United States
                       Securities and Exchange Commission
                             Washington, D. C. 20549

                                   FORM 10-KSB

  {  X  }  Annual Report Pursuant to Section 13 or 15 (d) of the Securities
            Exchange  Act of  1934 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 333-3618

                      PHYSICIANS INFORMATION EXCHANGE, INC.


                    TEXAS                                72-1315594
      (state or other jurisdiction of       (I.R.S. Employer Identification No.)
       incorporation or organization)
        1401 HUDSON LANE, SUITE 202                         71201
             MONROE, LOUISIANA                            (Zip Code)
       (Address of Principal Offices)

                                 (318) 323-5000
              (Registrant's Telephone Number, including area code.)

         Securities registered under Section 12(b) of the Exchange Act:

       Title of Each Class             Name of  Exchange  on which  Registered
             NONE                                 ____________ 

         Securities registered under Section 12(g) of the Exchange Act:

       Title of Each Class             Name of Exchange on which Registered
             NONE                                 ____________

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  periods 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 there  is no  disclosure  of  delinquent  filers  in
response to Item 405 of  Regulation  S-B is not  contained in this form,  and no
disclosure  will be contained,  to the best of the  registrant's  knowledge,  in
definitive proxy or information statements incorporated by reference in Part III
of the Form 10-KSB or any amendment to this Form 10- KSB.

                  Yes                   No   x

State issuer's revenues for its most recent fiscal year.   $  0           .
                                                        -------------------

As of March 31, 1997,  there were 351,000 shares of Class A common stock,  $.001
par  value  ("Class A Common  Stock")  and  75,902,528  shares of Class B common
stock,  $.001  par value  ("Class  B Common  Stock"  collectively,  the  "Common
Stock"), of the registrant issued and outstanding. The aggregate market value of
the Common Stock held by non-affiliates of the registrant as of   March 31, 1997
was  $706,124.      For purposes of this  computation,  all executive  officers,
directors and 10%  shareholders  were deemed  affiliates.  Such a  determination
should  not be an  admission  that such  executive  officers,  directors  or 10%
shareholders are affiliates.

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<PAGE>




                                      INDEX

                      PHYSICIANS INFORMATION EXCHANGE, INC.

<TABLE>
<CAPTION>

                                    PART  I                                                                     PAGE

<S>      <C>                                                                                                     <C>
Item 1.  Description of Business..................................................................................1

Item 2.  Description of Property.................................................................................16

Item 3.  Legal Proceedings.......................................................................................16

Item 4.  Submission of Matters to a Vote of  Security Holders....................................................16

                                    PART  II

Item 5.  Market for Common Equity and Related Stockholder Matters................................................16

Item 6.  Management's Discussion and Analysis of Financial Condition and Results.................................16
           of Operations or Plan of Operation.

Item 7.  Financial Statements....................................................................................17

Item 8.  Changes In and Disagreements with Accountants on Accounting
          and Financial Disclosure...............................................................................17

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;  Compliance
            with Section 16 (a) of the Exchange Act..............................................................17

Item 10. Executive Compensation..................................................................................19

Item 11. Security Ownership of Certain Beneficial Owners and Management..........................................20

Item 12. Certain Relationships and Related Transactions..........................................................21

                                    PART IV

Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................................22

Signatures.......................................................................................................24
</TABLE>

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<PAGE>



                                     PART I

                                ITEM 1. BUSINESS

GENERAL

         Physicians  Information  Exchange,  Inc.  ("PIE" or the "Company") is a
development  stage company that is  controlled  exclusively  by  physicians  and
directed and operated primarily by physicians.  PIE was founded on the principle
that physicians desire to provide healthcare market  leadership,  strengthen the
physician-patient relationship, improve the quality of healthcare and reduce the
cost of healthcare.  The Company intends to help  physicians  accomplish this by
leveraging physician training and experience with current information technology
to  transform  clinical  data  into  medical  knowledge  and  knowledge  of  the
healthcare system. The products and services described below are currently being
developed  by the Company;  however,  such  products and services  have not been
completed and are not yet commercially available.

         PIE's  focus is on  improving  the  quality  and  lowering  the cost of
healthcare  through  point-of-care  capture of clinical  data.  PIE is the first
company to develop the capability to successfully  collect on a nationwide basis
(across  provider   entities),   clinical   outcomes  and  fully  absorbed  cost
information  at  the  point-of-care.  This  information  enables  physicians  to
understand  the  outcomes  and  fully  absorbed  cost  of  clinical  procedures,
diagnoses and treatment  protocols.  Such information also enables physicians to
utilize  predetermined  guidelines for diagnosis and treatment.  This capability
will permit  implementation  of a national  evidence-based  medicine solution to
produce higher quality, more affordable healthcare.

         The  Company  believes  that  the  information   gathered  through  its
point-of-care  clinical information system, the Physicians  Information Exchange
Record  System  ("PIERS"),  will enable  widespread  adoption of  evidence-based
clinical  practices.  This  information  on  patient  care  protocols  and other
clinical  policies  derived from  statistical  analyses of patient  outcomes and
fully  absorbed cost data will  significantly  improve the quality of healthcare
and lower  its cost of  delivery.  Evidence-based  medicine  relies on  detailed
analyses of large data sets of patient  medical  records and clinical  data.  To
date,  such analyses have not been practical on a large scale as medical records
are  generally  not under  common  control  or in  standardized  formats.  PIE's
products  and  services  provide the tools  necessary  to  generate  and analyze
outcomes- based, quality and cost information while implementing  evidence-based
medicine solutions.

         The medical  records and  clinical  data will be collected by PIE in an
anonymous and abstract  format through a computerized  physician  network.  This
clinical  data will  form the  basis of the  Knowledge  Bank's  (to be  defined)
national  clinical data  repositories and facilitate the widespread  adoption of
evidence-based  medicine.  Evidence-based  medicine  is  regarded as a promising
development  for  improving  the  practice  of  medicine  and  the  delivery  of
healthcare  at lower  costs.  This  practice  of  medicine  bases  patient  care
protocols and other clinical policies on vigorous scientific analyses of patient
outcomes.

         To date,  large scale  analysis of clinical data has not been practical
as medical records are generally not centrally located,  under common control or
in a standardized  format. PIE intends to help solve such problems by addressing
the five integral  components of  evidence-based  medicine listed below with the
corresponding PIE product, service or methodology:





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                                                  PIE PRODUCT, SERVICE
EVIDENCE-BASED MEDICINE COMPONENT                  OR METHODOLOGY
---------------------------------                 ------------------------------
o   DATA.  Clinical data must be recorded in  a   PIERS
standardized format using consistent collection
methods.

o DISCIPLINE.  Physicians  must submit clinical   THE EXCHANGE'S  automatic data
data,   use   the  developed   protocols  (when   collection
applicable) and  contribute  feedback to improv
the process.

o   SOFTWARE AND SYSTEMS.  The  tools  used  to   THE KNOWLEDGE BANK and PIERS
collect data must be efficient,  user-friendly,
economical and reliable.

o  PROCESS.  The  procedures  used   for   data   PIE's    physician    ADVISORY
management  and  analysis, protocol,  treatment   COUNCIL
patterns  and  guideline  development, must  be
coordinated to  support  agreed  upon  clinical
objectives.

o GOVERNANCE.  To  be  effective,  this  entire   Physicians   acting    through
process  should  be  voluntary  and  under  the   their role  as  DIRECTORS  and
direction  of a  unified  management  structure   SHAREHOLDERS of PIE
that is organized and respected  by physicians.


         The  Company has entered  into a strategic  alliance  with the ATAC CPA
Healthcare   Network  (the  "CPA  Network")  a  network  of  affiliated  medical
accountants,  to market PIERS as part of the CPA Network's  "Guaranteed  Return"
Profit Improvement Program. This program, which generates increases in physician
practice  profitability,  is expected to  accelerate  PIE's  penetration  of the
physician  market,  as well as provide a  significant  source of revenue for the
Company.  Development of a large  installed base of physician users will provide
revenue  through usage of the  Company's  secure  nationwide  telecommunications
network and, more importantly,  will enable the Company to build a clinical data
repository in order to penetrate the $6 billion clinical data repository market.
The CPA Network had 168 offices in 20 states as of December 31, 1996. These CPAs
are trained to conduct physicians  healthcare cost accounting analyses that have
historically    generated    significant   increases   in   physician   practice
profitability.  Under the agreements between the CPA Network and the physicians,
the CPA  Network  receives  one-half  of the  savings  achieved  over a two-year
period. PIE receives one-third of the CPA Networks one-half, or one-sixth of the
overall savings realized by the physician  practice.  Over the past three years,
the annual profit  improvement  physicians have realized after  implementing the
profit improvement program has been in excess of $100,000 in all cases.

