  1995,  the Company  exchanged  approximately  343,991  shares
(adjusted for subsequent  stock splits) for all the outstanding  common stock of
MIS Software Development, Inc. ("MSD"), a software development company, based in
Tallahassee, Florida, that provides information technology services to state and
local  governments  in the form of on-line  data  bases  accessed  and  up-dated
directly by the user through its computer  terminals.  CMSI has  identified  the
state  and  local  government  market  as a  growth  sector  in the  process  of
converting to client/server  technologies.  MSD is a wholly-owned  subsidiary of
CMSI  and its  acquisition  was  accounted  for as a  pooling-of-interests  and,
accordingly,  the consolidated  financial  statements for all periods  presented
have been restated to include the accounts and results of operations of MSD. For
1996 and 1995, MSD  contributed  $4,411,325 and $2,837,617  towards CMSI's total
revenue of $46,095,306 and $31,998,220, respectively.

      On January 30, 1996, the Company  acquired  certain assets,  contracts and
personnel  of  Weldon   Systems,   Inc.,  a  company   located  in  Springfield,
Massachusetts that develops customized computer software  applications for firms
in the  financial  services and  insurance  industries.  The purchase  price was
$225,000 and the acquisition was accounted for under the purchase method.

      On April 30, 1996,  the Company  exchanged  approximately  945,907  shares
(adjusted  for  subsequent  stock  splits)  of its  common  stock for all of the
outstanding common stock of Summit Computer  Services,  Inc. ("SCS"), a computer
consulting firm, based in Charlotte, North Carolina, with concentrated expertise
in client/server technology. This business combination has been accounted for as
a pooling-of-interests  and, accordingly,  the consolidated financial statements
for all periods presented have been restated to include the accounts and results
of operations  of SCS. SCS is a  wholly-owned  subsidiary of CMSI.  For 1996 and
1995, SCS contributed  $6,720,580 and $4,185,322 towards CMSI's total revenue of
$46,095,306 and $31,998,220, respectively.

      On July 31,  1996,  the  Company  acquired  all of the assets of  Pathways
Consulting, Inc. ("Pathways"), an information technology firm, based in Atlanta,
Georgia,  specializing in providing systems  integration  consulting services to
the public utility  industry.  The  acquisition was accounted for as a purchase,
with a total  purchase  price of $4.4  million in cash of which $2.3 million was
paid at closing  and the  balance,  $2.1  million,  is  payable in equal  annual
installments over an approximate three year period subject to the achievement of
certain revenue goals.  Subsequent to December 31, 1996,  Pathways  exceeded its
first revenue goal and as a result $700,000 of contingent  consideration will be
paid in the first quarter of 1997.

                                       2
<PAGE>

      On January 17, 1997,  the Company  exchanged  584,080 shares of its common
stock for all of the outstanding common stock of Miaco Corporation  ("Miaco"), a
computer consulting firm, based in Denver, Colorado,  specializing in relational
database and client/server technologies. Miaco also has an office in Washington,
D.C. This business  combination will be accounted for as a  pooling-of-interests
and,  accordingly,  the Company's historical  consolidated  financial statements
presented in future reports will be restated to include the accounts and results
of  operations  of Miaco.  Miaco will  continue  to  operate  as a  wholly-owned
subsidiary of the Company.

Industry Background

      Historically,  computing was conducted on proprietary  host-based  systems
operating on mainframes or minicomputers supplied by a single vendor.  Operation
of these  centralized  "legacy" systems (i.e.,  established  applications run on
mainframes  that  require  frequent  enhancements)  typically  was  managed by a
Management  Information  Systems  ("MIS")  department  that  dictated  the  data
processing services available to the end-user.  In the 1980's, the proliferation
of  end-user  software,  such as  financial  spreadsheets,  databases  and  word
processing  packages,  resulted in rapid growth in the numbers of end-users  and
other systems, including some local area networks (LANs), not under MIS control.
Accordingly,  the  demand  for  more  cost-effective,  responsive  and  flexible
computing  systems  also grew.  Organizations  began  implementing  increasingly
varied  computing  environments  made up of personal  computers,  work stations,
minicomputers  and mainframes  interconnected  in local and wide-area  networks.
This move to open, distributed "client/server" systems (i.e., a configuration of
interconnected  personal  computers  or  workstations  and a  server,  such as a
minicomputer, which stores data and applications and distributes them across the
network)  continues as organizations  seek to take advantage of the improvements
in price/performance ratios offered by client/server  architectures and enabling
technologies.

      The Company believes this  technological  transition toward  client/server
systems  and  the  corresponding   expansion  of  technological  options  offers
significant  opportunities to the Company because,  in many cases,  clients have
found it prohibitively  expensive to maintain an in-house MIS staff sufficiently
well-versed in emerging technologies.  Moreover,  many organizations are finding
it  increasingly  difficult  and costly to support and maintain  their  existing
legacy systems because,  as providers of IT services focus on the  client/server
segment of the  market,  fewer IT  professionals  will  maintain  the skill sets
necessary to support legacy systems.

Strategies

      The Company's  objective is to be a leading  provider of IT consulting and
custom  software  development  services.  To achieve this  objective,  CMSI will
continue to pursue the following strategies:

      Provide  Differentiated  Value-Added Services. The Company is committed to
continuously expanding its services to meet the needs of its clients. In keeping
with this strategy, the Company will continue to provide network maintenance and
support  services to its numerous  legacy  system  clients,  while  increasingly
seeking more  value-added  IT solutions and  strategic IT  consulting  projects,
which are typically  billed at higher rates.  The Company intends to continue to
capitalize on its  proprietary  Evolution(R)  methodology to attract  additional
high-value business,  particularly engagements involving strategic IT consulting
services.  In  addition,  the SOCs will  enable the  Company to compete for more
lucrative  fixed-bid  and  outsourcing  engagements  and to  demonstrate  CMSI's
credentials and solutions capabilities.

      Focus on Margins.  CMSI seeks to continuously improve its gross margin and
operating margin.  One initiative  designed to enhance margins is to secure more
high-value  IT  solutions  and  strategic  IT  consulting  engagements,  such as
client/server  projects,  which  constitute  more than one-half of the Company's
current engagements.  Another initiative to increase  profitability is to obtain
more fixed-bid engagements which offer the opportunity to achieve higher margins
if projects are managed effectively. The Company also considers its current rate
of consultant  utilization (99%) and its emphasis on evaluating and compensating
employees on the basis of profitability  important components of its strategy to
improve its margins.

                                       3
<PAGE>

      Expand Client Base through  Incremental Growth, New Branches and Strategic
Alliances.  The Company intends to continue a  three-pronged  growth strategy to
expand its client base.  The Company  believes  that it can sustain the internal
growth  currently   underway  in  its  existing  branches  by  establishing  and
maintaining  long-term client  relationships  through the continuous delivery of
differentiated  value-added  services  that  address a  client's  IT needs.  The
Company also intends to continue to expand  horizontally  by opening  additional
branches  in  new  geographic  locations.  The  Company  believes  that  it  has
established a successful  operating model for establishing new branches that can
be  replicated in other  markets.  Finally,  the Company  intends to continue to
expand  vertically  by  acquiring  firms  that offer  synergistic  technological
capabilities not currently possessed by CMSI.

      Continue Technology Leadership.  The Company is determined to continuously
provide  state-of-the-art IT solutions to its clients. For instance, the Company
has  assisted  many of its  clients  in  smoothly  making  the  transition  from
legacy-based  systems to  client/server  systems.  In addition,  the Company has
established  strategic  alliances with  organizations such as Logic Works, Inc.,
Microsoft Corp.,  PowerSoft  Corporation,  Sybase,  Inc., and Texas  Instruments
Incorporated  that enable CMSI to implement the latest in advanced  hardware and
software  technology.  The Company believes its strategic alliances with vendors
will be enhanced by the SOCs, which are available to display  additional  vendor
hardware, utilize tools and profile new applications.

      Attract,  Develop,  Motivate  and Retain  Quality  People.  One of the key
elements  to the  Company's  continued  success is its  ability  to hire  highly
skilled  consultants.   Accordingly,   CMSI  devotes  significant  resources  to
recruiting,  maintaining  a full-time  recruiter  in each  branch and  full-time
recruiting  staff  at  corporate  headquarters.   To  help  attract  and  retain
consultants,  the Company has established  several  employee  benefit plans. The
Company's Employee Stock Ownership Plan (ESOP), established in 1989, has enabled
the  Company's  employees to acquire  approximately  1,474,300  shares of Common
Stock of the  Company as of  December  31,  1996.  The  Company  also  motivates
employees by  compensating  them on the basis of their  performance  rather than
their  position or tenure.  For  instance,  each employee is eligible for a cash
bonus  or  incentive  stock  options  based  on his or her  contribution  to the
Company's  profitability.  Development  of  Company  employees  is  fostered  by
in-house  peer-to-peer  training and mentoring programs that are conducted after
hours in the SOCs.  In  addition,  the Company  facilitates  development  of its
employees'  technical  skills by providing a  low-interest  loan  program  which
allows employees to finance hardware and software purchases for personal use.

Company Services

      CMSI  provides a broad  range of IT  consulting  services,  including  (i)
technology  support  services  designed  to provide  professional  personnel  to
augment a client's internal  information  systems  management and staff; (ii) IT
solutions  services  designed to solve a client's  complex  information  systems
problems or to satisfy a client's technological objectives;  and (iii) strategic
consulting  services targeted at the  enterprise-wide or business function level
and designed to enable a client to effectively integrate information systems and
strategic organizational goals.  Historically,  technology support services were
the  Company's  primary line of business,  accounting  for  virtually all of the
Company's  revenues  in 1992.  Since  1992,  the  Company  has  concentrated  on
developing the technical and managerial expertise required to deliver high-level
IT solutions services and strategic IT consulting  services to its clients.  The
following is a description of the Company's principal services.

      Technology   Support   Services.   The  Company  provides  highly  skilled
professionals to augment the internal  information  systems management and staff
of its clients.  Increasing  costs of MIS personnel and  facilities and hardware
constraints are the most  significant  competitive  factors driving this area of
the Company's  business.  The Company can provide these  services  either at the
client's site or by outsourcing, in whole or in part, to a Company facility. The
Company  believes  implementation  of SOCs will  greatly  enhance its ability to
provide   cost-effective   technology   support  services.   Technology  support
engagements,  with the exception of some data processing projects, generally are
billed on a time and materials basis.  Typical  technology  support  engagements
include the following:

                                       4
<PAGE>

           Systems Support,  Maintenance and Contract  Programming.  The Company
offers a variety of services  designed to support and maintain legacy,  midrange
(e.g., IBM AS/400),  and client/server  systems.  These services include systems
maintenance  and  management  support,  contract  programming  and  applications
enhancement,  training and help desk services.  The Company generally utilizes a
Service  Level  Agreement  to  define  the  scope  of the  various  support  and
maintenance services that will be provided in a client engagement.

           Data  Processing.  The  Company  offers a diverse  set of services to
clients  seeking cost  reductions and quality  improvement  in data  processing.
Clients  typically seek the Company's data processing  services because they are
constrained  by space or computing  asset  limitations.  The Company can address
these problems by outsourcing a client's in-house data processing operation,  in
whole or in part, to one of the Company's  facilities.  The Company believes the
SOCs have enhanced its ability to compete in the data processing  segment of the
IT services  market because they enable the Company to  efficiently  migrate the
client's data processing needs to the SOCs.

           Training.  The Company  offers  client/server  training  encompassing
various programming languages, software applications and methodologies. The goal
of  training  services  is  to  enhance  the  client's  satisfaction  with,  and
utilization  of, the systems and  applications  developed for the client through
education in the  technologies  and methods used to design and to develop  those
systems and applications.  The Company believes that proper training is critical
to end-user  "buy-in" to the  Company's  work  product  and the  maintenance  of
long-term  client   relationships.   The  Company  currently  supports  training
activities  at the SOCs  which has  strengthened  this  aspect of the  Company's
services.

      IT Solutions Services. The Company provides complex technical solutions to
the information  technology needs and goals of its clients. The Company believes
that one of the primary  factors  behind the growth in the solutions  segment of
the IT services market is the continuing  migration by large  organizations from
centralized,  mainframe systems to open, distributed computer networks utilizing
client/server architectures.  As a result, demand for the Company's IT solutions
services continues to grow. IT solutions services typically are billed on a time
and material basis, although the number of fixed-bid  engagements  undertaken by
the Company has recently  increased.  IT solutions  services  engagements  often
involve one or more of the following services:

           Software  Application  Design.  The  Company's  software  application
design services  result in a functional and technical  blueprint of the software
application  to be developed.  Such  applications  allow a client to enhance the
efficiency  and   functionality   of  specific   business   processes,   support
organizational goals, and achieve competitive advantage.  To enhance the quality
of the design,  a Solutions  Team  identifies all potential  business  processes
supported by the  application  and their related  functions,  prioritizes  these
processes,   identifies  end-user   requirements  and  details  the  application
specifications.  The  Solutions  Team then  delivers  a  comprehensive  plan for
developing and implementing the application.  In order to improve the efficiency
and quality of this process,  the Company maintains a library of object-oriented
software components to be re-used in software application  development.  In some
cases, the Solutions Team may employ the Company's  Evolution(R)  methodology in
applications  design,  which includes rapid application  development  techniques
such  as  parallelism,   reusable   components   repositories,   graphical  user
interfaces,   and  time-boxing  to  enable  the  Company  to  design  efficient,
cost-effective applications.

           Development,  Integration and Implementation.  These services include
development  of  the  custom  application  software  necessary  to  operate  the
application,  integration  of the  application  into  the  existing  information
processing architecture,  and testing the functionality of the application. Upon
completion of the development  process,  the Company helps the client  implement
the use of the application by the organization.  The Company typically  provides
training in advance of each stage of  application  roll-out so that end-users of
the  application  have the skills  required  to utilize  the  application.  This
facilitates   acceptance  of  the  application  and  any  new  related  business
processes, and enhances utilization of the application by client personnel.

                                       5
<PAGE>

      Strategic IT Consulting  Services.  The Company's  strategic IT consulting
services are  targeted at either the  enterprise-wide  or the business  function
level, and may include the re-engineering of certain business  processes.  These
services assist clients in identifying strategic  organizational  objectives and
in designing an IT  infrastructure  that will support  them.  From the Company's
perspective,   management   consulting  firms  typically   attempt  to  optimize
performance through improved strategic initiatives,  but often fail to integrate
these initiatives with the clients  information  technology system.  Conversely,
systems integrators tend to optimize  information systems, but often do not link
the system to the achievement of organizational  objectives.  CMSI,  through the
use  of  its  Evolution(R)  methodology,  provides  an  integrated  solution  by
identifying  strategic  objectives,  either at the  organizational  or  business
function level,  and designing a system that enables the end-user to achieve the
defined objectives.