         The  Company is seeking  strategic  and  financial  partners to provide
capital necessary to finance development, sales, marketing and general corporate
activities.

         PIERS.  The  PIERS  software  will be  licensed  at no  charge  to each
physician  who  purchased at least one share of Class B Common Stock in the June
24, 1996 offering of Common Stock (the "Offering") and who executes an agreement
with PIE to provide  clinical  abstract data to the Company.  This allows PIE to
normalize  the  interface  and data  elements  among users and  thereby  collect
statistically   significant   quantities   of  data  in  an   economically   and
technologically  feasible manner. In return,  the physicians  participate in the
automated  sharing of abstracted  clinical  information  with PIE's  information
repositories. This distribution method is designed to facilitate the creation of
clinical information repositories as quickly as the software is installed.  Once
installed,  the physician  base provides a clinical  information  source that is
expected to be  continually  expanded  and  enhanced.  The Company  will market,
install and service PIERS. Additional charges at normal rates, for installation,
training or maintenance fees, would not necessarily be waived. In

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                                                         2

<PAGE>



addition,  the Company may choose to require the purchase of a minimum number of
services if the securities purchase requirement is waived.

         PIERS will provide a user-friendly technical  infrastructure to support
collegial   communication   among   physicians   regarding  their  findings  and
experiences  with  respect to  protocol  outcomes,  new  treatments  and process
improvements.  Other PIERS attributes will include  physician-specific  clinical
outcomes  and cost  information  from the  clinic's  own data  repository.  This
information when combined with regional and national benchmark  information will
help  physicians  to market,  negotiate  and  compete  more  effectively  in the
provider  marketplace.  The PIERS physician  interface will integrate the latest
pen-based, hand-held, data collection, character recognition, voice digitization
and  wireless  data  transfer  technologies  with  a  knowledge  database  using
self-organizing data.

         THE EXCHANGE. It is anticipated that, when completed, the Exchange will
be a confidential  and secure,  interactive  patient record exchange network for
physicians.  The  Exchange's  services  will provide new,  emergency or referral
physicians  with  real-time  access  to the  patient's  clinical  history.  With
authorization  from both the  patient  and  physician,  other  entities  such as
pharmacies,  labs and payors may electronically access patient  non-confidential
clinical  information or update the record with clinical results.  However,  PIE
does not presume to own an individual  patient's  medical records.  Rather,  the
Exchange will provide  services that  facilitate  the  collection,  analysis and
secured distribution of this information.

         THE  KNOWLEDGE   BANK.   The  Company  is  currently   developing   the
infrastructure   of  the  Knowledge   Bank.  The  Knowledge  Bank  services  are
anticipated  to provide the greatest  profits of all the Company's  products and
services.   These   services  are  derived  from   regional  and  national  data
repositories  and fed by the  automated  sharing  of  abstracted  clinical  data
through the Exchange.  Some of the Knowledge Bank services will include clinical
outcome studies (both diagnostic and wellness),  normative  profiles,  treatment
therapies,  disease management  programs,  clinical  protocols,  epidemiological
research studies, capitation projections, benchmark analysis, market studies and
cost/benefit analyses. It is expected that the Company will derive a significant
percentage of its future revenues principally from the formatting,  analysis and
transfer of this  information  to integrated  delivery  systems,  payors,  major
providers,  provider  groups,  managed  care  organizations,  bio/pharmaceutical
companies, research institutions, government agencies, as well as physicians and
organizations needing current, clinically derived,  outcomes-based data and cost
information.  The Company  anticipates  that the Knowledge Bank services will be
provided  by  employees  of the  Company;  however,  the  Company  may choose to
additionally employ independent contractors depending on market demand.

         THE ATAC SYSTEM.  On September  25, 1996,  PIE entered into a strategic
alliance agreement with the CPA Network to make available the ATAC System to PIE
physicians.  The ATAC  System is the  enabling  technology  that  drives the CPA
Network's  "Guaranteed  Return"  Profit  Improvement  Program by  electronically
calculating each physician's fully absorbed costs for each procedure,  diagnosis
and protocol and the profitability of each capitated contract.  This proprietary
study uses hand-held computers to integrate utilization times, clinic activities
and  clinic  costs.   This  analysis  by  the   physicians'   CPAs  enables  the
implementation of re-engineering  solutions that generate significant  increases
in physician practice profitability.

         INFORMATION SECURITY AND CONFIDENTIALITY. PIE has designed its security
system  using  private  key  encryption  that  allows   healthcare   information
identified  with a  specific  patient  to be  retrieved  only  in the  attending
physician's office. This system has been designed to exceed the "trustee" system
requirements  currently being proposed before the United States Congress.  Under
PIE's system, PIE employees and all other non-physician users of PIE information
are denied access to protected patient  information.  Unlike the trustee system,
PIE keeps the  identity  of both the patient and the  physician  anonymous  and,
accordingly,  does  not have the  capability  to  respond  to court  orders  for
individual patient healthcare information.  This information will continue to be
accessible  only  through the  attending  physician's  office.  Consistent  with
current physician practice, PIE's security system will require emergency, new or
referral  physicians  to receive  the  patient's  authorization  before they are
granted access to the patient's healthcare information.

         ADVISORY  COUNCIL.  To meet the needs of the  physician  on an on-going
basis, the Company's service and product offerings will be guided by an Advisory
Council consisting of nationally  recognized  physicians  representing all major
specialties,  including  primary care.  Advisory Council members will assist the
Company in developing specialty modules for PIERS and provide ongoing advice for
updating  PIERS.  Advisory  Council  members  agree  to  represent  PIE to their
specialty  peers.  In  addition,  Advisory  Council  members  have  committed to
installing the PIERS system at their respective

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                                                         3

<PAGE>



practices,  and to participate in the Exchange.  The Advisory Council  currently
consists solely of physicians.  The Company expects to have the Advisory Council
fully established by the end of 1997.

         INCREASES PHYSICIAN CONTROL. PIERS, the Exchange and the Knowledge Bank
are all  caregiver  tools  designed to aid the most  important  component of the
healthcare delivery value chain: the physician. By empowering the physician with
point-of-care technology,  PIE will further position the physician at the center
of the healthcare delivery system,  making it less consequential as to whichever
delivery  system  prevails,  whether that be HMOs,  PPOs,  Integrated  Delivery,
Systems ("IDSs"),  PHOs,  Provider Sponsored  Networks ("PSNs"),  PPMs or single
payor systems (as in Canada).

         LOW COST ACCESS FOR PHYSICIANS.  PIE's business  strategy is suited for
all physician clinics that have historically lacked the expertise or been unable
or  unwilling  to devote  substantial  capital to the  purchase  of  information
systems that include decision support software  programs,  outcomes  measurement
tools and resource  utilization  review tools.  PIE's products are  particularly
well suited for the  overwhelming  majority of physicians that still practice in
smaller  clinics and who  generally  have fewer  options  for  capital  partners
necessary to fund information  systems needs. For the cost of the hardware only,
physicians  begin to benefit  as they  receive  the  clinical  software  free of
charge.  Physicians  also  receive  access to clinical  data from which they can
receive  clinical   decision  support,   measure   outcomes,   measure  resource
utilization and compare their performance against peer benchmarks.

CERTAIN AGREEMENTS

         MATRIX  PLUS.  The Company has entered into an agreement to acquire the
rights to the MR1 Clinical Record System software that was originally  developed
by Matrix Plus, Inc., a company controlled by Dr. Ernest Rutherford,  CEO of the
Company. See "Certain Relationships and Related Transactions - Transactions with
Matrix Plus." This software product has been in continuous use since 1985 and is
currently  operating in 19 clinical  sites in the United States and Canada.  The
MR1 software is designed to facilitate clinical communication and form the basis
for a computerized  patient record. The Company consummated the purchase in June
1996.