      Using its Evolution(R) methodology,  the Company delivers its strategic IT
consulting  services  through a series of phases,  each of which  begins  with a
"facilitated  workshop" (a Company term referring to a group discussion designed
to develop ideas),  and results in a "deliverable"  (a Company term referring to
either a document or  prototype  that  details the results of the last phase and
guides the direction of the next phase). The facilitated  workshops are led by a
Company  team  consisting  of a session  leader,  who  focuses  and  directs the
session,  and a scribe,  who prepares the current phase's  deliverable.  Clients
participate   in  the   facilitated   workshops   through   a  team  of   client
representatives,  ranging from executive officers to entry-level  end-users.  At
each phase of the process,  the session leader  ensures that group  consensus is
reached  regarding  the  harmony  between  the  proposed  system  design and the
organizational  objectives  by  requiring  the  group  to  endorse  the  phase's
deliverable  before  proceeding  to the next  phase.  This  process  ensures  an
information system design that achieves organizational objectives.  Strategic IT
consulting services are billed on both a time and materials and fixed-bid basis.
The various  stages of the typical  strategic IT consulting  project,  using the
Evolution(R) methodology, are described below:
           Planning and Requirements Analysis.  CMSI provides expert analysis of
the potential and limitations of a client's  current  computing  system prior to
beginning  design of a new system.  A detailed  requirements  analysis  allows a
client to fully  understand the  capabilities  of its current system and enables
the client to determine  whether its current  configuration  will support its IT
needs and goals.  Analysis  services  also  include a review and analysis of the
architecture,  security,  risks  and  costs of the  client's  current  computing
system.

           Project  Definition.  The focus of the  analysis  (e.g.,  a  specific
business  function,  an  interrelated  set of functions,  or an  enterprise-wide
system) is addressed at the project  definition  stage.  The  parameters  of the
project are defined in a facilitated  workshop involving  high-level  executives
and   functional   end-users  who  consider  the  strategic   direction  of  the
organization in conjunction  with the scope of the project.  Once the boundaries
of the project are defined,  the scribe and the session  leader produce a system
plan that is endorsed by the project definition stage participants.

           Business  Process   Re-engineering.   After  completing  the  project
definition stage  previously  described,  clients  sometimes decide that certain
business processes must be completely re-engineered.  The Company attributes its
success in re-engineering business processes primarily to two factors: (i) it is
continuously  experimenting with leading edge technology that can be implemented
to  achieve  client  goals in an  innovative  fashion;  and (ii) as an  unbiased
observer,  the  Company is not bound by  organizational  constraints  that often
inhibit  creative  problem  solving.   The  Company  utilizes  its  Evolution(R)
methodology   to   combine   enabling   technologies,   such  as   client/server
architectures and graphical user interfaces,  with the client's knowledge of its
business to achieve  significant,  and sometimes  breakthrough,  improvements of
business processes.

           Systems Design.  The Company's systems design services assist clients
in  identifying  and  designing a network  infrastructure  that will support the
interrelated  strategic business  objectives and information needs identified in
previous stages.  Design services include selection of viable systems platforms,
creation  of  migration  plans  from  the  existing  to  the  proposed   system,
integration of systems,  applications and databases and project management. Once
the system is designed,  the Company  works with the client to develop  plans to
implement and manage the improved system.

                                       6
<PAGE>

Delivery of Services

      Solutions Teams. The  organizational  structure of the Company has evolved
as the  complexity  and  breadth of the IT  consulting  services  offered by the
Company have expanded.  To better serve client needs, the Company's services are
delivered by a Solutions  Team  consisting  of Company  professionals  who offer
expertise spanning the full range of the Company's services.  The Solutions Team
is important because it results in comprehensive, integrated solutions to client
needs,  regardless  of whether  those needs  involve a single  Company  service,
multiple unrelated services or an overlapping series of services.  The Solutions
Team is also  important  because  it  facilitates  cross-marketing  of  multiple
Company  services,  which furthers the Company's  objective of establishing  and
maintaining long-term  relationships with its clients. For instance, many of the
Company's current legacy system clients  eventually may migrate,  in whole or in
part,  to  client/server  systems.  Because the  Solutions  Team  already has an
established  relationship  with the client,  it has an advantage in securing the
higher-margin  solutions and consulting  services resulting from such migration.
The  organizational  structure  of the Company is  designed  to provide  clients
across the United States with a range of responsive, efficient, state-of-the-art
solutions to virtually all of their IT needs.

      Systems  Outsourcing  Centers.  CMSI opened its first Systems  Outsourcing
Center in  Jacksonville  during  October  of 1995 and two  additional  SOCs were
brought   on-line  during  December  1996  and  February  1997  in  Atlanta  and
Tallahassee,  respectively.  The  SOCs are  modern,  highly  secured  facilities
equipped with a variety of advanced computer hardware,  software, and networking
technologies  and  systems,  and are designed to enable CMSI to provide its full
range of services in a Company  facility  rather  than  on-site at the  client's
facility.  Because of computing  asset and  facilities  constraints  at client's
locations,  it is increasingly difficult for the Company to complete large scale
application or systems  development using client hardware while the client's old
applications and systems  continue to operate.  The SOCs address this problem by
enabling  CMSI to simulate many  hardware  environments  and thereby to complete
projects at the SOCs before they are  implemented at the client's  facility.  An
added  advantage  of the SOCs is that they allow the  Company to assume  project
management  responsibility,  which can improve the Company's  margins if managed
effectively  and increases the Company's  ability to confidently  seek fixed-bid
engagements.   Accordingly,   the  Company  is  actively  pursuing   outsourcing
engagements  and believes that the SOCs will provide a  significant  competitive
advantage in securing them.

      The SOCs  also  serve an  important  marketing  function  for the  Company
because they are visually and  technically  designed to make an effective  first
impression on clients  evaluating  the Company for a potential  engagement.  The
client conference and demonstration center is used to introduce CMSI credentials
and, more  importantly,  exhibit  similar  solutions  previously  developed in a
multi-media,  high  impact  presentation.  After  the  demonstration,  potential
clients tour the facility,  including the multi-seat fully equipped training and
education  center,  the open,  work-flow-oriented  office and projects area, and
conference  rooms. This escorted tour is designed to highlight that CMSI has (i)
the  resources to handle a broad range of  projects;  (ii)  technically  similar
solutions  already  developed;  (iii) the  infrastructure  required  for a rapid
response  to customer  needs;  and (iv) the  management  and  technical  support
required to effectively  implement a potential  project.  The SOCs also serve as
the  backbone  of  CMSI-NET,  a  nationwide  communications  network  connecting
multiple Company locations and on-line clients.  The Company anticipates opening
three more SOCs in Charlotte, Denver, and Greenville, by year-end 1997.

                                       7
<PAGE>

      Software  Factory  Process.  The  Software  Factory  Process  ("SFP") is a
standardized   process,   developed  by  the   Company,   for  the  creation  of
documentation  and  development  of  custom  software  utilizing  the  Company's
proprietary Evolution(R)  methodology within the SOC infrastructure.  The SFP is
written to be compliant with  International  Standards  Organization  (ISO) 9001
requirements.  A standardized product description produced using guidelines from
Evolution(R) is the critical  starting point to enable a smooth flow through the
software factory (i.e. SOC). This standardized  product  description  provides a
complete   computer-interpretable   definition  of  the   product's   functional
capabilities.  This  standard,  called the System Job Order (SJO),  provides the
complete  definition  of the product in standard  format that is easily read and
comprehended  by the  factory  personnel.  The first  stop in the  manufacturing
process for the SJO is Production  Control.  The SJO provides a definition  that
categorizes  the  overall  product  functionality  into  functional  blocks  and
potentially some early  identification of components.  The functional  component
descriptions are used by production control to check the component repository to
determine what  functional  components,  if any, match the SJO and can be pulled
from the component inventory warehouse.  The component inventories of other SOCs
are also on-line  accessible to determine if the required  components  reside in
another SOC. After component  requirements  review,  Production Control develops
the assembly instructions and/or component development specifications and routes
them to Production  Planning to start the resource allocation process. To comply
with ISO  9001  requirements  the SFP is the  documentation  for all  procedures
followed in implementing  each SJO. The SJO and its updates including actions by
all  factory  personnel  relative  to the SJO are  tracked in CMSI's  electronic
document management system. Additionally, periodic internal audits are performed
to maintain and ensure compliance with the SFP and ISO 9001.

      Evolution(R)  Methodology.  Delivery of many of the IT consulting services
offered  by  CMSI  are  supported  by  the  Company's  proprietary  Evolution(R)
methodology.  Evolution(R)  methodology is an integrated  set of stages,  tasks,
work products,  techniques, tools and project management guidelines that provide
a  standard   (reproducible)  approach  for  the  planning,   development,   and
maintenance  of  systems  targeted  for  the  client/server  architecture.  CMSI
developed the  Evolution(R)  methodology in response to the computing  evolution
from centralized mainframe systems to distributed  client/server  networks.  The
Company recognized that, although a network of personal computers provides great
benefits by putting accessible, understandable and affordable computing power on
the desktop of the end-user,  it often results in locally-optimized  information
technology decisions (point solutions) that are not optimal for the organization
as a whole. For instance,  applications and databases are increasingly  built by
paraprofessionals  (i.e.,  end-users  programming  with  spreadsheets and fourth
generation  language  and who  sometimes  have little or no  training)  who make
technical  choices  only  in the  context  of a  particular  application,  often
resulting  in  incompatibilities   and  crippling   after-the-fact   efforts  at
integrating  systems across  different  departments and locations.  These poorly
planned   decisions   often   substantially   increase  the  cost  to  integrate
incompatible  systems  and  reduce  overall  efficiency  and  productivity.   By
employing  its  Evolution(R)  methodology,  CMSI is able to help clients  either
avoid or correct these mistakes.


Markets and Clients

      CMSI provides  services to a diverse group of clients,  primarily  Fortune
1000  companies,  other  large  organizations  and state  and local  governments
located throughout the United States. Because of the diverse range of industries
in which the  Company's  clients  operate,  the Company  believes that it is not
dependent  upon any single  industry or market.  Moreover,  because  many of the
engagements  undertaken  by the Company are  long-term  (in excess of one year),
they tend to occur  irregularly  and the  revenue  derived  from any  particular
client  engagement  can vary  from  year to year.  The  broad  range of  Company
services is  demonstrated by the diversity of the Company's  client base,  which
includes,  among many others,  the  following  customers in selected  industries
currently engaging the Company's services:


                                       8
<PAGE>

<TABLE>

<CAPTION>
Financial Services                 Insurance                   Industrial                   Transportation
<S>                                <C>                         <C>                          <C>
American Express Company           Aetna Life and Casualty     Flour Daniel, Inc.           CSX Corporation
AT&T Universal Card Services       Blue Cross Blue Shield of   General Electric Company     Landstar Corporate
Merrill Lynch                         Florida, Inc. (BCBSFL)   GE Electrical Distribution      Services, Inc.
NationsBank                        Health Alliance Plan           & Control                 Navistar International
Wachovia Operational Services                                  Westinghouse Group W            Corporation
   Corporation                                                    Information Services
<CAPTION>
State & Local Government                     Aerospace                              Various Other Industries
<S>                                          <C>                                    <C>
Florida Department of Transportation         Lockheed Aeronautical Systems          AT&T American Transtech
Florida Department of Corrections               Company                             Atlanta Gas & Light Company
North Carolina Department of                 United Technologies Corporation        Unisys Corporation
   Corrections                                  --Pratt & Whitney Group
                                                --Sikorsky Aircraft Division
</TABLE>

         Based  on 1996  revenue,  the top five  Company  clients  (in  terms of
revenue to the Company)  accounted for  approximately  25% of revenue,  with one
client  (BCBSFL)  accounting for more than 10% of revenue.  As is typical in the
industry,  most of the Company's  contracts  governing  client  engagements  are
terminable at will upon two weeks written  notice.  The Company does not believe
that backlog or any contract or  engagement  with a single client is material to
its business.

Marketing and Sales

         The Company  markets its  services  directly  through its  professional
staff of consultants operating out of its Jacksonville  headquarters and its ten
branches.  The Company  believes  that the key to success in its industry is the
creation of long-term client relationships that are sustained by the delivery of
IT consulting services in an efficient and cost-effective manner.

         Relationship-Based  Marketing.  The  Company  believes  there  are  two
primary  factors which help  establish  long-term,  mutually  beneficial  client
relationships:  (i) motivated personnel,  particularly branch managers, who have
established  contacts  in a market  and can  offer  local  support;  and (ii) an
organization  structure that is sufficiently flexible to enable the resources of
multiple divisions and branches to be combined to provide solutions. The Company
believes it is able to provide the required  local  contact and support  through
its  branches,   while  its  Solutions  Team  approach   provides  the  required
flexibility and resources. Once the Company establishes an initial relationship,
it  concentrates  on  familiarizing  itself  with all  aspects  of the  client's
business  in  order to  identify  and  capitalize  on  additional  opportunities
providing the client with IT services and  solutions.  The Company  believes its
Solutions Team approach also enhances this cross-selling process. The success of
this  strategy  is  underscored  by the  fact  that 13 of the  Company's  top 15
clients,  measured in terms of 1996 revenue to the Company,  have had an ongoing
relationship with CMSI for over three years.

         Strategic  Alliances and  Promotion.  The Company  currently  maintains
strategic  alliances (a term used by the Company to describe  the  relationships
discussed  below) with seven  technology  companies,  Logic Works,  Inc.,  Lotus
Development   Corporation,   Microsoft  Corp.,  PowerSoft  Corporation,   Sprint
Communication  Company,  L.P., Sybase, Inc. and Texas Instruments  Incorporated.
These  alliances  provide the Company with technical and marketing  information,
including access to pre-release software and services and cooperative  marketing
programs and, in some cases,  allow the Company to provide  technical  education
and training based on the new technologies.  The Company believes such alliances
help build the  Company's  credentials  with  clients and enhance the  Company's
visibility  and  stature in the IT  community.  Although  each of the  strategic
alliances that the Company has entered into is formalized by a written agreement


                                       9
<PAGE>

detailing the kind of  information  that will be made available and the level of
responsiveness  owed to CMSI,  such  agreements are terminable at will by either
party.  The initial fee paid by the Company to establish an alliance ranges from
$5,000 to $15,000,  and annual  renewals  range from $800 to $3,000.  During the
past three years, the greatest number of such strategic  alliances was seven and
the greatest  aggregate amount of fees (both initial fees and renewal fees) paid
in connection  with such  alliances in any one year was less than  $50,000.  The
Company does not consider any one of these strategic  alliances  material to its
business.

Competition

         The commercial IT services  market is highly  competitive and served by
numerous firms,  many of which serve only their  respective  local markets.  The
market includes participants in a variety of market segments,  including systems
consulting and integration firms,  professional services companies,  application
software firms,  temporary employment agencies,  the professional service groups
of  companies  such as Unisys  Corporation  and Digital  Equipment  Corporation,
facilities  management  and  MIS  outsourcing   companies,   certain  "Big  Six"
accounting  firms,  and  general  management  consulting  firms.  The  Company's
competitors include a range of companies such as Andersen Consulting, Technology
Solutions  Corporation,  Cambridge Technology Partners,  Inc., Computer Horizons
Corp., Cap Gemini America,  Business  Systems Group, the consulting  division of
Computer Sciences Corporation, Computer Task Group, Inc., Analysts International
Corp. and Keane, Inc.

         Many  participants in the IT consulting and software  solutions  market
have  significantly  greater  financial,  technical and marketing  resources and
generate  greater  revenue  than the  Company.  The  Company  believes  that the
principal  competitive  factors in the commercial IT services  industry  include
responsiveness to client needs, efficiency of delivery of solutions,  quality of
service,  price, project management capability and technical expertise.  Pricing
has its greatest  importance as a  competitive  factor in the area of technology
support services. The Company believes that its ability to compete also depends,
in part, on a number of competitive  factors outside its control,  including the
ability  of  its  competitors  to  hire,  to  retain  and  to  motivate  skilled
consultants and management personnel, the price at which others offer comparable
services and the extent of its competitors' responsiveness to customer needs.

Human Resources

         As of December 31, 1996, the Company employed approximately 533 people,
of whom approximately 472 were consultants.  The Company's  continued success is
highly  dependent  upon its  ability to attract  and  retain  highly  skilled IT
consultants.  Competition  for the  services  of these  individuals  is intense,
particularly  with respect to the limited number of qualified  project  managers
and  professionals  with certain "niche" skills.  Although the Company generally
has been  successful in attracting  employees  with the skills needed to fulfill
customer engagements, demand for qualified professionals conversant with certain
technologies  may outstrip supply as new and additional  skill sets are required
to keep pace with evolving computer technology. Accordingly, the Company devotes
significant resources to recruiting by maintaining a full time recruiter in each
branch and a full time  recruiting  staff at corporate  headquarters.  To assure
that all candidates meet the expectations of both CMSI and its clients,  CMSI is
committed to a Quality Assurance  Program that involves,  but is not limited to,
identification and qualification of potential  candidates,  detailed  interviews
conducted by CMSI's recruiting personnel, managerial reference checks, technical
interviews  conducted by CMSI's professional  consultant staff, and an appraisal
by CMSI management.

         Because the Company is committed to retaining its  professional  staff,
it  instituted  a  Nonqualified  Stock  Option Plan in 1985,  an Employee  Stock
Ownership Plan and Trust ("ESOP") in 1989, a Profit Sharing 401(k) Plan in 1989,
and an Incentive Stock Option Plan in 1992. In 1995, the Company  terminated the
Nonqualified Stock Option Plan and the Incentive Stock Option Plan and adopted a
new Stock  Incentive  Plan and  Non-Employee  Director  Stock Option Plan. As of
December  31,  1996,  the  ESOP  owned  approximately  1,474,300  shares  of the
Company's Common Stock. Contributions to the ESOP and Profit Sharing-401(k) Plan


                                       10
<PAGE>

are at the discretion of the Company's Board of Directors and were $1,000,000 in
1996.  The  Company  believes  that  this  commitment  to  its  employees  is  a
competitive  advantage  because it facilitates the Company's  ability to recruit
and hire qualified consultants and engenders employee loyalty.

Intellectual Property Rights

         The Company's success has resulted, in part, from its methodologies and
other  proprietary  intellectual  property  rights.  The  Company  relies upon a
combination of trade secrets,  nondisclosure and other contractual  arrangements
and technical  measures to protect its proprietary  rights. The Company holds no
patents, but has registered  copyrights on each of its Evolution(R)  methodology
and its  INTELLECT(R)  software  product.  The  Company  generally  enters  into
confidentiality and nonsolicitation agreements with its employees,  consultants,
clients and  potential  clients  and limits  access to and  distribution  of its
proprietary  information.  There can be no assurance that the steps taken by the
Company  in this  regard  will be  adequate  to  deter  misappropriation  of its
proprietary  information or that the Company will be able to detect unauthorized
use and take appropriate steps to enforce its intellectual property rights.

         The Company's  business  includes the  development  of custom  software
applications in connection with specific client  engagements.  Ownership of such
software generally is assigned to the client. In addition, as a residual benefit
of some of the Company's client engagements, object-oriented software components
are created that can be reused in software  application  development and certain
software products or "tools".  Often, such components remain the property of the
Company.  Although  the Company  believes  that its services and products do not
infringe  on  the  intellectual  property  rights  of  others,  there  can be no
assurance  that such a claim will not be  asserted  against  the  Company in the
future.

Item 2.  Properties

         The  Company's  headquarters  are  located in an  approximately  11,000
square  foot,  Company-owned  office  building in  Jacksonville,  Florida.  This
facility is  currently  fully  utilized  and serves as  headquarters  for senior
management.  Also located in Jacksonville is an approximately 7,500 square foot,
company-owned  SOC. During 1996, the Company  purchased an  approximately  8,300
square foot  building in  Tallahassee  and an  approximately  15,000 square foot
building in Atlanta,  to house SOCs in those cities.  The Atlanta  property also
has an  approximately  35,000 square foot vacant  industrial  building  which is
being held for sale or lease.  The remainder of the Company's branch offices are
operated  from leased space with lease terms ranging from monthly to five years.
See note 11 of notes to consolidated  financial statements for information as to
the Company's annual lease  obligations.  In January 1997, the Company closed on
an  approximately  14,800  square foot building for a SOC in  Greenville,  South
Carolina.  The Company  anticipates  that  additional  space will be required as
business  expands and believes that it will be able to obtain  suitable space as
needed.

Item 3.  Legal Proceedings

         The Company  currently is not a party to any legal  proceedings that it
believes  could have a material  adverse effect upon its operations or financial
condition.

Item 4.  Submission of Matters to a Vote of Security Holders

         No matters were submitted to a vote of the Company's  security  holders
during the fourth quarter of the fiscal year ended December 31, 1996.


                                       11
<PAGE>


                                    PART II

Item 5.  Market For Registrant's Common Equity and Related Stockholder Matters

Market Price of and Dividends on the Company's Common Equity

         Since its initial  public  stock  offering on September  29, 1995,  the
Company's  Common  Stock has been traded on the NASDAQ  National  Market  System
under the symbol "CMSX".  The following  table sets forth,  on a per share basis
for the periods shown (as adjusted for stock splits  during 1996),  the range of
high and low sales  prices of the  Company's  Common  Stock as  reported  by the
Nasdaq.


                                                         High          Low
         Fiscal Year 1996:

         First Quarter                                  $  8.778     $  6.667
         Second Quarter                                  $16.111     $  7.556
         Third Quarter                                   $15.833      $11.833
         Fourth Quarter                                  $25.000      $15.333

         Fiscal Year 1995:

         Third Quarter (from Sept. 29, 1995)            $  7.778     $  7.111
         Fourth Quarter                                 $  9.889     $  6.556

         The Company has never paid any cash dividends on its Common Stock.  The
Company currently intends to retain future earnings for use in its business and,
therefore,  does not  anticipate  paying any cash  dividends in the  foreseeable
future.  The Company's  current borrowing  arrangements  prohibit the payment of
dividends  without the lender's  prior consent.  As of February 28, 1997,  there
were approximately 114 stockholders of record.

Recent Sales of Unregistered Securities

         The following table shows all sales by the Company of securities during
the past three fiscal  years and  subsequent  thereto  that were not  registered
under the Securities Act of 1933, as amended (the "Act"). All of such sales were
made  for  cash to key  employees  or  non-employee  directors  of the  Company,
pursuant to the  exercise of stock  options or  otherwise,  or to the  Company's
ESOP. The Company claims an exemption from  registration  under the Act for such
sales  in  reliance  upon  the  provisions  of  Section  3(b) or 4(2) of the Act
applicable  to certain  limited  offerings of  securities.  All shares have been
adjusted for subsequent stock splits.

<TABLE>
<CAPTION>
                                                                  Number of Shares              Aggregate
    Date Issued                    Purchaser                      of Common Stock              Consideration
    <S>                 <C>                                       <C>                          <C>

      3/29/94           Employee Stock Ownership Plan                    107,014  shs.          $   165,000
     12/28/94           Susan E. Quan                                     33,466                      2,600
     12/29/94           Employee Stock Ownership Plan                     33,466                     51,600
      1/27/95           Susan E. Quan                                      8,365                        650
       3/6/95           Employee Stock Ownership Plan                    156,055                    318,000
       5/1/96           Paul G. Kahn                                       1,350                      8,400
      8/21/96           Ann E. Kofsuske                                    3,346                      5,154
     10/29/96           Paul S. Whitman                                    6,693                      4,551
       1/7/97           Paul G. Kahn                                       1,350                      8,400
</TABLE>

                                       12
<PAGE>

         In addition to the above sales of unregistered securities,  the Company
also issued unregistered common shares in connection with the following mergers:

Acquisition of MIS Software Development,  Inc. On December 28, 1995, the Company
exchanged  approximately  343,991  shares (the "MSD Shares") of its common stock
(adjusted  for  subsequent  stock splits) for all of the  outstanding  shares of
common stock of MIS Software  Development,  Inc., a Florida corporation ("MSD"),
in a reverse  triangular  subsidiary  merger (the "MSD Merger").  The MSD shares
were  issued  pro rata to each of the five  shareholders  of MSD  based on their
respective  equity  interest in MSD. The issuance of the MSD shares  pursuant to
the MSD Merger was exempt from registration under the Act, by virtue of Sections
3(b)  and  4(2) of the Act,  and  Regulation  D  promulgated  by the  Securities
Exchange  Commission  (the  "Commission")   thereunder,   and  was  exempt  from
registration  under  the laws of the  State of  Florida  by  virtue  of  Section
517.061, Florida Statutes.

         Acquisition of Summit  Computer  Services,  Inc. On April 30, 1996, the
Company exchanged  approximately 945,907 shares (the "SCS Shares") of its common
stock (adjusted for subsequent  stock splits) for all of the outstanding  shares
of common stock of Summit Computer Services,  Inc., a North Carolina corporation
("SCS"), in a reverse triangular  subsidiary merger (the "SCS Merger").  The SCS
shares  were issued pro rata to each of the three  shareholders  of SCS based on
their respective equity interest in SCS. The issuance of the SCS shares pursuant
to the SCS  Merger  was  exempt  from  registration  under  the Act by virtue of
Sections  3(b)  and  4(2)  of the  Act,  and  Regulation  D  promulgated  by the
Commission  thereunder,  and was exempt from registration  under the laws of the
State of North  Carolina by virtue of Sections  78A-17(9)  and (17) of the North
Carolina Securities Act and Rules .1205 and .1206 promulgated thereunder.


Item 6.  Selected Financial Data

         The selected  financial data  presented  below as of and for the fiscal
years ended December 31, 1996,  1995,  1994,  1993, and 1992,  have been derived
from the  Company's  consolidated  financial  statements.  All  historical  data
previously  reported has been restated to reflect the combination of the Company
and  SCS  on   April   30,   1996,   which   has   been   accounted   for  as  a
pooling-of-interests  (see  note  2  of  the  notes  to  consolidated  financial
statements).  This  data  should  be  read  in  conjunction  with  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations,"  the
Company's  consolidated  financial  statements,   including  the  related  notes
thereto, and other financial information appearing elsewhere in this report.

                                       13
<PAGE>
<TABLE>
<CAPTION>

                                                        Fiscal Year Ended December 31,
                                     -----------------------------------------------------------------------

                                          1996          1995          1994          1993          1992
<S>                                    <C>           <C>           <C>           <C>           <C>
                                                     (In thousands, except per share data)
Consolidated Statement of Operations
Data:
  Revenue............................  $    46,095   $    31,998   $    24,935   $    17,468   $    16,693
  Direct costs.......................       28,451        20,061        15,597        10,964        10,955
                                          --------      --------      --------      --------      --------
     Gross profit....................       17,644        11,937         9,338         6,504         5,738
  Selling, general and
     administrative expenses.........        8,859         7,440         6,500         5,044         4,994
                                          --------      --------      --------      --------      --------
     Income from  operations.........        8,785         4,497         2,838         1,460           744
  Other income.......................        1,525           533            39            76            41
                                          --------      --------      --------      --------      --------
  Income before income
    taxes............................       10,310         5,030         2,877         1,536           785
  Provision for income taxes.........        4,091         1,893         1,073           464           305
                                          --------      --------      --------      --------      --------
  Net income ........................  $     6,219   $     3,137   $     1,804   $     1,072   $       480
                                          ========      ========      ========      ========      ========
  Unaudited pro forma information:
  Net income as reported.............  $     6,219   $     3,137   $     1,804   $     1,072   $       480
  (Benefit) charge in lieu of income
    taxes, net (1)...................         (114)           76           (23)          101            81
                                          --------      --------      --------      --------      --------
  Pro forma net income...............  $     6,333   $     3,061   $     1,827   $       971   $       399
                                          ========      ========      ========      ========      ========

  Pro forma net income per share.....  $      .44    $      .29    $      .20    $      .11    $      .05
                                          =======       =======       =======       =======       =======
  Weighted average number of
     common and common
     equivalent shares outstanding...       14,433        10,550         9,131         8,975         8,710
                                          ========      ========      ========      ========      ========

  Cash dividends per share...........  $      -      $      -      $      -      $      -      $      -
                                          ========      ========      ========      ========      ========
<FN>

     (1) Reflects federal and state income taxes (assuming an effective tax rate
         of 39.1%) as if SCS had been a C Corporation for all periods presented,
         but excludes  the impact of the  non-recurring  charge  relating to the
         change in tax status of SCS from an S Corporation  to a C  Corporation,
         which resulted in an increase in income tax expense of $247,000 in 1996
         pursuant  to the  provisions  of SFAS No.  109.  Pro forma  income  tax
         expense (benefit) for SCS was $133,000, $76,000,  ($23,000),  $101,000,
         and $81,000 in 1996, 1995, 1994, 1993, and 1992, respectively. See note
         2 to the consolidated financial statements.
</FN>
<CAPTION>

                                                        As of December 31,
                                 ------------------------------------------------------------------
                                                                        ---------------------------
                                     1996         1995         1994         1993         1992
                                     ----         ----         ----         ----         ----
<S>                                <C>          <C>          <C>          <C>          <C>
                                                          (In thousands)
Consolidated Balance Sheet Data:
  Working capital                  $   26,218   $   32,842   $    2,963   $    2,331   $    1,345
  Total assets                         46,330       40,079        8,159        5,440        4,858
  Long-term liabilities, less
     current portion                      216          102          211          317          360
  Total shareholders' equity       $   43,343   $   36,999   $    5,818   $    3,771   $    2,578
</TABLE>

                                       14
<PAGE>



Unaudited Selected Quarterly Operating Results

     The  following  table  sets forth  certain  unaudited  quarterly  operating
information  for the last eight quarters  beginning with the quarter ended March
31, 1995,  and ending with the quarter  ended  December 31, 1996.  This data has
been prepared on the same basis as the audited  financial  statements  contained
elsewhere  herein and includes all  adjustments,  consisting of normal recurring
adjustments,  necessary  for a fair  presentation  of the  information  for  the
periods  presented,  when  read in  conjunction  with  the  Company's  financial
statements and notes thereto contained  elsewhere herein.  The operating results
for any previous quarter are not necessarily indicative of results of any future
period. The Company believes that its business is generally not seasonal, except
for the fourth  calendar  quarter,  in which the number of holidays and employee
vacation days  adversely  impacts the  Company's  revenue and  profitability  in
comparison to preceding quarters.