         THE ATAC SYSTEM.  On September  25, 1996,  PIE entered into a strategic
alliance agreement with the CPA Network to make available the ATAC System to PIE
physicians.  ATAC, as used in the CPA Network's profit improvement program, is a
cost  saving  analysis  combining  an  electronic  time and motion  study with a
customized  practice  cost  modeling  system.  This  analysis is  performed by a
physician's CPA utilizing  hand-held  computers to integrate  utilization times,
clinic  activities and clinic costs.  This enables a physician to understand the
costs  and   profitability   of  each  procedure   performed  and  to  implement
reengineering  recommendations  that  historically  have  generated  significant
increases in physician  practice  profitability.  A University of  Pennsylvania,
Wharton study,  funded by HCFA,  concluded "ATAC answers the questions of how to
provide accurate,  flexible,  low cost and feasible measures of direct costs for
all the services an office practice  performs." As part of the program,  the CPA
Network  will  promote  installation  of the  PIERS  software  to its  physician
clients.  The CPA  Network  believes  that  availability  of the PIERS  software
increases  the  attractiveness  of their  program to  physicians.  In  addition,
installation of PIERS automates the CPA Network's profit improvement program and
decreases the amount of CPA time  necessary to complete the program.  Generally,
the time and motion study and practice cost  modeling  portion of the program is
completed in 30 days and  cost-saving  recommendations  are  implemented  in the
following  60-day  period.  Payment  of the CPA  Network's  share  of  physician
practice  savings will be collected on a monthly basis over the two-year  period
of the contract.

INDUSTRY BACKGROUND

         Market-driven  efforts to contain rising healthcare costs have resulted
in an increasing demand for access to patient-centered,  outcomes-based clinical
and cost decision support information. Physicians and other healthcare providers
are under substantial  pressure to contain healthcare costs and increasingly are
required to demonstrate the quality and cost- effectiveness of care delivered to
patients.  In  addition,  managed  care payors  continue to expand  their market
penetration and are increasingly  transferring some or all of the economic risks
of  healthcare   delivery  to  providers   through  a  variety  of  risk-sharing
arrangements,  including  capitation.  This creates further need for information
systems that enable providers

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to demonstrate  the quality and understand the costs of care  delivered.  Unlike
traditional  fee-for-service  reimbursement,  such risk sharing arrangements put
physicians  and  other  healthcare  providers  at risk for the costs of care and
encourage them to modify their emphasis from not only treating illness, but also
to  maintaining  wellness.  These  arrangements  therefore,  put  a  premium  on
understanding the outcomes and costs of various healthcare delivery alternatives
in order to enter  into  contracts  and  other  arrangements  that can  generate
profitability  for the provider.  These factors have increased the importance of
comprehensive  outcomes-based,  patient-centered healthcare information that can
be used by physicians and other healthcare  providers to more accurately measure
the clinical value and costs of medical tests, procedures and clinical pathways.

          [THIS IS A CHART THAT DEPICTS THE FACT THAT ECONOMIC RISK TO
                    HEALTHCARE PROVIDERS INCREASES THE VALUE
           OF OUTCOMES-BASED PATIENT-CENTERED HEALTHCARE INFORMATION.]




         According to the 1996  HIMSS/Hewlett-Packard  Leadership Survey, 31% of
the  healthcare  executives  surveyed  indicated  that the need for  comparative
outcomes  data  was the top  clinical  force  driving  computerization  in their
organization.  Access to timely  information is a critical tool to  successfully
manage  today's  rapidly  changing  healthcare  economy.  Efforts to control the
clinical costs of healthcare  historically  have been hampered by the complexity
of healthcare  delivery and the lack of  "benchmark"  data required to study the
appropriateness, efficiency and effectiveness of healthcare delivery. Currently,
the only healthcare data available in large volumes is mostly claims-based. Such
data has  drawbacks,  however,  in that only limited  insights can be drawn from
claims-based  data in the absence of corresponding  clinical  outcomes and fully
absorbed cost data. Only  clinically-based  data can demonstrate the efficacy of
the care provided.

         The Company estimates that the market potential for a national clinical
data  repository  like the  Knowledge  Bank is large and growing.  Users of this
information  comprise  virtually  every  component of the  healthcare  industry,
including  healthcare  providers,  physicians and physician practice  management
organizations,  third party  payors and  managed  care  organizations,  contract
research  organizations,  public research  agencies,  pharmaceutical  companies,
medical device companies,  healthcare consulting firms,  healthcare  information
technology vendors, healthcare associations and accreditation bodies. Currently,
outcomes   assessment  is  performed   individually   by   physicians,   payors,
pharmaceutical manufacturers and academic researchers combining forces after the
fact to measure and  compare the  clinical  results  and  cost-effectiveness  of
specific  medical  diagnostic and treatment  processes of care.  These processes
should lead to good results.  However, it is hard to prove that the link between
process and outcome is valid. The cause and effect relationship  between process
and outcome is difficult to relate unless the processes are clearly defined, the
outcomes  consistently  measured and the results  reflect the continuum of care.
Claims-based  data cannot  address  these  issues.  As a result,  the demand for
outcomes-based  analysis  is  almost  completely  unmet.  The  Knowledge  Bank's
clinically-derived  information  permits  such  outcomes  analysis  and provides
physicians  with the  information  and tools  necessary  to  assist  them in the
delivery of higher quality medicine at lower cost.

         The Company has observed that, at present,  many physicians practice in
relative  isolation  from their  peers.  This results in  considerable  practice
variability  between  existing  providers.  The variability  frequently  follows
consistent  patterns,  but unfortunately little information about care decisions
is returned to the physicians.  The Company  believes that  aggregating  patient
populations  to examine  variations  in  physician  decision  making  will yield
valuable   insights   into   improving   patient   care  and  cost  savings  for
practitioners.  Information  is a  crucial  enabler  in this  process,  allowing
physicians  to  engage  in  constructive   discussions  about  practice  pattern
variation. PIE believes that physician groups are in the best position to create
value and benefits from clinically-based  information because physicians are the
only  licensed  care  providers  and can  therefore  best put new insights  into
practice.  However,  to date,  this has not  happened  because  clinically-based
information has not been available and physician groups have been too fragmented
to gain  access to the  necessary  capital  required  to  develop  sophisticated
information  systems.  To create  significant  volumes of  dispersed  clinically
derived  information  outside  of  the  PIE  model  requires  not  only  raising
sufficient  capital  to  build  the  significant   infrastructure  but  building
cooperative consensus among a myriad of competing providers.


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STRATEGIC VISION

         The Company's strategic vision is to facilitate the working together of
physicians to produce higher quality,  lower cost healthcare while strengthening
the  patient-physician  relationship.  The  enabling  aspect  of this  vision is
physicians,  empowered by PIE,  leveraging  their training and  experience  with
information  technology.  This  combination  will allow  physicians  to exercise
healthcare  leadership  by  transforming  clinical  and  cost  information  into
cost-effective medical knowledge. PIERS, as well as the services of the Exchange
and the  Knowledge  Bank,  are  specifically  designed by  physicians  to expand
physician clinical management and diagnostic  decision  capabilities and thereby
expedite the healthcare  improvement  process  without  requiring  physicians to
raise substantial capital for information systems and infrastructure.

         PROVED PHYSICIAN-DRIVEN  SOLUTION TO CLINICAL INFORMATION NEEDS. PIE is
owned,  directed and operated by  physicians.  The PIERS software is designed to
build clinical decision support networks and healthcare information repositories
that  address the needs of the  physician  community to provide  higher  quality
healthcare at lower cost.  PIERS has been designed  with  significant  physician
input,  capitalizing  on the  expertise of the  Company's  CEO and founder,  Dr.
Ernest  Rutherford,  and many  other  physicians  over the past 10 years.  PIE's
efforts have been focused on ensuring  that the PIERS  software will address the
clinical  needs of  practicing  physicians  while  simultaneously  gathering the
clinical and cost information necessary to understand the true cost and outcomes
of healthcare delivery in an ambulatory setting.

         PROMOTE RAPID IMPLEMENTATION OF PIERS SOFTWARE THROUGH THE CPA NETWORK.
The  Company's  marketing  efforts  are  targeted  toward  rapidly  building  an
installed base of physician PIERS users through a "free  software"  distribution
plan and strategic  marketing  relationship  with CPAs.  This should achieve the
critical mass  necessary for the Exchange and Knowledge  Bank to be  successful.
PIE's  products  and  services  will be marketed  primarily  through a strategic
alliance with the CPA Network. As part of the CPA Network's  "Guaranteed Return"
Profit  Improvement  Program  (using  electronic  time and motion  studies)  for
physicians,  the CPAs will promote  installation  of PIERS at no charge to their
physician clients as a significant component of the program.

         DEVELOP ADDITIONAL STRATEGIC ALLIANCES.  The Company is also in various
stages of establishing additional relationships with state medical associations,
specialty societies and other healthcare organizations. In addition to providing
a  significant  source of revenue  through  the CPA  Network  relationship,  the
Company   expects  these  alliances  to  result  in  the   establishment   of  a
significantly  larger  installed  base  of  physician  users  and to  accelerate
penetration of the physician market.