     The five quarters ended March 31, 1996 differ from those amounts previously
reported due to the  restatement  to reflect the  combination of the Company and
SCS on April 30, 1996, which was accounted for as a pooling-of-interests.
<TABLE>
<CAPTION>

                                                                   Quarter Ended
                                 ----------------------------------------------------------------------------------
                                                   1996                                     1995
<S>                              <C>        <C>      <C>        <C>        <C>       <C>       <C>       <C>


                                 ----------------------------------------- ----------------------------------------
                                  Dec. 31   Sept. 30  June 30   Mar. 31     Dec. 31   Sept. 30  June 30   Mar. 31
                                  -------   --------  -------   -------     -------   --------  -------   -------
                                                       (In thousands, except per share data)

Revenue                          $  12,660 $  11,782 $  11,231 $  10,422   $   8,931 $   7,774 $   7,716 $   7,577
Income before income taxes           2,827     2,617     2,539     2,327       1,680     1,094     1,119     1,137
Pro forma net income per share   $    .12  $    .11  $    .11  $    .10    $    .07  $    .07  $    .07  $    .08
</TABLE>


Item 7.  Management's Discussion & Analysis of Financial Condition and Results
         of Operations

     The following  discussion and analysis should be read in conjunction  with,
and is  qualified in its entirety  by, the  consolidated  financial  statements,
including the notes thereto,  and selected  financial data included elsewhere in
this  report.  Historical  events are not  necessarily  indicative  of trends in
operating results for any future period.  Reference is also made to Part I, Item
1  (Forward  Looking  Statements),  with  regard to the risks and  uncertainties
associated with forward-looking statements.

Overview

     The Company was incorporated in 1983 to pursue opportunities in the rapidly
growing information  technology consulting services market. The Company provides
IT consulting  and custom  software  development  services to a diverse group of
clients,   primarily   consisting  of  Fortune  1000   companies,   other  large
organizations  and state and local  governments that are located  throughout the
United  States.  The  Company's  services  are  generally  an  outside  resource
supplementing  a client's  internal  information  technology  capabilities,  and
include  a  broad  range  of  technical  services,  such as  technology  support
services, IT solutions services and strategic IT consulting.  Technology support
services  include  systems  support and  maintenance  and contract  programming.
Solutions  services  include  software   application  design,   development  and
implementation,  as well as systems  integration.  Strategic consulting services
include planning and designing enterprise-wide  information systems and business
process  re-engineering  which allow clients to maximize the strategic  value of
business information.



                                       15
<PAGE>

Significant Trends and Developments

     Recent Growth.  The Company has experienced  significant  growth in revenue
and geographic  expansion in the past nine years.  The Company  established  its
first  branch in  Hartford  in 1987,  after  which it opened  or  acquired  nine
additional branch offices:  Atlanta (1990);  Greenville,  South Carolina (1991);
Boston  (1993);  Portland,  Oregon,  Chicago and Cleveland  (1994);  Tallahassee
(1995);  Charlotte and Detroit  (1996).  A significant  portion of the Company's
revenue growth since 1994 is attributable  to the incremental  revenue growth of
existing branches. For instance, the growth in revenue from 1994 to 1996 for the
branches listed above that began operating prior to January 1, 1994, was greater
than 100%.  During the next 24  months,  the  Company  expects to  establish  an
average of three or four branches per year by new start-up or acquisitions. As a
result of its merger  with  Miaco,  the  Company  added  branches  in Denver and
Washington, D.C. in January 1997.

     Strategic  Shift  toward  Premium-Billed  Services.  In late 1992 and early
1993,  the  Company  made  a  strategic   decision  to  seek  more  value-added,
premium-billed  engagements,  particularly those involving complex client/server
solutions and strategic IT consulting.  The Company also  established  strategic
alliances  with several  major  technology  companies,  which have  provided the
Company with access to  technical  and  marketing  information  and  specialized
training  for  client/server  applications.   Moreover,  the  Company  continued
developing its Evolution(R) methodology,  which has been of competitive value in
securing strategic consulting engagements.  As a result of the implementation of
these  efforts,  in 1993  revenue  was  essentially  flat,  but  profit  margins
increased.  Since  1993,  revenue  has grown  rapidly  and profit  margins  have
continued to increase.

     Increase in Fixed-Bid Projects. Relying on its Software Factory Process and
Evolution(R) methodology,  which enable the Company to better project and manage
its costs in fixed-bid projects,  the Company recently has pursued a strategy of
seeking to improve its gross margins by undertaking more fixed-bid  engagements.
During 1994,  approximately  4% of the  Company's  revenue was  attributable  to
fixed-bid projects. Revenue attributable to fixed-bid projects was approximately
9% and 5% in 1996 and 1995, respectively. With recent awards of some significant
fixed-bids,  it is anticipated that fixed-bids will represent  approximately 12%
of revenue in 1997. The Company's SOC  infrastructure  has proven to be a viable
model  that  provides  for  greater  management  control of  projects,  improved
efficiency  resulting from access to the latest "state of the art"  technologies
and improved profitability resulting from the process and methodology.  Although
fixed-bid projects  historically have increased the Company's gross margins, the
Company bears the risk of cost  over-runs and inflation in connection  with such
projects,  and there can be no assurance that such risks in the future might not
negatively impact the Company's gross margins.

     Revenue  Recognition.  Revenue earned on time and materials  engagements is
recognized as incurred. The Company recognizes revenue attributable to fixed-bid
engagements on the percentage of completion method.  Utilization of this method,
which requires the Company's management to estimate the status of each fixed-bid
project at the end of each period, can increase the variability of the Company's
revenue  because  of the  possible  necessity  from  time to  time of  adjusting
estimates for subsequent  developments.  Although  fixed-bid  engagements  are a
relatively  small component of revenue,  as the Company seeks to increase volume
of fixed-bid  engagements,  such possible variability in revenue recognition may
likewise increase.

     ESOP/Profit  Sharing  Expense.  The  Company has  actively  used its profit
sharing plan and its Employee Stock Ownership Plan ("ESOP") to attract, develop,
motivate and retain  employees and has made  significant  contributions to these
plans in recent  periods.  These  contributions  are a significant  component of
selling,   general  and  administrative  expenses.  The  total  cash  and  stock
contributions  to  these  plans  in  1996,  1995  and  1994  were  approximately
$1,000,000,  $770,000,  and $663,000,  respectively.  Although contributions are
made at the  discretion  of the Board of  Directors,  the Company  expects  that
contributions will continue based on the Company's profitability.



                                       16
<PAGE>

      Significant  Business  Combinations  During 1996.  On April 30, 1996,  the
Company  exchanged  approximately  945,907 shares  (adjusted for subsequent sock
splits) of its common  stock for all of the  outstanding  common stock of Summit
Computer  Services,  Inc.  ("SCS"),  a Charlotte,  North Carolina based computer
consulting firm with concentrated  expertise in client/server  technology.  This
business combination has been accounted for as a pooling-of-interests.  Prior to
the merger,  SCS was an S  Corporation  and therefore the tax liability on SCS's
income before tax was the  responsibility  of SCS's  shareholders.  For 1996 and
1995, SCS contributed  $6,720,580 and $4,185,322 towards CMSI's total revenue of
$46,095,306  and  $31,998,220,  respectively.  On July  31,  1996,  the  Company
acquired  all  of  the  assets  of  Pathways  Consulting,  Inc.  (Pathways),  an
Atlanta-based  information  technology firm  specializing  in providing  systems
integration  consulting services to the public utility industry. The acquisition
was accounted for under the purchase method.
<TABLE>

 Results of Operations
<CAPTION>

     The  following  table  sets  forth,  for the  periods  indicated,  selected
consolidated  statement of operations  data and the  percentage of the Company's
total  revenue  represented  by each  line  item  presented,  together  with the
percentage increase or (decrease) in each line item between comparative periods:


                                            Percentage of Total Revenue
                                                                                        Percentage
                                                                                   Increase (Decrease)
                                     -----------------------------------------
                                               Year Ended December 31,
                                     -----------------------------------------  ---------------------------
                                           1996         1995          1994        1996/1995    1995/1994
                                           ----         ----          ----        ---------    ---------
<S>                                        <C>          <C>          <C>             <C>         <C>

Revenue..............................      100.0%       100.0%       100.0%            44.1%        28.3%
Direct costs.........................       61.7         62.7         62.6             41.8         28.6
Gross profit.........................       38.3         37.3         37.4             47.8         27.8
Selling, general and administrative
  expenses...........................       19.2         23.3         26.1             19.1         14.5
Income from operations...............       19.1         14.0         11.3             95.4         58.4
Other income.........................        3.3          1.7           .2            186.0      1,272.6
Income before income taxes...........       22.4         15.7          8.5            105.0         74.8
Net income...........................       13.5          9.8         11.5             98.3         73.9
Pro forma net income.................       13.7          9.6          7.2            106.9         67.5
Pro forma net income per share.......        -            -            -               51.2         45.0

</TABLE>

1996 Compared To 1995

     Revenue. Revenue for 1996 was $46,095,000, a 44.1% increase over revenue of
$31,998,000 recorded in 1995. The increase in revenue was primarily attributable
to an increase in volume of services  which was  sustained  by the growth in the
average  billable  consultant  headcount  from  approximately  305  in  1995  to
approximately  424 in 1996, a 39.0% increase.  Also contributing to the increase
in revenue was a slight change in the mix of services  delivered by the Company.
During 1995, the Company's engagements consisted primarily of technology support
and IT solution services billed on a time and material basis. Over the course of
1996, however, the number of strategic IT consulting and  outsourcing/fixed  bid
projects  undertaken by the Company steadily  increased and positively  impacted
average  billing  rates.  The change in mix of services is primarily  due to the
success of the SOC in Jacksonville,  which came online in October 1995 and fixed
bid projects in the Greenville branch. Software sales also increased $177,000 or
17.8% over the prior year. The branch offices which significantly contributed to
the above increases were: Atlanta (including the Pathways acquisition,  see note
2 to the consolidated financial statements); Charlotte (the business combination
with SCS); Cleveland;  Greenville;  Jacksonville;  and Tallahassee (the business
combination with MSD), which posted revenue  increases in 1996 of 60.0%;  60.6%;
66.4%; 127.2%; 46.9%; and 55.5%, respectively, over 1995.



                                       17
<PAGE>

     Gross Profit.  The 1996 gross profit of  $17,644,000  was a $5,707,000,  or
47.8%, improvement over 1995. Expressed as a percentage of revenue, gross profit
was 38.3% in 1996 versus 37.3% in 1995. This  improvement is attributable to the
delivery of more strategic IT consulting  services, a larger percentage of fixed
bid business, and increased software revenue. As mentioned above, the success of
the SOCs has  contributed  to an increase in outsourced  and fixed bid projects,
which generally  command higher billing rates than technology  support services.
Also contributing to the increased gross profit percentage in 1996, was a slight
increase in consultant utilization from 98% in 1995 to 99% in 1996.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  totaled  $8,859,000 in 1996, an increase of $1,419,000
over 1995.  Expressed  as a  percentage  of  revenue,  however,  S,G&A  expenses
decreased from 23.3% in 1995 to 19.2% for 1996. The improved percentage for 1996
resulted from increased volume and cost containment of marketing and other fixed
expenses.  The single largest  discretionary  expense  included in S,G&A was the
ESOP/Profit  Sharing  Plan  contribution,  which was 2.2% and 2.4% of revenue in
1996 and 1995, respectively.

     Income Before Income Taxes. Income before income taxes increased $5,280,000
to  $10,310,000  in 1996,  an increase of 105.0%.  As a  percentage  of revenue,
income  before  income  taxes was 22.4% in 1996  compared to 15.7% for the prior
period.  This  result  was  driven  by  increased  operating  revenue,  improved
operating  efficiencies  and interest  income on the  proceeds of the  Company's
initial public offering,  which closed on October 4, 1995.  Interest income from
such  proceeds   amounted  to   $1,314,000   and  $392,000  in  1996  and  1995,
respectively.  The business  combinations with MSD and SCS, which were accounted
for as  poolings-of-interests  in 1995 and 1996,  contributed  significantly  to
income from operations during 1996. MSD's and SCS's  contribution to income from
operations in 1996 was $1,079,000 and $1,331,000 versus $200,000 and $214,000 in
1995, respectively.

     Net Income and Pro Forma Net Income.  For 1996, net income was  $6,219,000,
an increase of $3,082,000 or 98.3% over 1995.  This  improvement was a result of
increased  revenue,  stronger gross margins,  cost containment of S,G&A expenses
and investment income earned on funds received from the Company's initial public
offering.  For 1996, the effective tax rate was 39.7% versus 37.6% for 1995. The
significant  increase  in  the  effective  tax  rate  is  due  to  the  business
combination  with SCS,  an S  Corporation  acquired  by the Company on April 30,
1996. The acquisition of SCS was accounted for as a pooling-of-interests.  As an
S Corporation,  SCS's tax liability was the  responsibility of its stockholders.
To  reflect  the  earnings  of SCS on an  after-tax  basis,  a pro forma  charge
(benefit)  in lieu of income taxes has been  included for the periods  preceding
the termination of S Corporation status. A pro forma benefit for the impact of a
non-cash,  non-recurring net charge for deferred income taxes resulting from the
termination of the S Corporation  status has also been included  pursuant to the
provisions  of SFAS No.  109.  On a  comparable  basis,  pro  forma  net  income
expressed as a percentage of revenue was 13.7% in 1996 versus 9.6% for 1995. Pro
forma net income per share increased 51.2% over the prior period.

1995 Compared To 1994

     Revenue. Revenue for 1995 was $31,998,000, a 28.3% increase over revenue of
$24,935,000 recorded in 1994. The increase in revenue was primarily attributable
to an increase in volume of services  which was  sustained  by the growth in the
average  billable  consultant  headcount  from  approximately  257  in  1994  to
approximately 305 in 1995, an 18.7% increase. Management also contributed to the
increase in revenue through a concerted effort to improve billing rates and sell
higher-end  IT solution  (client/server)  engagements.  While the  percentage of
revenue  attributable to fixed bid projects remained relatively  consistent with
1994,  management's  focus on improving  profitability  and gross  margins had a
favorable  impact on  average  billing  rates.  Software  sales  also  increased
$482,000 or 94.0% over the prior year.  The branch  offices which  significantly
contributed  to the above  increases  were:  Atlanta;  Charlotte  (the  business
combination with SCS); Chicago (opened in 1994); Cleveland (opened in 1994); and
Jacksonville,  which posted revenue increases in 1995 of 434.5%;  58.8%; 150.7%;
694.1%; and 14.2%, respectively, over 1994.

     Gross  Profit.  The 1995 gross profit of  $11,937,000  was a $2,599,000  or
27.8% increase over 1994. The increase in gross profit was  attributable  to the
increase in revenue  discussed  above.  Expressed  as a  percentage  of revenue,
however, gross profit remained relatively consistent with the prior year.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative expenses totaled $7,440,000 in 1995, an increase of $940,000 over
1994.  Expressed as a percentage of revenue,  however,  S,G&A expenses decreased
from 26.1% in 1994 to 23.3% for 1995. The improved  percentage for 1995 resulted
from  economies  of  scale  and  operating  efficiencies.   The  single  largest
discretionary  expense  included  in  S,G&A  was the  ESOP/Profit  Sharing  Plan
contribution, which was 2.4% and 2.7% of revenue in 1995 and 1994, respectively.

                                       18
<PAGE>

     Income Before Income Taxes. Income before income taxes increased $2,153,000
to $5,030,000 in 1995, an increase of 74.8%. As a percentage of revenue,  income
before  income  taxes was 15.7% in 1995  compared to 8.5% for the prior  period.
This  result was  driven by  increased  operating  revenue,  improved  operating
efficiencies and interest income on the proceeds of the Company's initial public
offering, which closed on October 4, 1995.
Interest income from such proceeds amounted to $392,000.

     Net Income and Pro Forma Net Income.  For 1995, net income was  $3,137,000,
an increase of $1,333,000  or 73.9% over 1994.  This  improvement  resulted from
increased  revenue,  cost  containment of S,G&A  expenses and investment  income
earned on funds received from the Company's  initial public offering.  For 1995,
the  effective tax rate was 37.6% versus 37.3% for 1994. To reflect the earnings
of SCS on an after tax basis,  a pro forma  charge  (benefit)  in lieu of income
taxes  has  been  included  for  the  periods  preceding  the  termination  of S
Corporation  status.  On a comparable basis, pro forma net income expressed as a
percentage  of  revenue  was 9.6% in 1995  versus  7.2% for 1994.  Pro forma net
income per share increased 45.0% over the prior period.

Liquidity and Capital Resources

         On  September  29,  1995,  the Company  completed  its  initial  public
offering of common stock, in which 4,916,250 shares of common stock were sold at
a price of $6.222 per share  (shares and per share amount have been adjusted for
subsequent  stock  splits).  The net  proceeds  from the sale  amounted to $28.4
million.  The  Company  continues  to use the  proceeds  for  general  corporate
purposes,  including  establishing  additional  branch  offices and  outsourcing
centers,  funding  increased  working  capital  requirements  resulting from the
Company's   anticipated   growth,  and  acquisitions  of  companies  in  related
businesses.

     During  1996,  cash  decreased  $15,877,241  and  working  capital  dropped
$6,624,673.  While a number  of  factors  contributed  to the  change,  the main
components  were  increases  in  long-term   investments,   accounts  and  other
receivables, and property and equipment, as discussed below.

     As of December 31, 1995,  $28,515,745  was invested in funds with  original
maturity of ninety days or less and were  classified  as cash  equivalents.  The
drop in interest rates experienced  during 1996 required the Company to look for
investments with maturities  extending beyond ninety days to increase its yield.
By the end of 1996,  $4,895,482 was invested in debt and equity  securities that
were  classified as current  investments  and $5,542,369 was invested in various
corporate and  governmental  bonds with maturities  exceeding one year and other
equity securities that were classified as long-term investments.

     Accounts  receivable  increased  $3,726,453 during 1996. The number days of
sales  outstanding  increased  10 days since the end of 1995 to 74 days of sales
outstanding.  Therefore,  the increase in accounts receivable is a reflection of
increased sales volume and an increase in days of sales outstanding  experienced
during the  period.  The amount of fixed bid  business  rose  during the year by
approximately  $2.3  million.  Most  of this  business  requires  payment  after
completion  of particular  phases of a project or upon  completion of the entire
project.  The  amounts  of  revenue  earned  in  excess  of  billings  increased
approximately $952,000 since the end of 1995.

     During  1996,  the Company  spent  approximately  $5.1  million for capital
expenditures and  approximately  $2.5 million for  acquisitions.  Of the capital
expenditures,  $3.4 million was spent for  property  and  buildings to house the
Atlanta and Tallahassee SOCs and $1.5 million was spent for computer  equipment,
software  and   furniture  for  the  Atlanta  and   Tallahassee   SOCs.  Of  the
acquisitions,  $2.3  million  was  spent  on the July 31,  1996  acquisition  of
Pathways  Consulting,  Inc.  and $0.2  million was spent on the January 30, 1996
acquisition of Weldon Systems, Inc.

     The Company  maintains a revolving  credit facility with a commercial bank,
permitting  advances  equal  to the  lesser  of  $750,000  or 75% of  "qualified
accounts"  (defined as trade  accounts  receivables  less than 90 days old which
approximated $8.1 million as of December 31, 1996). The credit facility has been
inactive during 1996. The Company assumed certain mortgage  obligations totaling
$55,321 in  connection  with its December 28, 1995 merger with MSD, and $221,414
in notes  payable in  connection  with its April 30, 1996  merger with SCS.  The
mortgages and notes were paid off during the first half of 1996.

                                       19
<PAGE>

     The Company currently anticipates that its existing cash and operating cash
flow are sufficient to meet both the Company's  short-term and long-term working
capital  requirements  and to fund its expansion  through the  establishment  of
additional branches and SOC locations, and possible acquisitions.

Recently Issued Accounting Standards

         The Financial  Accounting Standards Board issued Statement of Financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation" (SFAS
No.  123),  in October  1995.  SFAS No. 123 requires the Company to estimate the
value of stock-based  compensation  and either record this value as compensation
expense in the  consolidated  statements of operations or disclose the amount in
 the notes to consolidated financial statements.  SFAS No. 123 was effective for
the Company beginning January 1, 1996.

         Prior to January 1, 1996,  the Company  accounted  for its stock option
plans in accordance  with the  provisions of Accounting  Principles  Board (APB)
Opinion  No.  25,  "Accounting  for Stock  Issued  to  Employees,"  and  related
interpretations.  As such, compensation expense would be recorded on the date of
grant only if the current  market  price of the  underlying  stock  exceeded the
exercise  price.  On January 1, 1996,  the Company  adopted SFAS No. 123,  which
permits  entities to recognize  as expense,  over the vesting  period,  the fair
value of all stock-based  awards on the date of grant.  Alternatively,  SFAS No.
123 also allows  entities to continue to apply the provisions of APB Opinion No.
25 and provide pro forma net income and pro forma earnings per share disclosures
for  employee  stock  option  grants  made in 1995  and  future  years as if the
fair-value-based  method  defined in SFAS No. 123 had been applied.  The Company
has elected to continue  to apply the  provisions  of APB Opinion 25 and provide
the  pro  forma  disclosure  provisions  of  SFAS  No.  123  (see  note 8 of the
consolidated financial statements).

Item 8.  Financial Statements and Supplementary Data

     The consolidated financial statements included in this report are listed in
Part IV, Item 14(a). The supplementary data included in this report is presented
in Item 6 under the caption "Unaudited Selected Quarterly Operating Results."

Item 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure

     None.



                                       20
<PAGE>



                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

         Information  required by this Item is  incorporated by reference to the
definitive  proxy statement to be filed by the Company for the Annual Meeting of
Shareholders to be held June 6, 1997.

Item 11.  Executive Compensation

         Information  required by this Item is  incorporated by reference to the
definitive  proxy statement to be filed by the Company for the Annual Meeting of
Shareholders to be held June 6, 1997.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         Information  required by this Item is  incorporated by reference to the
definitive  proxy statement to be filed by the Company for the Annual Meeting of
Shareholders to be held June 6, 1997.

Item 13.  Certain Relationships and Related Transactions

         Information  required by this Item is  incorporated by reference to the
definitive  proxy statement to be filed by the Company for the Annual Meeting of
Shareholders to be held June 6, 1997.


                                       21
<PAGE>

                                     PART IV

Item 14.  Exhibits, Financial Statements, Schedules, and Reports on Form 8-K

(a)      The following documents are filed as part of the report:

         1. The Company's 1996 consolidated financial statements,  including the
         report  thereon of KPMG Peat Marwick LLP dated  January 24,  1997,  are
         listed on the index  immediately  preceding the consolidated  financial
         statements at the end of this report.

         2. All  financial  statement  schedules  are omitted  because  they are
         inapplicable or the requested information is either immaterial or shown
         in the financial statements of the Company or notes thereto.

         3.  For Exhibits see Item 14(c) below.

(b)      The Company  filed Form 8-K reports on January 12,  1996,  May 3, 1996,
         and January 31, 1997, Commission File No. 0-26622.

(c)      List of Exhibits:

Exhibit No.   Description

2.1**         Agreement  and Plan of Merger,  dated  December 28,  1995,  by and
              among the Company,  MSD, MSD  Acquisition,  Inc.,  and each of the
              shareholders of MSD.
2.3**         Agreement  and Plan of Merger,  dated April 8, 1996,  by and among
              the  Company,  SCS,  SCS  Acquisition,   Inc.,  and  each  of  the
              shareholders of SCS.
2.4**         Agreement and Plan of Merger, dated January 16, 1997, by and among
              the Company,  Miaco,  Bronco  Acquisition,  Inc.,  and each of the
              shareholders of Miaco.
3.1*          Amended and Restated Articles of Incorporation of the Company
3.2*          Bylaws of the Company
4.2*          Agreement  dated October 15, 1991,  between  SunBank/North
              Florida,  N.A., and the Company ("Line of Credit")
4.3*          Letter of Amendment to Line of Credit
21.1          Subsidiaries of the Registrant
27.1          Financial Data Schedule
99.3          Report of Williams, Cox, Weidner and Cox, Independent Auditors
              for MSD
99.4          Report of Dellinger & Deese, L.L.P., Independent Auditors for SCS

* Filed with  Amendment  No. 3 to the  Company's  Registration  Statement on
Form S-1,  dated  September  26, 1995, Registration No. 33-95544, and
incorporated herein by reference.

** Filed with the Company's Current Reports on Form 8-K, dated January 12, 1996,
May 3, 1996, and January 31, 1997.

(d)  Financial Statements excluded by Rule 14a-3(b).  None


                                       22
<PAGE>

                                   Signatures

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

                                        COMPUTER MANAGMENT SCIENCES, INC.


Date:  March 27, 1997                   By:   /s/ Anthony V. Weight
                                           ---------------------------
                                           Anthony V. Weight, Senior Vice
                                           President and Chief Financial Officer


                                         By:  /s/ Anthony Colaluca
                                            ---------------------------
                                            Anthony Colaluca, Vice President and
                                            Chief Accounting Officer


         Pursuant to the  requirements  of the  Securities  and  Exchange Act of
1934,  this  report has been  signed by the  following  persons on behalf of the
Registrant and in the capacities shown below as of March 27, 1997.

         Signature                                            Title


/s/ Jerry W. Davis                                   President, Chief Executive
---------------------------                          Officer and Director
Jerry W. Davis

/s/ Anthony V. Weight                                Senior Vice President,
---------------------------                          Chief Financial Officer and
Anthony V. Weight                                    Director

/s/ Larry A. Longhi                                  Group Vice President and
---------------------------                          Director
Larry A. Longhi

/s/ David C. Minardi                                 Group Vice President and
---------------------------                          Director
David C. Minardi

/s/ Edward W. Fishback, Jr.                          Group Vice President and
---------------------------                          Director
Edward W. Fishback, Jr.

/s/ Harry C. Stonecipher                             Director
---------------------------
Harry C. Stonecipher

/s/ Perry E. Esping                                  Director
---------------------------
Perry E. Esping


                                       23
<PAGE>

                       COMPUTER MANAGEMENT SCIENCES, INC.


                   Index to Consolidated Financial Statements






                                                                     Page

Independent Auditors' Report                                          F-2

Consolidated Balance Sheets as of December 31, 1996 and 1995          F-3

Consolidated Statements of Operations for the years ended
     December 31, 1996, 1995 and 1994                                 F-5

Consolidated Statements of Shareholders' Equity for the years ended
     December 31, 1996, 1995 and 1994                                 F-6

Consolidated Statements of Cash Flows for the years ended
     December 31, 1996, 1995 and 1994                                 F-7

Notes to Consolidated Financial Statements                            F-9








                                      F-1
<PAGE>












                          Independent Auditors' Report



The Board of Directors and Shareholders
Computer Management Sciences, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  Computer
Management Sciences,  Inc. and subsidiaries as of December 31, 1996 and 1995 and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the  three-year  period ended  December 31, 1996.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial  statements  based  on our  audits.  We did not  audit  the  financial
statements of MIS Software Development, Inc. and Summit Computer Services, Inc.,
which were  acquired by the Company in business  combinations  accounted  for as
poolings of  interests,  as  described in note 2, and whose  statements  reflect
combined total assets  constituting  7.1 percent of the  consolidated  totals at
December 31, 1995,  and combined total  revenues  constituting  21.9 percent and
21.5 percent in 1995 and 1994, respectively, of the related consolidated totals.
Those  statements  were  audited  by other  auditors  whose  reports  have  been
furnished  to us, and in our  opinion,  insofar  as it  relates  to the  amounts
included for MIS Software Development,  Inc., and Summit Computer Services, Inc.
are based solely on the reports of the other auditors.