         OUTSOURCING OF SELECTED SERVICES. In order to facilitate development of
the PIERS  software  and the  infrastructure  related  to the  Exchange  and the
Knowledge  Bank and to support the  roll-out  of PIERS,  the Company has entered
into arrangements with The Americas Group Technology  Consultants,  Inc. ("TAG")
to provide software development services and with First Consulting Group ("FCG")
to receive  management  support.  In addition,  PIE has  contracted  with FCG to
provide  implementation  and training services for PIERS. The Company expects to
continue using outside  parties to perform  selected  functions  relating to its
business,  including management support services related to the Exchange and the
Knowledge Bank clinical data repository. The Company believes that this strategy
best fits its  growth  model  while  providing  it with  quality  service.  This
strategy  should  allow  PIE to  focus on  developing  commercial  products  and
services  derived from data collected in the Knowledge  Bank,  thereby  enabling
physicians and other providers to improve the quality while lowering the cost of
healthcare delivery.

PRODUCTS AND SERVICES

         PIE's  product  and  service   offerings   will  consist  of  PIERS,  a
computer-based  patient record product, the Exchange and the Knowledge Bank. PIE
will also derive  revenue from its share of cost savings  resulting from the CPA
Network's  Profit  Improvement  Program.  These  products and services allow PIE
physicians  to benefit from clinical  decision  support  involving  longitudinal
clinical  patient data with analysis of alternative  treatment costs and outcome
results at the point-of-care. The services also enable PIE to quickly accumulate
the national  repository of clinical  information  that will drive and support a
myriad of national and regional evidence-based medicine initiatives.



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         PIERS

         General.  PIERS is a patient  record  software  product that provides a
patient-centered,  physician-driven tool that enables the physician to save time
while providing real time clinical  information at the point-of-care.  This tool
has a degree  of  flexibility  to allow  each  physician  to  build  and  access
computer-based  patient records automatically without significantly changing his
or her preferred  practice style.  The patient records are built as a by-product
of a normal clinical practice.  These services provide a user-friendly technical
infrastructure  supporting  collegial  communication among physicians  regarding
their  findings  and  experiences  with  respect  to  protocol   outcomes,   new
treatments,  process  improvements and other clinical matters.  This information
should allow  physicians to improve the quality and  efficiency of their care as
well as allow them to market, negotiate and compete more effectively.  The PIERS
physician interface integrates pen-based, hand-held, data collection,  character
recognition,  voice digitization and wireless data transfer  technologies with a
robust knowledge  database using  self-organizing  data. PIERS is designed using
scalable client-server architecture and object-oriented, HTML technology.

PIERS is intended to offer a number of benefits, including:

         o   Providing rapid access to and storage of clinical patient records.
         o   Enabling real time access to historical  outcomes and  costs  of  a
               proposed medical intervention.
         o   Enabling use of an information based continual quality  improvement
               approach to patient care rather than  retrospective  analysis  of
               the outliers.
         o   Reducing paperwork.
         o   Increasing the efficiency of physicians and office staff.
         o   Decreasing errors and omissions by utilizing alerts  and  protocols
               at the point-of-care.
         o   Permitting physicians to differentiate  themselves  in  the  market
               with  medically   meaningful  and  clinically  credible  outcomes
               information.
         o   Protecting patient medical record confidentiality.
         o   Enabling  physicians  to analyze and improve the  profitability  of
             managed care contracts (including capitation contracts).
         o   Improving  ability to negotiate  favorable  managed care  contracts
             with payors by providing  meaningful cost and outcomes  information
             to physicians.
         o   Enabling  analysis  of  cost  and  historical  outcomes of  various
             protocols and treatment patterns at the point-of-care.
         o   Providing cost information  on  procedures, diagnosis and protocols
             that is broken down into manageable components.
         o   Providing  individual  physicians  the ability to  benchmark  their
             practice  patterns  and  outcomes  and  compare  them with a normal
             specialty composite profile.

         [The Company  completed  development  of the PIERS software in February
1997.]  Initial  specialty  modules will be  available in the second  quarter of
1997. Once  development is completed,  the PIERS software will be licensed at no
charge to each physician who elects to install PIERS in connection  with the CPA
Network's Profit  Improvement  Program and agrees to provide anonymous  clinical
abstract  data to the Company.  This allows PIE to normalize  the  interface and
data  elements  among  users  and  thereby  collect  statistically   significant
quantities of data in an economically and technologically feasible manner. While
the Company will use its software  initially on an exclusive basis, PIE plans to
use the best clinical  information  collection  software that becomes available.
All PIE  software is designed to be  compatible  with a wide variety of clinical
and practice  management software systems.  The Company  anticipates  developing
integration  interfaces with numerous practice  management,  accounts receivable
and acute care systems rather than developing these applications internally. The
PIE  interface  will  eventually  allow access by other  computer-based  patient
record  systems to the  Exchange  and the  Company's  broad  range of  fee-based
services.

         PIERS is being designed to run in the Microsoft Windows(R)  environment
(95 or NT) and takes advantage of client server and HTML  technology.  Data will
be entered by physicians and other clinic staff directly  through  dictation,  a
personal computer keyboard or hand-held computers, using a choice or combination
of pen-based, cursive and picklist technology.  Although the PIERS software will
be  provided  at no charge,  installation  of PIERS at a clinic site may require
purchase of certain hardware,  depending on the options chosen by the clinic and
the amount of computer  hardware  already owned. To ensure the largest  possible
market penetration, the Company intends to offer clinics a PIERS low cost

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hardware  option that will require only personal  computer  systems and a server
(approximate  cost of an entry lever server,  fully  configured,  is $6,500) and
will run with or without hand-held computers.  The full PIERS option may include
hand-held  computers  for each  healthcare  professional,  one or more  wireless
transmitters (depending on the size of the clinic), and a server to run the full
functionality  of the software  options.  Standard  network  infrastructure  and
personal computer work stations will also be required for the full option.  Both
the low cost and full PIERS  options will allow  collection  of clinical data at
the point-of-care.

         The  following is a more detailed  description  of some of the intended
PIERS benefits:

         CONFIDENTIALITY  OF  PHYSICIAN  INFORMATION.   All  physician  specific
correspondence,  results,  reports and  services  will be provided  directly and
solely to that individual physician unless they instruct PIE otherwise.

         INTEGRATED   SOLUTIONS.   PIE  is  committed  to  providing  integrated
solutions  and  services  that meet the  clinical  information  requirements  of
physicians.  Using standard application interface protocols such as Health Level
Seven  ("HL7"),  American  Society for Testing and Materials  ("ASTM") and other
industry  interface  standards,  PIERS's  operating  environment  is designed to
provide  inter-operability  with leading  software  packages.  This  environment
encourages integrated interfaces with practice management,  billing, scheduling,
computer-based  patient records and hospital  information systems that adhere to
PIE's published open  architecture and system  standards.  The use of PIERS will
not be a requirement  for gaining access to the Exchange or the Knowledge  Bank.
As  market  demand  dictates,  PIERS may be  augmented  or  superseded  by other
software products.

         FAMILIAR  "LOOK AND FEEL."  PIERS  will  present  personalized  patient
information and  communication  reminders to streamline  physician work flow and
support  flexible,  personalized  formats  of  clinical  results.  The  system's
intuitive,  icon-based  interface  should be comfortable for clinicians to learn
and use. "Chart tabs" that are graphical  representations of the tabs found in a
patient's paper medical record, are intended to provide intuitive and simplified
navigation through the patient's electronic medical record. Physicians and other
clinicians can analyze flow sheets of either  scheduled  patient care activities
or global results in personalized formats.

         PROTOCOLS AND GUIDELINES.  PIE believes that quality  improvements  and
cost-reduction  can most efficiently be driven by the physician  (supported with
information) at the  point-of-care.  Physicians will have access to on-line,  at
the point-of-care, specialty specific protocols (standardized plans for treating
specific  conditions) and/or guidelines.  They will also have the ability to add
customized  or modified  protocols  that they commonly use. The clinic's cost of
each  protocol or  treatment  pattern can be  displayed or detailed by procedure
components.  PIE's cost reporting  modules require specific  initial  accounting
input from the clinic's  accountant  or CPA.  Protocols and  guidelines  help to
reduce variance by standardizing the steps;  however,  the physician will always
have the option to deviate  from the pathway at any point.  The system will also
allow the addition of free form  narrative  entry through the  transcription  or
keyboard functions.

         CONTRACT NEGOTIATION INFORMATION SUPPORT. The emergence of managed care
(capitation  in  particular)  has  increased the need for clinical and financial
patient information. PIERS will allow physicians to analyze the profitability of
their managed care contracts,  including  capitation.  More  importantly,  it is
intended to provide information to the physician that will assist in negotiating
a rate with payors that more closely  reflects the  physician's  activities  and
regional epidemiological data.

         RESULTS  REPORTING.  PIERS  will  provide  on-line  review of  results,
including  laboratory and radiology.  The system also provides on-line review of
narrative  results such as  transcriptions,  discharge  summaries and medication
profiles. Results will be stored permanently as part of the patient's electronic
medical record.

         COSTS/OUTCOMES/ANALYSIS/MANAGEMENT.  PIERS's  database of clinical  and
financial  information will enable physicians to measure and analyze the quality
and cost effectiveness of care provided. Specifically, PIERS is intended to give
physicians the ability to:

         o         Evaluate the historical  quality and the  cost of alternative
                    medical interventions at the point-of-care.
         o         Confidentially provide  individual physicians  the ability to
                    compare  their quarterly  practice outcomes  with a national
                    specialty composite profile.

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         o        Access  full  absorption  costing  data  for  each  procedure,
                  diagnosis or treatment  pattern.  Cost  components  are broken
                  down into  manageable  size with line item detail.  PIE's cost
                  reporting  modules require specific  initial  accounting input
                  from the clinic's accountant or CPA.
         o        Access on-line their clinic and research  database to monitor,
                  manage  and  report  detailed  clinical  information  on their
                  medical procedures, diseases, protocols and patient outcomes.
         o        Reengineer medical interventions  by using the above  cost and
                    outcome information.

         ALERTS.  PIERS is  designed  to  alert  physicians  when a  potentially
unsuitable  medication is ordered.  This would include  reminder alerts for drug
interactions and allergies. PIE will also be expanding PIERS to include protocol
reminders using decision  support  algorithms to aid clinical  decisions.  PIERS
will also be  enhanced  to allow  physicians  the  ability to select  ranges for
abnormal test result alerts.

         MEDICATION  MANAGEMENT.  PIERS will enable  clinicians to prescribe new
medications  to a patient as well as renew  medications  existing in a patient's
history.  This system will also provide  patients with  educational  material as
part of the care delivery  process and will allow the clinician to print, fax or
transmit a prescription.

         LIFETIME  PATIENT RECORD.  PIERS will  incorporate an on-line record of
patient specific prior services, diagnosis,  therapies and outcomes. It is being
designed to (i) enable improved  efficiency and reduced  uncertainty  during the
care giving  process,  (ii) reduce the potential for adverse  medical  decisions
(such as  prescribing  drugs to which the patient is known to be  allergic)  and
(iii) reduce  administrative  burden.  PIE believes that these  benefits  should
result in reduced  healthcare  delivery  costs,  improved  outcomes and a higher
quality of care, as well as provide complete and easily  accessible  information
for  reimbursement  documentation.  The  system  will allow  providers  to track
patients'  status over time,  which is  particularly  beneficial  for  following
patients  with chronic  conditions  such as diabetes,  instage renal disease and
congestive heart failure.

         PHYSICIANS'  ON-LINE  RESOURCE.  PIERS  is being  designed  to meet the
clinical and diagnostic information needs of physicians.  In addition to patient
data, PIERS will provide access to the most current medical reference  materials
and bibliographic  databases  available,  including  MEDLINE,  medical specialty
practice knowledge banks and other information sources.  Physicians will be able
to  communicate  with each  other and with  their  affiliated  institutions  and
organizations through the PIERS E-mail system.

         INTEGRATION CAPABILITY. The PIERS system can be accessed simultaneously
at different locations within the healthcare delivery system by doctors,  nurses
and technicians using distributed deployment of LAN and WAN technology.  PIERS's
distributed  architecture  should allow for  communication  and interaction with
other  products from different  vendors.  The  utilization of industry  standard
software supports  integration of voice,  data, video and imaging.  This creates
effective network solutions for ambulatory practitioners.

         PATIENT  ACCOUNTING.  PIERS  will  collect  and  organize  patient  and
clinical  information,  which  may be used  in the  physician's  current billing
system.

         HEALTHCARE INFORMATION EXCHANGE NETWORK (EXCHANGE) SERVICES

         GENERAL. The Exchange is a confidential and secure national network for
interactive  physician  patient record  exchange.  The  Exchange's  services are
provided to new or emergency  physicians needing real-time access to a patient's
clinical history for diagnostic purposes.  In addition,  with authorization from
both the patient and  physician,  other  entities such as  pharmacies,  labs and
payors may electronically access non-confidential  patient information or update
the record with  clinical  results.  PIE does not  presume to own an  individual
patient's medical record. Rather, the Exchange provides services that facilitate
the collection, analysis and secure distribution of this information.

         Access to the Exchange  will be provided  through  PIERS or through the
physician's  compatible ambulatory  computer-based  patient record software. The
Exchange will use intranet  technology to enable  providers to obtain  real-time
delivery of critical clinical information.  This will put vital information into
the hands of attending healthcare  professionals at the time of the decision. It
will make medical diagnostic information available,  even if the data resides in
another PIE  physician's  clinic.  This network will help  physicians to provide
higher quality  healthcare at lower cost by providing the necessary  information
at decision time,  thereby  eliminating  unnecessary  analysis and testing.  The
Exchange is also

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expected to improve  the  efficiency  of  healthcare  delivery  by allowing  the
physician and staff to electronically  receive new patient records, lab reports,
and  other  results  as  well as  patient  charts.  In  addition,  the  Exchange
facilitates  communication  and  information  exchange  between primary care and
specialist physicians in resolving complex diagnoses.

         The Company will receive a per transaction  charge for each transfer of
medical  records or other  patient  information  (e.g.,  lab reports)  using the
Exchange.  The  transferring  physician will receive a royalty  payment for each
patient  record  transferred  from his  practice.  The Exchange will also enable
delivery of a number of automatic  electronic services to physicians,  including
those derived from data residing in the Knowledge Bank.

         The following describes the Exchange in more detail:

         BENEFITS.  The  Exchange is intended to improve  management  of patient
service from physician to physician. The Exchange will also enable delivery of a
number of automatic  electronic services to physicians (see description of PIERS
and the  Knowledge  Bank).  The  physician  and staff  will be able to  decrease
telephone calls by using the Exchange to  electronically  receive lab reports as
well as other results  reports and patients  charts.  In addition,  the Exchange
will improve the ease of communications  between physicians in resolving complex
diagnosis.

         PHYSICIAN  ROYALTY  PAYMENT.  The  Company  will incent  physicians  to
participate  in the  Exchange by paying  royalties  to  physicians  who transfer
clinical data  automatically  to requesting  physicians  through the  Exchange's
electronic  network.  These  royalties  will  be  paid  from  the  fees  charged
requesting physicians or other authorized users of clinical data.

INTEGRATED HEALTHCARE INFORMATION AND RESEARCH (KNOWLEDGE BANK) SERVICES

         GENERAL.  The Knowledge Bank will be PIE's comprehensive  clinical data
warehouse  consisting  of  clinically  rich,  statistically  representative  and
geographically distributed clinical information. This information will reside in
the Company's  integrated network of secure,  regional data  repositories.  Each
regional data  repository will be created by the automated  collection,  through
PIERS and the Exchange,  of clinical information from physicians in that region.
The Knowledge  Bank services are  anticipated  to provide the largest  source of
revenue and profits for the Company.

         The Knowledge Bank will contain clinical  outcomes and cost information
gathered  by PIE's  physician  users  at the  point-of-care.  The  data  will be
encrypted to ensure  patient  confidentiality.  The  Knowledge  Bank will enable
healthcare  professionals  to increase the quality of healthcare  while managing
and reducing resource consumption through research, benchmarking and comparative
analysis.  The Knowledge Bank will also allow the active integration of clinical
data with  outcomes and cost  information  and does not rely upon  retrospective
claims-based  data. As the Knowledge Bank  continually  expands and is enhanced,
this healthcare information should serve as a resource for education,  research,
prevention,  epidemiology  and clinical process  improvement.  It is anticipated
that the Knowledge  Bank services will be  commercially  available by the fourth
quarter of 1997.

         Some of the  Knowledge  Bank  services  will include  clinical  outcome
studies (both diagnostic and wellness), normative profiles, treatment therapies,
disease  management  programs,  clinical  protocols,   epidemiological  research
studies,   capitation  projections,   benchmark  analyses,  market  studies  and
cost-benefit analyses. It is expected that the Company will derive a significant
percentage of its future revenues principally from the formatting,  analysis and
transfer of this  information  to integrated  delivery  systems,  payors,  major
providers,  provider  groups,  managed  care  organizations,  bio/pharmaceutical
companies, contract research organizations, research institutions and government
agencies, as well as to physicians and organizations needing current, clinically
derived  outcomes-based data and cost information.  The Company anticipates that
the  Knowledge  Bank  services  will be provided by  employees  of the  Company;
however,  the Company may choose to additionally employ independent  contractors
depending on the market demand.  The Company expects to generate  revenues based
on information  contained in the Knowledge Bank in a number of ways,  including:
subscription  fees for standard  research  studies and reports  generated by the
Company; charges for providing access to data in the Knowledge Bank for research
purposes;  strategic relationships with organizations of providers, managed care
and  integrated  delivery  networks;  and  customized  research,  reporting  and
consulting services.