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

In our opinion,  based on our audits and the reports of the other auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material respects, the financial position of Computer Management Sciences,  Inc.
and  subsidiaries  as of December  31,  1996 and 1995,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December  31,  1996 in  conformity  with  generally  accepted  accounting
principles.




                                                          KPMG Peat Marwick LLP


Jacksonville, Florida
January 24, 1997


                                      F-2
<PAGE>



<TABLE>


                       COMPUTER MANAGEMENT SCIENCES, INC.

                           Consolidated Balance Sheets

                           December 31, 1996 and 1995

<CAPTION>

                       Assets                                                         1996              1995
                       ------                                                         ----              ----
<S>                                                                             <C>                   <C>

Current assets:
     Cash and cash equivalents                                                  $    14,191,603       30,068,844
     Accounts receivable, net of allowance for
         doubtful accounts of $147,000 and $40,000
         for 1996 and 1995, respectively (note 6)                                     7,823,553        5,070,071
     Revenue earned in excess of billings                                             1,485,205          532,707
     Investments available for sale, at fair value (note 5)                           4,895,482               -
     Other receivables                                                                   81,516           61,043
     Notes receivable (note 3)                                                          425,250           41,609
     Other current assets                                                                85,436           46,539
                                                                                  -------------    -------------

              Total current assets                                                   28,988,045       35,820,813
                                                                                  -------------    -------------

Property and equipment:
     Land                                                                             2,107,000          168,000
     Buildings and improvements                                                       3,282,703        1,516,356
     Computers and software                                                           1,930,150        1,049,166
     Office furniture and equipment                                                   1,191,804          811,400
     Vehicles                                                                           313,181          169,883
                                                                                  -------------    -------------
                                                                                      8,824,838        3,714,805
     Less accumulated depreciation                                                    1,481,048        1,126,707
                                                                                  -------------    -------------

              Net property and equipment                                              7,343,790        2,588,098
                                                                                  -------------    -------------
Other assets:
     Intangible assets, net of accumulated
         amortization of $310,280 and $88,551
         for 1996 and 1995, respectively (note 2)                                     2,544,604          312,823
     Land held for investment (note 4)                                                  424,065          428,465
     Investments available for sale, at fair value (note 5)                           5,542,369          646,536
     Notes receivable, less current portion (note 3)                                  1,106,284          202,014
     Other                                                                              380,457           80,551
                                                                                  -------------    -------------

              Total other assets                                                      9,997,779        1,670,389
                                                                                  -------------    -------------

              Total assets                                                      $    46,329,614       40,079,300
                                                                                  =============    =============





                                                                                                        (Continued)
</TABLE>


                                      F-3
<PAGE>

<TABLE>


                       COMPUTER MANAGEMENT SCIENCES, INC.

                     Consolidated Balance Sheets (continued)

                           December 31, 1996 and 1995


<CAPTION>

       Liabilities and Shareholders' Equity                                           1996              1995
       ------------------------------------                                           ----              ----
<S>                                                                             <C>                 <C>

Current liabilities:
     Notes payable (note 6)                                                     $           100          232,396
     Accounts payable                                                                    68,194          236,278
     Accrued expenses (note 9)                                                        2,231,161        1,720,825
     Unearned revenue                                                                   106,690          531,913
     Income taxes payable                                                               312,249          181,760
     Deferred income taxes (note 7)                                                      52,108           75,425
                                                                                  -------------    -------------

              Total current liabilities                                               2,770,502        2,978,597
                                                                                  -------------    -------------

Long-term liabilities:
     Notes payable (note 6)                                                                  -            44,439
     Deferred income taxes (note 7)                                                     216,309           57,666
                                                                                  -------------    -------------

              Total long-term liabilities                                               216,309          102,105
                                                                                  -------------    -------------

Shareholders' equity (note 10):
     Common stock, $.01 par value; 20,000,000
         shares authorized, 12,413,021 and 5,479,950
         shares issued and outstanding in 1996
         and 1995, respectively                                                         124,130           54,800
     Preferred stock, $.01 par value; 5,000,000 shares
         authorized, no shares issued and outstanding                                        -                -
     Paid-in capital                                                                 30,078,816       29,337,969
     Retained earnings                                                               13,089,603        7,565,688
     Unrealized gain on investments, net of income tax (note 5)                          50,254           40,141
                                                                                  -------------    -------------

              Total shareholders' equity                                             43,342,803       36,998,598
                                                                                  -------------    -------------

Commitments (notes 2 and 11)

              Total liabilities and shareholders' equity                        $    46,329,614       40,079,300
                                                                                  =============    =============


</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>



<TABLE>

                       COMPUTER MANAGEMENT SCIENCES, INC.

                      Consolidated Statements of Operations

                  Years ended December 31, 1996, 1995 and 1994


<CAPTION>


                                                                   1996             1995              1994
                                                                   ----             ----              ----
<S>                                                         <C>                   <C>               <C>

Revenue                                                   $      46,095,306        31,998,220       24,935,415
Direct costs                                                     28,450,872        20,060,669       15,597,173
                                                            ---------------  ----------------  ---------------
              Gross profit                                       17,644,434        11,937,551        9,338,242

Selling, general and administrative
     expenses (notes 8 and 11)                                    8,859,077         7,440,408        6,499,983
                                                            ---------------  ----------------  ---------------
              Income from operations                              8,785,357         4,497,143        2,838,259

Other income (expense):
     Investment and other income (note 5)                         1,452,814           542,171           82,567
     Interest expense                                                (4,990)          (26,032)         (30,116)
     Other, net                                                      77,046            17,002          (13,610)
                                                            ---------------  ----------------  ---------------
                                                                  1,524,870           533,141           38,841
                                                            ---------------  ----------------  ---------------

              Income before income taxes                         10,310,227         5,030,284        2,877,100

Provision for income taxes (notes 2 and 7)                        4,091,000         1,893,682        1,073,473
                                                            ---------------  ----------------  ---------------

              Net income                                  $       6,219,227         3,136,602        1,803,627
                                                            ===============  ================  ===============

Unaudited pro forma information (note 2):
     Net income as reported                               $       6,219,227         3,136,602        1,803,627
     (Benefit) charge in lieu of income taxes, net                 (114,207)           75,752          (23,561)
                                                            ---------------  ----------------  ---------------

              Pro forma net income                        $       6,333,434         3,060,850        1,827,188
                                                            ===============  ================  ===============


     Pro forma net income per share                       $             .44               .29              .20
                                                            ===============  ================  ===============

     Weighted average number of common and
         common equivalent shares outstanding                    14,433,172        10,550,039        9,130,518
                                                            ===============  ================  ===============

</TABLE>





See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>



<TABLE>


                       COMPUTER MANAGEMENT SCIENCES, INC.

                 Consolidated Statements of Shareholders' Equity

                  Years ended December 31, 1996, 1995 and 1994

<CAPTION>


                                                                                            Unrealized      Total
                                                                                               Gain        Share-
                                         Common     Preferred       Paid-in    Retained      (Loss) on    holders'
                                          Stock       Stock         Capital    Earnings     Investments    Equity
<S>                                   <C>              <C>      <C>            <C>        <C>          <C>

Balance at January 1, 1994            $    31,698         -       1,030,646    2,683,459         -        3,745,803

Shares issued for exercised stock
     options                                  521         -          20,179           -          -           20,700
Shares issued to ESOP                         694         -         317,306           -          -          318,000
Dividends paid to shareholders of
     pooled entities                           -          -              -       (56,000)        -          (56,000)
Net income                                     -          -              -     1,803,627         -        1,803,627
Unrealized loss on investments,
     net of income tax (note 5)                -          -              -            -     (13,640)        (13,640)
                                        ---------  ---------  -------------  -----------  ---------  --------------

Balance at December 31, 1994               32,913         -       1,368,131    4,431,086    (13,640)      5,818,490

Shares issued for exercised stock
     options                                   37         -             614           -          -              651
Shares issued in initial public
     offering                              21,850         -      28,426,850           -          -       28,448,700
Dividends paid to shareholders of
     pooled entities                           -          -              -        (2,000)        -           (2,000)
Stock issuance costs                           -          -        (457,626)          -          -         (457,626)
Net income                                     -          -              -     3,136,602         -        3,136,602
Unrealized gain on investments,
     net of income tax (note 5)                -          -              -            -      53,781          53,781
                                        ---------  ---------  -------------  -----------  ---------  --------------

Balance at December 31, 1995               54,800         -      29,337,969    7,565,688     40,141      36,998,598

Shares issued for exercised stock
     options                                  392         -         114,473           -          -          114,865
Stock splits (note 10)                     68,938         -         (68,938)          -          -               -
Contribution of undistributed
     S Corporation earnings of
     pooled entity                             -          -         695,312     (695,312)        -               -
Net income                                     -          -              -     6,219,227         -        6,219,227
Unrealized gain on investments,
     net of income tax (note 5)                -          -              -            -      10,113          10,113
                                        ---------  ---------  -------------  -----------  ---------  --------------

Balance at December 31, 1996          $   124,130         -      30,078,816   13,089,603     50,254      43,342,803
                                        =========  =========  =============  ===========  =========  ==============


</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>


<TABLE>



                       COMPUTER MANAGEMENT SCIENCES, INC.

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1996, 1995 and 1994

<CAPTION>


                                                                     1996               1995              1994
                                                                     ----               ----              ----
<S>                                                              <C>                 <C>              <C>

Cash flow from operating activities:
     Net income                                               $     6,219,227         3,136,602        1,803,627
     Adjustments to reconcile net income to net
        cash provided by operating activities:
         Depreciation and amortization                                599,685           444,176          333,124
         Net gain on disposition of property
              and equipment                                            (7,631)           (1,984)            (121)
         Net gain on sale of investments                              (22,852)          (25,655)          (1,706)
         Deferred income tax expense (benefit)                        128,909            (3,721)         (69,316)
         ESOP stock contribution                                           -                 -           318,000
         Change in assets and liabilities:
              Increase in accounts and other
                  receivables                                      (3,726,453)       (1,762,446)      (1,220,716)
              Increase in other current assets                        (38,897)          (40,254)          (4,088)
              Decrease in refundable income taxes                          -             23,726           57,690
              (Increase) decrease in other assets                    (299,906)           16,068          (31,036)
              Increase in accounts payable and
                  accrued expenses                                    342,252           495,490          302,673
              (Decrease) increase in unearned revenue                (425,223)          262,079          142,186
              Increase in income taxes payable                        130,489            90,165           66,303
                                                                -------------     -------------    -------------

                  Net cash provided by operating
                      activities                                    2,899,600         2,634,246        1,696,620
                                                                -------------     -------------    -------------

Cash flow from investing activities:
     Purchases of property and equipment                           (5,127,475)       (1,127,960)        (884,941)
     Proceeds from the sale of property and equipment                   9,610            23,703           32,005
     Purchase acquisitions                                         (2,457,262)          (30,190)        (364,270)
     (Increase) decrease in notes receivable                       (1,287,911)         (221,873)           8,250
     Purchases of investments                                     (13,490,608)         (502,102)        (138,332)
     Proceeds from sale of investments                              3,738,674           303,802          113,596
                                                                -------------     -------------    -------------

                  Net cash used in investing activities           (18,614,971)       (1,554,620)      (1,233,692)
                                                                -------------     -------------    -------------


                                                                                                        (Continued)
</TABLE>

                                      F-7
<PAGE>


<TABLE>


                       COMPUTER MANAGEMENT SCIENCES, INC.

                Consolidated Statements of Cash Flows (continued)

                  Years ended December 31, 1996, 1995 and 1994


<CAPTION>


                                                                        1996             1995               1994
                                                                        ----             ----               ----
<S>                                                              <C>                 <C>                 <C>

Cash flow from financing activities:
     Proceeds from issuance of common stock                   $          114,865       28,449,351            20,700
     Payment of stock issuance costs                                          -          (457,626)               -
     Dividends paid                                                           -            (2,000)          (56,000)
     Proceeds from notes payable                                              -            48,414           358,000
     Repayment of notes payable                                         (276,735)        (186,578)         (311,107)
                                                                ----------------  ---------------  ----------------

              Net cash (used in) provided by
                  financing activities                                  (161,870)      27,851,561            11,593
                                                                ----------------  ---------------  ----------------

              Net (decrease) increase in cash
                  and cash equivalents                               (15,877,241)      28,931,187           474,521

Cash and cash equivalents at beginning of year                        30,068,844        1,137,657           663,136
                                                                ----------------  ---------------  ----------------

Cash and cash equivalents at end of year                      $       14,191,603       30,068,844         1,137,657
                                                                ================  ===============  ================

Cash paid for income taxes                                    $        3,831,602        1,794,867           932,516
                                                                ================  ===============  ================

Cash paid for interest                                        $            4,990           26,032            30,116
                                                                ================  ===============  ================








</TABLE>









See accompanying notes to consolidated financial statements.

                                      F-8
<PAGE>





                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1996 and 1995




(1)    Summary of Significant Accounting Policies and Operations

       Nature of Operations

       Computer Management Sciences, Inc. (the Company) is a national consulting
       and professional  services  company  providing  client/server  solutions,
       information technology,  systems consulting,  project management, systems
       analysis and design,  programming,  and information  systems  outsourcing
       services to a broad range of industries and software/hardware platforms.

       Basis of Presentation

       The accompanying  consolidated  financial statements include those of the
       Company  and its wholly  owned  subsidiaries,  after  elimination  of all
       significant intercompany accounts and transactions.

       Cash and Cash Equivalents

       For purposes of the  consolidated  statements of cash flows,  the Company
       considers all short-term  investments with an original maturity of ninety
       days or less to be cash equivalents. The carrying amount approximates the
       fair value because of the short maturity of these investments.

       Investments

       The Company  accounts for its investments in accordance with Statement of
       Financial  Accounting  Standards No. 115 (SFAS No. 115),  "Accounting for
       Certain Investments in Debt and Equity Securities."

       Under SFAS No. 115, the Company has  classified  all of its  investments,
       consisting  of  equity  and  debt   securities   and  mutual  funds,   as
       available-for-sale  which are recorded at fair value.  Unrealized holding
       gains and losses, net of the related income tax effects,  are included as
       a separate component of shareholders' equity, until realized. Investments
       are  categorized  as short or long-term  based on their stated  maturity.
       Investments  with  no  stated  maturity  are  categorized  based  on  the
       Company's best estimate as to when such investments will be disposed.



                                      F-9
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(1)    Summary of Significant Accounting Policies and Operations, continued

       Property and Equipment

       Property and equipment are recorded at cost.  Depreciation is computed on
       the straight-line method using estimated useful lives as follows:
                                                         Estimated Useful Lives
                                                               (in years)

             Buildings                                             31
             Building improvements                               7 to 27
             Computers and software                                 5
             Office furniture and equipment                      5 to 7
             Vehicles                                               5

       The Company  reviews its property and equipment for  impairment  whenever
       events or changes in  circumstances  indicate  the  carrying  value of an
       asset may not be recoverable. Recoverability is measured by comparison of
       the carrying amount to the net cash flows expected to be generated by the
       asset.