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         SERVICES. The Knowledge Bank is intended to allow physicians to compare
their results against relevant regional and national specialty benchmarks.  This
database will also be used as a foundation to perform many types of research and
retrospective analyses, some examples are:

         o         Cost and outcome specialty benchmarks by diagnosis, procedure
                    and treatment on a regional as well as national basis.
         o         Interactive  data  analysis  to  identify  specific   patient
                    groups for intensive care and/or disease management.
         o         Patient cohort classification with patterns of care.
         o         Identification of areas with high resource consumption.
         o         Patient-centered   measures  of  outcomes  and  satisfaction,
                    including preventative  screening and the ability  to return
                    to work.
         o         Retrospective analysis on process of care delivery (protocols
                    and guidelines) organized by:
                 o         Chronic disease groups
                 o         Patient health-risk behaviors
                 o         High volume procedures
                 o         Resource intensive procedures
                 o         Best demonstrated practice for outcomes
                 o         Low cost protocols and treatment patterns
                 o         Detailed cost and  outcome  variance  analysis  using
                            normative  comparisons   by   principal   procedure,
                            diagnosis, disease and treatment pattern
                 o         Longitudinal analysis across the care continuum
                 o         Measuring the relative effectiveness of treatment and
                           mode of  intervention results  (e.g., pill,  shot  or
                            patch; telemedicine, phone call or visit)
                 o         Applied clinical research  on outcomes  and costs  of
                            treatment for chronic diseases
                 o         Statistical analysis, models and simulations

         NO  CHARGE  SERVICES  TO PIERS  PHYSICIANS.  The  Knowledge  Bank  will
identify and update the list of specialty- specific, point-of-care protocols and
corresponding  historical  outcome  measures.  It will  also be used to  produce
confidential physician practice outcome profiles. These standard profile reports
will document a physician's  outcomes  relative to an appropriate  national peer
group.  A copy of this  profile  will be provided  quarterly  to each  physician
without  charge  after a  statistically  significant  amount  of data  has  been
collected.

         KNOWLEDGE  ENGINEERING.  Medical data, by its very nature, is extremely
complex and difficult to normalize.  PIE will use the  standardized  data of the
PIERS  system  and  other  compatible  systems  along  with  advanced  knowledge
engineering skills to build integrated clinical databases.  These databases will
be designed to be unbiased,  while  preserving  the quality and integrity of the
data.  The data will be organized  in  rigorously  structured  formats to permit
multiple logical views of data including longitudinal,  encounter,  episodic and
context dependent.  The latest scientific and clinical  methodologies and models
will be used to normalize and link clinical  outcomes and cost data with patient
care episodes across the continuum of care.

         STANDARD RESEARCH STUDIES AND REPORTS.  The Knowledge Bank will produce
general distribution publications and standardized reports that target all major
markets for clinically-based healthcare information. These products may often be
the initial product purchased by a non-physician  customer. The products will be
developed  from specific  portions of the Company's  data  warehouse and feature
particular views or niches (e.g.,  national or regional views by a specialty for
outcomes,  costs for  procedure,  disease/diagnosis  group or  protocol).  "Best
Demonstrated  Practice"  studies will report outcome  measures and  intervention
costs for various diagnosis/disease groups per specialty.  These studies consist
of  evidence-based,  rigorous  scientific  identification  of best  practices as
demonstrated from clinical results.

         Most   standardized   reports   will  be  sold  as   annual   renewable
subscriptions or through a multi-year  contract.  Products  intended for general
distribution will be available in a variety of standardized  formats that should
appeal to broad audiences. These products will range from structured statistical
reports to more complex analyses.



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         STRATEGIC  RELATIONSHIPS.  The Company  intends to enter into strategic
relationships  with  organizations  of  providers,  managed care and  integrated
delivery  networks,   whereby  the  Company  will  build  a  database  for  such
organizations and provide services to the organizations and their members. These
organizations   could  include  state  medical   societies,   medical  specialty
associations and various healthcare provider organizations.

         SUPPLIER  SERVICES.  The  distribution  system for medical  products is
rapidly  realigning as a result of industry changes (such as the use of pharmacy
benefits managers and consolidation of hospital group purchasing organizations).
These  entities  select  and  purchase a medical  product  based not only on the
product's  ability to resolve medical  conditions,  but also on its demonstrated
ability to  minimize  total  treatment  costs.  As a result,  PIE  believes  its
benefit/cost  and  outcomes  analysis  can be a vital  tool  for the  successful
marketing of drugs, medical devices and supplies in the future.

         Information  used to provide  supplier  services  will be derived  from
PIE's database and will support pharmaceutical, medical supply companies, device
companies and biotechnology  companies in market analysis,  product positioning,
benefit/cost analyses and outcomes analyses.

         CONSULTING  SERVICES.  Consulting  clinicians,  knowledge engineers and
technicians  will provide the expertise to prepare the  customized  analysis and
perform  research,  data  mining  and  customer  reporting.   These  clinicians,
engineers  and  technicians  will  also  support  customers  in their use of the
Company's  decision  support  tools.  PIE personnel  will provide  expertise and
knowledge in resolving issues such as stratification  and granularity of data or
exploratory  and  confirmatory  data  analysis  as  well as how to  account  for
confounding and colinearity. It is anticipated that the bulk of the consultants'
time will be spent on original custom research for PIE's clients.

CONFIDENTIALITY OF CLINICAL INFORMATION

         PIE  understands  the  public's   patient   confidentiality   concerns.
Additionally,  PIE concurs with those who believe that the health  professionals
they  engage can be trusted to keep their  records  confidential  and not misuse
them.   Given   the   physician's   practical   experience   regarding   patient
confidentiality, PIE has taken the position that its security system will exceed
the "trustee"  system  requirements  currently  being proposed before the United
States  Congress.  This "trustee"  system defines any one who comes into contact
with individually  identifiable  health  information  (i.e.,  "protected" health
information) as a health information  "trustee." Proposed protection is afforded
against unauthorized disclosure via a deterrence structure of civil and criminal
penalties.  While the Company  supports this protection of patient  privacy,  it
does not believe that the "trustee" system is adequate.

         The PIE  confidentiality  security  system will  function like a safety
deposit box in a bank.  The contents  (information)  of the box can be retrieved
only with a  combination  of keys from the correct  bank (PIE) and the  customer
(physician/patient).  Physicians  and  patients  will  be  able  to  select  the
information that will be inaccessible to others.  The Company's  security system
not  only  encourages  authorized  usage  of  clinical  data,  it  mandates  its
enforcement  by  designing  the system to allow  access to  protected  data only
through  physicians  who are at  their  office.  PIE  employees  and  all  other
non-physician  users of PIE information  are denied access to protected  patient
information unless a specific use authorization for such information is provided
by the patient. In addition, the PIE security system requires a PIE physician to
use his PIE-physician  password and request the patient  information through his
clinic's one-way encryption device.  Patients may elect even further security by
requesting  a patient  password  that would be required to obtain the  patient's
medical  records.  This password  would be required of physicians in addition to
PIE's other security measures.
PIE will also maintain audit trails of all requests for patient information.

SERVICES AND PRODUCT DEVELOPMENT

         The Company is currently  completing  development of the PIERS software
product.  The  Company  expects  the initial  PIERS  version to be  commercially
available in [May 1997].  The Company has identified 51 specialist  modules that
will be  available  for use with the  PIERS  product.  These  modules  are being
developed in conjunction with members of the Company's  Advisory Council and are
expected to be commercially available starting in May 1997, with all specialties
available  by the end of 1997.  The Exchange and  Knowledge  Bank are  currently
under  development  and are  expected to be  commercially  available  during the
fourth quarter of 1997.


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         Certain   clinics   affiliated  with  the  Company's  CEO,  Dr.  Ernest
Rutherford, will serve as alpha and beta test sites for PIERS and its nephrology
module. In addition, the Monroe  Gastroenterology  Clinic/Endoscopy Center began
alpha testing the  gastroenterology  module of PIERS in February 1997. The alpha
test stage is  expected to last four to six weeks and will be followed by a beta
testing period.  This process will be repeated for each specialty  module,  with
numerous  specialties  being  developed  in  parallel  once  the  first  few are
completed.

         The Company has engaged TAG to perform  software  development  services
for PIERS.  As well,  the Company  has  contracted  with FCG to provide  project
management  support  in  the  development  of the  PIERS  software  and  related
specialty  modules,  network  infrastructure  for the Exchange and the Knowledge
Bank. PIE has also contracted with FCG to perform  training  services to support
the national roll-out of PIERS.

         The Company's product development project has three phases. The Company
expects phase one (the initial PIERS version) will be commercially  available by
the first  quarter of 1997.  The  subsequent  two phases are expected to produce
clinical  information  exchange  software and  regional  and  national  clinical
repositories  that should be commercially  available  during 1997.  PIE's phased
approach  is  predicated  upon the data  volume  dynamics  depicted in the graph
below:


          [THIS IS A CHART THAT DEPICTS THE FACT THAT ACCESSIBILITY TO
            LARGER VOLUMES OF CLINICAL DATA FACILITATES HIGHER VALUE
                         INFORMATION REPORTING USAGES.]


CORPDAL:63070.2  29375-00001
                                                        13

<PAGE>



ASSET CREATION

         PIE is creating a strategic relationship with physicians to resolve the
expensive  proposition of  collecting,  enriching and  distributing  significant
quantities of clinically-derived information. PIE's solution is to provide PIERS
software  to  physicians  without  charge.  This  allows  PIE to  normalize  the
interface  and data  elements  among  users and  thereby  collect  statistically
significant  quantities of data in an economically and technologically  feasible
manner.  In return,  the  physicians  participate  in the  automated  sharing of
abstracted  clinical  information  with  PIE's  information  repositories.  This
distribution method is designed to facilitate a rapid service roll-out and begin
creation  of clinical  information  repositories  as quickly as the  software is
installed.

MAINTENANCE FEES

         It is  anticipated  that annual  physician  maintenance  fees for PIERS
(without  regard  to  hardware  costs)  initially  will be  $850  per  year  per
physician,  collected on an advance basis.  However, the Company has no interest
in retaining  any  maintenance  fee net income from its  physicians'  customers.
Therefore,  the Company has developed a formula to reallocate  the  "maintenance
fee net income," as defined below,  to those  physicians  most  responsible  for
disseminating medical knowledge to their specialty. The Company anticipates that
there will be approximately 50 specialty categories.  Maintenance fee net income
is equal to maintenance fee revenue less Company expenses related to maintenance
releases,  help desk and software support,  documentation,  expenses incurred by
Advisory  Council  members in the normal course any business and related general
and  administrative  expenses.  Maintenance  fee net income will be allocated as
follows:

o        40%      Current Advisory  Council members  (40%  of  each  specialty's
                  maintenance   fee  net  income  will  be  divided  among  that
                  specialty's Advisory Council members)

o        30       Original  Advisory   Council   members  ("Founders")  (30%  of
                  each  specialty's  maintenance  fee net income will be divided
                  among that  specialty's  Founders  for the first five years of
                  the Advisory Council)

o        15%      Current  Advisory   Council   members   (15%  of   the   total
                  maintenance  fee  net  income  from  all  specialties  will be
                  divided pro rata to the various  Advisory  Council  members in
                  each  specialty,  based  upon the  number of  physicians  in a
                  specialty  relative  to  the  total  physician  base  in  that
                  specialty)

o        15%      Non-Advisory   Council   Physicians  (15% of  each specialty's
                  maintenance fee net income will be divided pro rata among that
                  specialty's  physicians who are not Advisory  Council  members
                  and who make a good faith  effort,  as determined by the Board
                  of Directors,  to make a medical knowledge contribution during
                  the year to their fellow  specialists  through  PIE's  medical
                  knowledge base (e.g., new or modified clinical protocol))

         Any maintenance fee net income not allocated above, such as to Founders
after five years,  will be allocated on a yearly basis by the Board of Directors
to Advisory Council members,  physicians or PIE shareholders.  In addition,  the
Board of Directors,  in its  discretion,  may provide  additional  incentives to
attract and retain certain  Advisory  Council  members,  such as providing PIERS
software at no charge.

CUSTOMERS

           PIE  anticipates  that its  customers  for PIERS  will be  physicians
located throughout the United States, practicing in both large and small groups.
Anticipated  customers for the Exchange services will be physicians,  integrated
delivery systems and payors located  throughout the United States. The customers
for the  Knowledge  Bank  services  will include  integrated  delivery  systems,
payors,   major  providers,   provider  groups,   managed  care   organizations,
bio/pharmaceutical   companies,   contract  research   organizations,   research
institutions and government  agencies,  as well as physicians and  organizations
needing current,  clinically derived,  outcomes-based data and cost information.
Healthcare suppliers,  which include  pharmaceutical,  biotechnology and medical
supply and device companies are a strong customer market.


CORPDAL:63070.2  29375-00001
                                                        14

<PAGE>



SALES AND MARKETING

         The  Company's  marketing  efforts  are  targeted  toward  building  an
installed  base of PIERS  physician  users in order to achieve the critical mass
necessary for the Exchange and Knowledge Bank to be  successful.  PIE's products
and services will be marketed  primarily through its strategic alliance with the
CPA Network.  These  efforts will be  supported  by PIE's public  relations  and
targeted  marketing  efforts to medical  associations,  specialty  societies and
other  medical  groups  intended to introduce  physicians  to the CPA  Network's
Profit Improvement Program and the benefits of the PIERS software,  the Exchange
and the Knowledge Bank.

         PIE's marketing efforts are organized into physician marketing, general
corporate  marketing,  customer  communication  programs  and target  marketing.
Physician  marketing is designed to create  market  awareness and demand for the
PIERS  system,  either  directly  from the Company or through the CPA  Network's
Profit Improvement  Program.  Medical  associations,  specialty  societies and a
variety of medical  groups  will be used to  introduce  the PIE  solution to the
physician  community.  Introduction methods include using direct mail, seminars,
telemarketing,  presentations  at  industry  events,  trade  shows and  speaking
engagements. These efforts will target both physicians and CPAs.

COMPETITION

         The  market  for  healthcare   information  products  and  services  is
intensely  competitive.  Competitors vary in size, scope and breadth of products
and services offered,  and the Company competes with different companies in each
of its target markets.  Many companies that currently provide  claims-based data
are  trying  to  enter  the   clinically-derived   data  market.  The  Company's
competitors have significantly greater financial, technical, product development
and marketing resources than the Company.  Furthermore,  other major information
companies not presently offering clinical  healthcare  information  services may
enter the  markets  in which  the  Company  competes.  The  Company's  potential
competitors  include  specialty  healthcare  information  companies,  healthcare
information   system  and  software   vendors  and  large  data  processing  and
information  companies.  Many of these  competitors have  substantial  installed
customer  bases in the healthcare  industry and the ability to fund  significant
product development and acquisition efforts.

         The Company  believes  that the  principal  competitive  factors in the
healthcare network and clinical information markets are the physician acceptance
of the point-of-care interface, access to point-of-care clinical data, price and
the  effectiveness  of marketing  and sales  efforts.  In addition,  the Company
believes  that the speed with which  information  companies can  anticipate  and
respond  to the  evolving  healthcare  industry  structure  and  identify  unmet
information needs is an important  competitive factor. The Company believes that
it  compares  well and will  compete  favorably  with  respect  to each of these
factors.

INTELLECTUAL PROPERTY

         The Company will seek to protect its information through  nondisclosure
agreements with its employees,  contractors and vendors. The Company's policy is
to have employees enter into a  nondisclosure  agreement  containing  provisions
prohibiting  the  disclosure of  confidential  information to anyone outside the
Company,  requiring  disclosure  to the Company of any new ideas,  developments,
discoveries or inventions conceived during employment,  and requiring assignment
to the Company of  proprietary  rights to such  matters  that are related to the
Company's  business and technology.  The Company also relies on a combination of
trade secret, copyright and trademark laws, contractual provisions and technical
measures to protect its rights in its tools and software technology. The Company
believes that patent, trade secret and copyright protection are less significant
than the Company's  ability to further  develop,  enhance and modify its current
services and products.

EMPLOYEES

         As of March 31, 1997, the Company had no   full-time employees. None of
the Company's employees are a party to a collective  bargaining  agreement,  and
the Company believes that its relationship with its employees is good.


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                                                        15

<PAGE>



                         ITEM 2. DESCRIPTION OF PROPERTY

         The Company's  corporate  headquarters are located at 1401 Hudson Lane,
Suite 202, Monroe,  Louisiana 71201 and contain  approximately 2,000 square feet
of office  space.  The  Company  believes  that this space is  adequate  for its
current needs.