       Intangible Assets

       Intangible   assets   primarily   consist  of  goodwill  and  non-compete
       agreements, associated with purchased acquisitions. Goodwill is amortized
       over the period  estimated to benefit  from the acquired  assets which is
       five to seven years.  Non-compete  agreements are amortized over the term
       of the agreement.  Management periodically assesses the recoverability of
       intangible assets based on the cash flows from operations of the acquired
       entity.

       Revenue Recognition

       The Company  derives  substantially  all of its revenue  from  consulting
       services  provided  on both a  time-and-materials  and fixed  fee  basis.
       Revenue with respect to  time-and-material  contracts  is  recognized  as
       incurred.  Revenue with respect to fixed fee contracts is recognized on a
       percentage of completion basis and is adjusted monthly for the cumulative
       impact of any revision in estimates.  The Company  recognizes  the entire
       loss on a  fixed  fee  contract  in the  period  when  current  estimates
       indicate a loss.

       Revenue  earned  in excess  of  billings  and  unearned  revenue  consist
       principally  of services  performed and not yet billed and amounts billed
       or received for services not yet performed.



                                      F-10
<PAGE>





                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(1)    Summary of Significant Accounting Policies and Operations, continued

       Income Taxes

       The Company  follows the asset and  liability  method of  accounting  for
       income  taxes  in  accordance  with  Statement  of  Financial  Accounting
       Standards No. 109, "Accounting for Income Taxes." Deferred tax assets and
       liabilities are recognized for the future tax  consequences  attributable
       to  differences  between  the  financial  statement  carrying  amounts of
       existing assets and liabilities and their respective tax bases.  Deferred
       tax assets and  liabilities are measured using enacted tax rates expected
       to  apply to  taxable  income  in the  years  in  which  those  temporary
       differences  are  expected  to be  recovered  or  settled.  The effect on
       deferred  tax  assets  and  liabilities  of a  change  in  tax  rates  is
       recognized in income in the period that includes the enactment date.

       Net Income per Common and Common Equivalent Share

       Net  income  per  common  and  common  equivalent  share  is based on the
       weighted-average   number  of  common   and  common   equivalent   shares
       outstanding  during all years. Stock options granted with exercise prices
       below the  initial  public  offering  (the  Offering)  price  during  the
       twelve-month  period  preceding  the initial  filing date of the Offering
       have been included in the calculation of common share equivalents,  using
       the treasury stock method,  as if they were  outstanding  for all periods
       presented.  All other stock options granted more than twelve months prior
       to the Offering and  subsequent to the Offering have been included in the
       computations  since  their date of  issuance,  using the  treasury  stock
       method, only when their effect is dilutive.

       Pro forma net income per common  and common  equivalent  share,  assuming
       full  dilution,   is  equal  to  that   disclosed  on  the   accompanying
       consolidated   statements  of  operations  and  thus  is  not  separately
       disclosed.  Retroactive  recognition has been given in the calculation of
       earnings  per share to the  shares  issued  in the  pooling  of  interest
       mergers discussed in note 2 and the stock splits discussed in note 11.

       Use of Estimates

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



                                      F-11
<PAGE>





                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(1)    Summary of Significant Accounting Policies and Operations, continued

       Concentration of Credit Risk

       Financial   instruments   which   potentially   expose  the   Company  to
       concentrations  of  credit  risk  consist  primarily  of  trade  accounts
       receivable. The Company has not experienced significant losses related to
       receivables  from  individual  customers  or  groups  of  customers  in a
       particular industry or geographic area. Due to these factors,  management
       believes no additional credit risk beyond amounts provided for collection
       losses is inherent in the Company's accounts receivable

       During 1996,  the Company  earned  revenues  from one  customer  that
       totaled $4.8 million or 10.4% of total revenue.

       Stock Option Plan

       Prior to January 1, 1996,  the  Company  accounted  for its stock  option
       plans in accordance  with the provisions of Accounting  Principles  Board
       (APB) Opinion No. 25,  "Accounting  for Stock Issued to  Employees,"  and
       related interpretations.  As such, compensation expense would be recorded
       on the date of grant only if the current  market price of the  underlying
       stock  exceeded  the  exercise  price.  On January 1, 1996,  the  Company
       adopted SFAS No. 123,  "Accounting for Stock-Based  Compensation,"  which
       permits entities to recognize as expense over the vesting period the fair
       value of all stock-based awards on the date of grant. Alternatively, SFAS
       No. 123 also allows  entities to continue to apply the  provisions of APB
       Opinion No. 25 and  provide  pro forma net income and pro forma  earnings
       per share  disclosures  for employee stock option grants made in 1995 and
       future years as if the  fair-value-based  method  defined in SFAS No. 123
       had been  applied.  The  Company  has  elected to  continue  to apply the
       provisions  of APB  Opinion  25 and  provide  the  pro  forma  disclosure
       provisions of SFAS No. 123.

(2)    Business Combinations and Acquisitions

       Business Combinations

       On April 30,  1996,  the  Company  issued  approximately  945,907  shares
       (adjusted  for  subsequent  stock splits) of its common stock in exchange
       for all of the outstanding common stock of Summit Computer Services, Inc.
       (SCS), a Charlotte,  North Carolina based computer  consulting  firm with
       concentrated  expertise  in  client/server   technology.   This  business
       combination  has  been  accounted  for  as  a  pooling-of-interests  and,
       accordingly,  the  consolidated  financial  statements  for  all  periods
       presented  have been  restated  to include  the  accounts  and results of
       operations  of SCS.  Prior to its  acquisition  by the  Company,  SCS had
       elected S  Corporation  status for federal and state income tax purposes.
       As an S Corporation,  SCS's tax liability was the  responsibility  of its
       stockholders.  Included in the  provision  for income  taxes in 1996 is a
       non-cash,  non-recurring  charge of $246,876  for  deferred  income taxes
       resulting from the termination of the S Corporation status.




                                      F-12
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(2)    Business Combinations and Acquisitions, continued

       Business Combinations, continued

       To reflect the earnings of SCS on an after tax basis,  a pro forma charge
       (benefit)  in lieu of income  taxes of $132,669 in 1996,  $75,752 in 1995
       and ($23,561) in 1994 has been included, in the accompanying consolidated
       statements of operations,  for the periods preceding the termination of S
       Corporation  status.  A pro forma benefit for the impact of the non-cash,
       non-recurring net charge described above is also included for 1996.

       On December 28, 1995,  the Company  issued  approximately  343,991 shares
       (adjusted  for  subsequent  stock splits) of its common stock in exchange
       for all of the outstanding common stock of MIS Software Development, Inc.
       (MSD),  an  information   systems  consulting   company.   This  business
       combination has been accounted for as a pooling-of-interests  combination
       and, accordingly,  the consolidated  financial statements for all periods
       presented  have been  restated  to include  the  accounts  and results of
       operations of MSD.

       The results of operations previously reported by the separate enterprises
       and the  combined  amounts  presented  in the  accompanying  consolidated
       financial  statements  for the years ended December 31, 1995 and 1994 are
       summarized below:

                                           1995          1994
                                           ----          ----

               Revenue:
                   Company .........   $24,975,281    19,571,392
                   SCS .............     4,185,322     2,636,081
                   MSD .............     2,837,617     2,727,942
                                       -----------   -----------
                        Combined ...   $31,998,220    24,935,415
                                       ===========   ===========

               Net income (loss):
                   Company .........   $ 2,740,223     1,578,992
                   SCS .............       193,740       (60,258)
                   MSD .............       202,639       284,893
                                       -----------   -----------
                        Combined ...   $ 3,136,602     1,803,627
                                       ===========   ===========


       There were no significant transactions between the Company and MSD or SCS
       prior to the combinations.





                                      F-13
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(2)    Business Combinations and Acquisitions, continued

       Acquisitions

       On January 30, 1996, the Company acquired  certain assets,  contracts and
       personnel of Weldon Systems, Inc. (Weldon), a Springfield,  Massachusetts
       company that develops customized  applications for firms in the financial
       services and insurance industries for $225,000.  Goodwill of $185,000 was
       recorded and is being amortized over 7 years.

       On July 31,  1996,  the  Company  acquired  all of the assets of Pathways
       Consulting, Inc. (Pathways), an Atlanta-based information technology firm
       specializing in providing systems integration  consulting services to the
       public utility industry. The acquisition was accounted for as a purchase,
       with a price of $4.4  million in cash of which $2.3  million  was paid at
       closing and $2.1 million of contingent  consideration is payable in equal
       installments  over an  approximate  three year period if  Pathways  meets
       certain revenue goals. Subsequent to December 31, 1996, Pathways exceeded
       its  first  revenue  goal  and as a  result  $700,000  of the  contingent
       consideration  will be paid in the first  quarter of 1997,  with goodwill
       adjusted  accordingly.  Goodwill of $2,275,425 has been recorded thus far
       and is being amortized over 7 years.

       On March 18,  1994,  the  Company  purchased  certain  assets of Symmetry
       Systems,  Inc.  (Symmetry)  for  $272,086.  As part of this  transaction,
       goodwill of $142,270 was recorded  and is being  amortized  over 5 years.
       Additionally,  the Company entered into a non-compete  agreement with the
       President  of Symmetry  for  $10,000.  The  agreement is for a term of 36
       months and expires on March 18, 1997.

       On July 28, 1994, the Company  purchased  Cynosure,  Inc.  (Cynosure) for
       $50,000 and the assumption of certain leases.

       The  acquisition  of  Weldon,  Pathways,   Symmetry,  and  Cynosure  were
       accounted  for as purchases  and as such the results of their  operations
       are included in the  consolidated  financial  statements from the date of
       the  acquisition.  None  of  the  acquisitions  were  significant  to the
       operations  of the  Company in the year in and they were  acquired or the
       year preceding the acquisition.






                                      F-14
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(3)    Notes Receivable

       Notes  receivables  consisted  of the  following at December 31, 1996 and
       1995:

                                                    1996         1995
                                                    ----         ----

          Notes receivable from third parties   $  924,197      221,873
          Notes receivable from stockholders       273,250       21,750
          Notes receivable from an employee .      235,825         -
          Notes receivable from an officer ..       98,262         -
                                                ----------   ----------
                       Total ................   $1,531,534      243,623

                       Less current portion .      425,250       41,609
                                                ----------   ----------

                       Non-current portion ..   $1,106,284      202,014
                                                ==========   ==========


       Notes  receivable  have interest rates ranging from 5% to 9.75% per annum
       with maturities beginning in October 1998 through October 2001. The notes
       are  secured by  tangible  assets  with the  exception  of the notes from
       stockholders  which are  unsecured.  Based on the range of interest rates
       and the stated  maturities,  management  believes  the fair values of the
       notes receivable is not materially different from their carrying amounts.


(4)    Land Held for Investment

       Land held for investment purposes primarily  represents  undeveloped land
       located in north Georgia. The undeveloped land is recorded at cost, which
       is less than net realizable value determined by appraisal.
       Annual carrying costs associated with the land are expensed.






                                      F-15
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(5)    Investments

       The cost, gross unrealized  holding gains and losses,  and estimated fair
       value of investments available for sale at December 31, 1996 and 1995 are
       as follows:
<TABLE>

<CAPTION>

                                                                Gross             Gross          Estimated
                                                             Unrealized        Unrealized          Fair
                                               Cost             Gains            Losses            Value
         <S>                            <C>                 <C>                 <C>            <C>

         1996
         Equity securities              $     2,069,528            99,196           (7,578)        2,161,146
         Debt securities                      8,130,844             5,250          (30,710)        8,105,384
         Mutual funds                           155,340            15,981               -            171,321
                                          -------------     -------------       ----------     -------------

              Total                     $    10,355,712           120,427          (38,288)       10,437,851
                                          =============     =============       ==========     =============


         1995
         Equity securities              $       381,545            56,878           (3,514)          434,909
         Mutual funds                           199,382            12,245               -            211,627
                                          -------------     -------------       ----------     -------------

              Total                     $       580,927            69,123           (3,514)          646,536
                                          =============     =============       ==========     =============

<CAPTION>

       The cost and estimated fair value of debt  securities  available for sale
       at December 31, 1996, by contractual maturity is as follows:

                                                                            Estimated
                                                            Cost           Fair Value
                  <S>                                <C>                 <C>

                  Due in one year or less            $      3,168,513        3,143,643
                  Due in one to five years                  4,962,331        4,961,741
                                                       --------------    -------------
                                                     $      8,130,844        8,105,384
                                                       ==============    =============


</TABLE>




                                      F-16
<PAGE>





                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(5)    Investments, continued

       Net gain on the sale of  investments  included  gross  realized  gains of
       $32,491,  $27,295 and $1,706 and gross realized losses of $9,639,  $1,640
       and  $-0-,  for the  years  ended  December  31,  1996,  1995  and  1994,
       respectively.  For the purpose of  determining  gross  realized gains and
       losses,   the  cost  of  marketable   securities  is  based  on  specific
       identification.

       Net unrealized  gains on investments  available for sale were $82,139 and
       $65,609  at  December  31,  1996 and 1995,  respectively.  The  change in
       unrealized  gains, net of income taxes,  have been included as a separate
       component of shareholder's equity and amounted to $10,113 and $53,781 for
       the years ended December 31, 1996 and 1995, respectively.


(6)    Notes Payable
<TABLE>
<CAPTION>

       Notes payable consisted of the following at December 31, 1996 and 1995:


                                                                                           1996           1995
                                                                                           ----           ----
              <S>                                                                   <C>               <C>

              Line-of-credit,  up to the  lesser  of  $750,000  or 75% of  trade
                  accounts  receivable  less than 90 days old ($8.1  million  at
                  December 31, 1996), secured by trade accounts receivable,  due
                  on demand, with interest
                  due at the prime rate                                             $         100            100

              Other notes  payable,  interest  ranging from 8% to 12% per annum,
                  collateralized by accounts receivable and
                  real property, paid in full during 1996                                      -         276,735
                                                                                      -----------    -----------

                      Total                                                                   100        276,835

              Less current portion                                                            100        232,396
                                                                                      -----------    -----------
                      Non-current portion                                           $          -          44,439
                                                                                      ===========    ===========


</TABLE>




                                      F-17
<PAGE>



                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements





<TABLE>

(7)    Income Taxes
<CAPTION>

       The income tax expense for the years ended  December 31,  1996,  1995 and
       1994 was allocated as follows:

                                                                     1996             1995                1994
                                                                     ----             ----                ----
           <S>                                                <C>                 <C>               <C>

           Income from continuing operations                  $     4,091,000         1,893,682        1,073,473
           Shareholders' equity, for recognition of
                unrealized gain (loss) on marketable
                equity securities                                       6,417            34,122           (8,654)
                                                                -------------     -------------    -------------

                                                              $     4,097,417         1,927,804        1,064,819
                                                                =============     =============    =============

<CAPTION>

       Net  income  before   income  taxes  is  derived   solely  from  domestic
       operations.  The  provision  for income tax  expense  for the years ended
       December 31, 1996, 1995 and 1994 consists of the following:


                                                                     1996             1995                1994
                                                                     ----             ----                ----
          <S>                                                  <C>                <C>                <C>

           Current tax expense                                $     3,962,091         1,897,403        1,142,789

           Deferred tax expense (benefit)                             128,909            (3,721)         (69,316)
                                                                -------------     -------------    -------------

                Total                                         $     4,091,000         1,893,682        1,073,473
                                                                =============     =============    =============

</TABLE>

                                      F-18
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements





<TABLE>

(7)    Income Taxes, continued
<CAPTION>

       Income tax expense attributable to income from continuing  operations for
       the years ended  December  31,  1996,  1995 and 1994,  differed  from the
       amounts  computed by applying the U.S.  Federal income tax rate of 34% to
       income before taxes as follows:

                                                                     1996             1995                1994
                                                                     ----             ----                ----
           <S>                                                <C>                    <C>              <C>

           Computed "expected" tax expense                    $     3,505,477         1,710,297          978,214
           Increase (decrease) in income taxes resulting
             from:
                S Corporation (income) loss                          (115,364)          (65,872)          20,488
                Tax exempt interest                                   (34,650)           (3,772)          (7,798)
                Non-deductible meals and entertainment                 35,420            31,779           52,169
                State income tax, net of federal benefit              500,903           238,349          140,441
                Dividend income exclusion                             (25,194)               -                -
                Deferred income taxes resulting from
                    change in tax status of pooled entity             246,876                -                -
                Other, net                                            (22,468)          (17,099)        (110,041)
                                                                -------------     -------------    -------------
                                                              $     4,091,000         1,893,682        1,073,473
                                                                =============     =============    =============
<CAPTION>

       The  effects  of  temporary  differences  that give  rise to  significant
       portions of deferred tax assets and  liabilities  as of December 31, 1996
       and 1995 are as follows:

                                                                                      1996                1995
                                                                                      ----                ----
              <S>                                                                <C>                <C>

              Deferred tax assets:
                  Intangible assets                                             $            -            13,500
                  Accrued expenses                                                      144,485           19,409
                  Allowance for doubtful accounts                                        57,000           14,363
                  Other                                                                   3,284            1,961
                                                                                  -------------    -------------
                      Total deferred tax assets                                         204,769           49,233
                                                                                  -------------    -------------

              Deferred tax liabilities:
                  Change of reporting from the cash basis to the
                      accrual basis for income tax purposes                             193,497           91,750
                  Property and equipment depreciation                                   234,147           65,106
                  Intangible assets                                                      13,657               -
                  Unrealized gain on investments                                         31,885           25,468
                                                                                  -------------    -------------
                           Total deferred tax liabilities                               473,186          182,324
                                                                                  -------------    -------------
                           Net deferred tax liabilities                         $       268,417          133,091
                                                                                  =============    =============
</TABLE>

                                      F-19
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(7)    Income Taxes, continued

       In  assessing  the  realizability  of  deferred  tax  assets,  management
       considers  whether it is more likely than not that some portion or all of
       the deferred tax assets will not be realized. The ultimate realization of
       deferred tax assets is dependent  upon the  generation of future  taxable
       income  during the periods in which those  temporary  differences  become
       deductible. Management considers the schedule of reversal of deferred tax
       assets,  projected future taxable income, and tax planning  strategies in
       making the assessment. Based upon the above criteria and that the Company
       has paid sufficient  taxes in prior years which is available for recovery
       of deferred  tax assets,  management  believes it is more likely than not
       that  the  Company  will   realize  the  benefits  of  these   deductible
       differences.

<TABLE>

(8)    Benefit Plans
<CAPTION>

       The Company provides a 401(k) withholding plan which covers substantially
       all employees after sixty days of employment.

       The Company  maintains  an  Employee  Stock  Ownership  Plan (ESOP) and a
       Profit Sharing Plan  (collectively,  the Plans) for  substantially all of
       its employees.  Contributions  to the Plans are made at the discretion of
       the Board of  Directors.  The Plans may be terminated at any time without
       further  obligation  to the Company.  Employee  benefit plan expenses are
       summarized as follows:


                                                                   December 31,
                                             1996                  1995                  1994
                                             ----                  ----                  ----
                                      Cash        Stock      Cash        Stock     Cash         Stock
         <S>                       <C>            <C>       <C>        <C>        <C>          <C>

         Profit Sharing Plan     $       -          -       294,929        -       163,284         -
         ESOP                       1,000,000       -       475,000        -       182,000      318,000
                                  -----------  ---------  ---------   ---------  ---------    ---------

                                 $  1,000,000       -       769,929        -       345,284      318,000
                                  ===========  =========  =========   =========  =========    =========

</TABLE>

       The Company accrues a combined  contribution to the Plans  throughout the
       year and recognizes employee benefit plan expense. Cash is contributed to
       the ESOP  throughout  the  year as  needed  and at year end the  Board of
       Directors approves the contribution  allocation between the Plans and the
       payment of cash and/or stock.





                                      F-20
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(8)    Benefit Plans, continued

       The Company also has a nonqualified  stock option plan (the  Nonqualified
       Plan) and an  incentive  stock  option  plan (the ISO Plan)  under  which
       certain key  employees  are granted the option to purchase  shares of the
       Company's common stock at a price equal to the market price of stock. The
       Nonqualified  and ISO Plans  were  terminated  on August 31,  1995,  with
       respect to the issuance of new options under these plans.

       The Company has a Stock Incentive Plan and a Non-Employee  Director Stock
       Option  Plan (the  Plans)  pursuant  to which the Company may grant stock
       options to officers,  directors and key  employees.  The Plans  authorize
       grants of options to purchase up to 1,125,000  shares of  authorized  but
       unissued  common stock.  Stock options are granted with an exercise price
       equal to the stock's  fair market  value at the date of grant.  All stock
       options   generally  have  10  year  terms  and  vest  and  become  fully
       exercisable after 5 years from the date of grant (20% per year), with the
       exception of 397,792  stock  options  which were issued during 1995 under
       the Nonqualified Plan and vested immediately.

       At December 31, 1996, there were 758,125  additional shares available for
       grant under the Plans. The per share weighted-average fair value of stock
       options  granted during 1996 and 1995 was $10.26 and $2.23 on the date of
       grant using the Black  Scholes  option-pricing  model with the  following
       weighted-average   assumptions:   1996  -  no  expected  dividend  yield,
       risk-free interest rate of 5.9%,  weighted average expected volatility of
       53.4% and an expected life of 6 years; 1995 - no expected dividend yield,
       risk-free interest rate of 5.4%,  weighted average expected volatility of
       53.4% and an expected life of 6 years.

       The Company  applies APB Opinion No. 25 in accounting  for its Plans and,
       accordingly,  no  compensation  cost has been  recognized  for its  stock
       options  in  the  consolidated  financial  statements.  Had  the  Company
       determined  compensation  cost  based on the fair value at the grant date
       for its stock  options under SFAS No. 123, the Company's net income would
       have been reduced to the pro forma amounts indicated below:

                                                   1996             1995
                                                   ----             ----

             Net income:
                As reported                 $     6,333,434         3,060,850
                Pro forma                         6,195,733         2,674,400

             Per share:
                As reported                 $           .44               .29
                Pro forma                               .43               .25






                                      F-21
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(8)    Benefit Plans, continued

       Pro forma net  income  reflects  only  options  granted in 1996 and 1995.
       Therefore,  the full impact of  calculating  compensation  cost for stock
       options  under SFAS No. 123 is not  reflected in the pro forma net income
       amounts  presented above because  compensation cost is reflected over the
       options'  vesting  period of 5 years and  compensation  cost for  options
       granted prior to January 1, 1995 is not considered.

       Stock option activity during the period indicated is as follows:


                                                                     Weighted-
                                               Number of              Average
                                                Shares            Exercise Price

         Balance at December 31, 1993           1,556,293       $        .081
              Granted                             147,033               1.542
              Exercised                          (117,139)               .078
              Forfeited                              -                   -
                                            -------------         -----------

         Balance at December 31, 1994           1,586,187                .167
              Granted                             882,747               3.917
              Exercised                            (8,368)               .078
              Forfeited                           (29,275)              2.578
                                            -------------         -----------

         Balance at December 31, 1995           2,431,291               1.576
              Granted                             182,375              17.802
              Exercised                           (83,201)              1.381
              Forfeited                           (69,910)              4.839
                                            -------------         -----------

         Balance at December 31, 1996           2,460,555       $       2.649
                                            =============         ===========






                                      F-22
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(8)    Benefit Plans, continued

       The  following   table   presents   information   regarding  all  options
       outstanding at December 31, 1996.


                              Weighted
                               Average                                Weighted
             Number of        Remaining          Range of              Average
              Options        Contractual         Exercise             Exercise
            Outstanding         Life              Prices                Price

             1,338,746         1.1 years      $           .078    $      .078
                83,671         6.6 years                  .680           .680
               672,612         8.3 years         1.542 - 2.578          2.462
               192,151         9.0 years         6.222 - 8.167          7.958
               173,375         9.9 years       13.000 - 20.750         18.302
         -------------    --------------       ---------------      ---------

             2,460,555         4.5 years      $  .078 - 20.750    $     2.649
         =============    ==============       ===============      =========


       The following  table presents  information  regarding  options  currently
       exercisable at December 31, 1996.


                                                                Weighted
              Number of                 Range of                 Average
               Options                  Exercise                Exercise
             Exercisable                 Prices                   Price

               1,338,746         $               .078         $      .078
                  66,938                         .680                .680
                 467,817                1.542 - 2.578               2.511
                  38,700                6.222 - 8.167               7.946
           -------------           ------------------           ---------
               1,912,201         $        .078 - .680         $      .853
           =============           ==================           =========





                                      F-23
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(9)    Accrued Expenses

       Accrued expenses at December 31, 1996 and 1995 consist of the following:


                                                     1996             1995
                                                     ----             ----

         Salaries and benefits               $     1,286,065           963,389
         Employee benefit plan contributions         227,492           351,125
         Payroll tax and withholdings                520,866           355,984
         Other                                       196,738            50,327
                                               -------------    --------------
                                             $     2,231,161         1,720,825
                                               =============    ==============


(10)   Shareholders' Equity

       On August 2, 1995,  the Board of  Directors  of the  Company  amended and
       restated  the  Articles of  Incorporation  of the Company to, among other
       things,  divide  the  capital  stock  into two  classes:  twenty  million
       (20,000,000)  shares of common voting  stock,  having a par value of $.01
       per share, and five million (5,000,000) shares of preferred stock, having
       a par value of $.01 per share.  The  amended  and  restated  Articles  of
       Incorporation  were approved by the Company's  shareholders  on August 3,
       1995.  The Board of Directors  also approved the issuance and sale by the
       Company to the public of up to 4,500,000  (adjusted for subsequent  stock
       splits)  shares of the  Company's  common  stock (the  issuance  of up to
       4,916,250 shares was  subsequently  approved by the Board of Directors on
       September 26, 1995).

       On  August  8,  1995,  the  Company's  Board  of  Directors  declared  an
       approximate  3.72-for-1  stock  split,  effected  in the  form of a stock
       dividend, of the Company's common stock.

       On October 4, 1995,  the Company  closed its initial  public  offering of
       4,916,250 shares of common stock for $6.22 (adjusted for subsequent stock
       splits) per share.  The net proceeds of $28.4 million are currently being
       invested in acquisitions,  systems outsourcing centers,  branch expansion
       and marketable securities.

       On June 7, 1996,  the  Company's  Board of  Directors  declared a 3-for-2
       stock  split,  which was  effected as a fifty  percent  dividend,  of the
       Company's common stock. The common stock dividend was distributed on July
       5, 1996 to shareholders of record on June 21, 1996.





                                      F-24
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(10)   Shareholders' Equity, continued

       On October 17, 1996, the Company's Board of Directors  declared a 3-for-2
       stock split, to be effected as a fifty percent dividend, of the Company's
       common stock.  The Common stock dividend was  distributed on November 21,
       1996 to shareholders of record on November 4, 1996.

       All share, per share and conversion  amounts relating to common stock and
       stock  options  included  in  the  accompanying   consolidated  financial
       statements  and notes  have been  restated  to  reflect  the above  stock
       splits.


(11)   Commitments

       The Company  leases office space in nine national  locations and computer
       equipment under  non-cancelable  agreements which expire at various dates
       through  1999.  Office  rentals  are  subject  to  escalations  based  on
       increases in real estate taxes and  operating  expenses.  Aggregate  rent
       expense under these operating leases was approximately $322,000, $304,000
       and  $205,000  for the years  ended  December  31,  1996,  1995 and 1994,
       respectively.

       Future minimum lease  payments  required  under  operating  leases having
       remaining  non-cancelable  terms in excess of one year as of December 31,
       1997 are as follows:


                                    1997      $     234,661
                                    1998            148,657
                                    1999             65,049
                                                -----------
                                              $     448,367
(12)   Subsequent Event

       On January 17,  1997,  the Company  issued  584,080  shares of its common
       stock for all the outstanding common stock of Miaco Corporation  (Miaco),
       a computer  consulting  firm  specializing  in  relational  database  and
       client/server  technologies.  This business combination will be accounted
       for as a pooling-of-interests combination and, accordingly, the Company's
       historical  consolidated financial statements presented in future reports
       will be restated to include the  accounts  and results of  operations  of
       Miaco.





                                      F-25
<PAGE>




                       COMPUTER MANAGEMENT SCIENCES, INC.

                   Notes to Consolidated Financial Statements






(12)   Subsequent Event, continued

       The following unaudited pro forma data summarizes the combined results of
       operations  of the  Company  and  Miaco  as if the  combination  had been
       consummated on December 31, 1996.


                                                  Years Ended December 31,
                                               1996         1995        1994

         Pro forma revenue               $  57,432,222   41,535,734   31,788,590
                                           ===========  ===========  ===========

         Pro forma net income            $   6,053,326    2,748,264    1,929,482
                                           ===========  ===========  ===========

         Pro forma net income per share  $         .40          .25          .20
                                           ===========  ===========  ===========






                                      F-26