                            ITEM 3. LEGAL PROCEEDINGS

         The Company is not involved in any legal proceedings.

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

         None

                                     PART II

        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         There is no public  market for the Common  Stock of the  Company.  Such
securities  are not listed on a stock  exchange  or quoted by the  NASDAQ  Stock
Market.

         The  Company has never paid,  and has no present  intention  of paying,
cash dividends on its Common Stock. The Company  currently intends to retain its
earnings  to  finance  the  growth  and   development   of  its  business.   Any
determination  in the  future to pay  dividends  will  depend  on the  Company's
financial condition,  capital requirements,  results of operations,  contractual
limitations and any other factors deemed relevant by the Board of Directors.

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

         The following  discussion  and analysis  should be read in  conjunction
with the Financial Statements of the Company and related notes thereto appearing
elsewhere in this filing.

RESULTS OF OPERATIONS

         The  Company has  expended  $1,988,106  in general  and  administrative
expenses since its inception in November 1995,  including $1,618,681 in 1996. In
1996,  approximately  $1,405,000  of the expenses were paid to  consultants  for
development  of  its  business  plan  and in  research  and  development  of its
potential  products.  Approximately  $299,000  of this  amount  was  paid by the
issuance  of common  stock.  The company is  continuing  to develop its plan and
products  and has received no revenues  from its  operations  through  March 31,
1997.  The Company  used  approximately  $1,183,000  in cash in its  development
activities  in 1996,  offset by  approximately  $1,084,000  in cash  provided by
financing activities.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has provided  $1,354,704 in cash from financing  activities
since its inception,  including  approximately $590,000 in sale of common stock,
net of offering expenses,  and approximately $765,000 from accounts payable to a
stockbroker.  The Company's developmental activities have utilized virtually all
of this cash as of December  31,  1996,  leaving a cash  balance of $1,686.  The
Company has  subsequently  obtained a  $1,000,000  line of credit from a bank to
supplement its cash flow needs during 1997 and is presently  attempting to raise
equity funds in the private market through strategic alliance partners. Although
there can be no  assurance,  management  believes it will be  successful in this
process.

FORWARD LOOKING STATEMENTS

         Certain of the  information  contained  in this  Annual  Report on Form
10-KSB constitutes  forward looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act of

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                                                        16

<PAGE>



1934, as amended,  that involves  certain  risks,  uncertainties  and additional
costs  described  herein.  The  actual  results  that are  achieved  may  differ
materially   from  any  forward   looking   projections,   due  to  such  risks,
uncertainties  and  additional  costs.  Although the Company  believes  that the
expectations  reflected  in such  forward  looking  statements  are  based  upon
reasonable  assumptions,  it can give no assurance that its expectations will be
achieved. Subsequent written and oral forward looking statements attributable to
the Company or persons  acting on its behalf are  expressly  qualified  in their
entirety by reference to such risks, uncertainties and additional costs.

                          ITEM 7. FINANCIAL STATEMENTS

         See  "Financial   Statements"  beginning  on  page  F-1  and  Index  to
Consolidated  Financial Statements and Financial Statement Schedules included in
Item 13.

     ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                              FINANCIAL DISCLOSURE.

         None


                                    PART III

      ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
               COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The Board of  Directors  currently  consists  of six (6)  persons.  The
following table sets forth certain  information  regarding the present directors
and the executive officers of the Company:

<TABLE>
<CAPTION>

          NAME                                     AGE                      POSITIONS
          ----                                     ---                      ---------
<S>                                                 <C>                                                      
Dr. W. Ernest Rutherford                            57                  Chairman, Chief Executive Officer and
                                                                         President
Ileta Rutherford                                    54                  Vice President--Operations, Secretary
                                                                         and Director
Philip A. Ratcliff                                  67                  Vice President-Marketing and Director
Dr. Joan Blondin                                    59                  Director
Robert L. Boyle, Jr.                                53                  Director
Dr. David Raines, Jr.                               55                  Director
</TABLE>

         All officers are appointed by and serve at the  discretion of the Board
of  Directors.  Each  Director  serves for a  one-year  term or until his or her
successor is duly elected and qualified.

         Dr. W. Ernest Rutherford - Dr. Rutherford has served as Chairman, Chief
Executive  Officer and  President of the Company since its inception in December
1995. From 1990 to 1995, Dr. Rutherford  served on the North Louisiana  Hospital
Board  of  Directors  (Columbia/HCA)  and  is  currently  a  Clinical  Associate
Professor  at  Louisiana  State  Medical  Center  and an  Adjunct  Professor  at
Louisiana  Tech  University.  In 1991,  Dr.  Rutherford  began  introducing  the
Continuous Quality  Improvement  ("CQI") principles in his dialysis  facilities,
which resulted in lower cost and higher  quality  (decreased  mortality).  As an
authority in the  application  of CQI to healthcare,  he is frequently  asked to
speak and is often quoted in the media. In 1990, Dr.  Rutherford  co-founded the
Northern Louisiana Healthcare Alliance, bringing hospitals,  doctors, businesses
and  insurance  companies  together  to study  the  quality  and cost  issues in
healthcare.  In 1985, Dr.  Rutherford  founded Matrix Plus, a computer  software
company,  and has served as President and a director since its inception.  Since
1979,  Dr.  Rutherford has been a partner in Nephrology  Consultants,  a medical
consulting  firm and was the head of the Renal  Division of the Wash. U. Service
at St. Louis City Hospital, from 1973-1978, where he

CORPDAL:63070.2  29375-00001
                                                        17

<PAGE>



conducted  independent research funded with independent grants from the National
Institute  of Health.  During that time Dr.  Rutherford  authored 32 articles in
international,  peer-reviewed scientific  publications.  In 1978, Dr. Rutherford
entered  private  practice  in  Monroe,  Louisiana  where  he and  his  partners
established  five  chronic  and two acute  dialysis  facilities  serving  all of
northeast Louisiana.

         Ileta Rutherford - Ms. Rutherford, the  spouse of Dr.  Rutherford,  has
served as Vice  President--Operations,  Secretary  and  Director  of the Company
since  December  1995.  Since  August  1993,  Ms.  Rutherford  has held  various
positions at Matrix Plus,  including  Chief  Executive  Officer,  Secretary  and
Treasurer.  Ms. Rutherford is a licensed real estate agent with John Rea Reality
and served on the Board of Directors of the Louisiana  Realtor  Association from
December 1991 to December 1995.

         Phillip A.  Ratcliff - Mr.  Ratcliff  has  served as Vice  President  -
Marketing of the Company  since May 1996 and as a Director of the Company  since
December 1995.  Since March 1994, Mr. Ratcliff has been an instructor at Webster
Junior College in Florida.  Prior to retiring in April 1991, Mr. Ratcliff served
as Chief Executive Officer of AFCA Communications,  Inc., an agency specializing
in marketing and investor public relations.

         Dr. Joan Blondin - Dr. Blondin has served  as a Director of the Company
since  December  1995.  Since 1978, Dr. Blondin has been a Partner in Nephrology
Consultants,  a medical  consulting  firm.  Dr.  Blondin has served as a medical
director of the North Louisiana  Dialysis  Center,  a medical service  provider,
since  1992.  Dr.  Blondin  has been an  active  staff  member  at North  Monroe
Community  Hospital  and St.  Francis  Medical  Center,  since  1984  and  1978,
respectively.  From 1980 to 1992,  Dr.  Blondin was  President  of the  Northern
Louisiana Dialysis Center, Inc., a medical service provider.

         Robert L. Boyle, Jr. - Mr.  Boyle  has served  as  a  Director  of  the
Company since April 1996.  Since  September  1995, Mr. Boyle has served as Chief
Executive Officer of  Cardiovascular  Provider  Resources,  Inc. Since 1994, Mr.
Boyle has served as Executive  Vice  President  and Chief  Operating  Officer of
Camino    Healthcare.    Since   1989,    Mr.   Boyle   has   served   as   Vice
President-Administration  of the  Palo  Alto  Medical  Foundation,  a  physician
multi-specialty  group  practice.  In  addition,  Mr.  Boyle  is  currently  the
President-elect of the Medical Group Management Association ("MGMA").

         Dr. David Raines, Jr. - Dr.  Raines  has  served  as  a Director of the
Company since December 1995. Since 1978, Dr. Raines has been in private practice
at the  Gastroenterology  Clinic, Inc. In addition,  Dr. Raines has served as an
Associate of Medicine at Louisiana State University since 1980.

         Other  than the  relationship  between  Dr.  and Mrs.  Rutherford,  the
Company is not aware of any "family relationships" (as defined in Item 401(c) of
Regulation S-B  promulgated by the Securities and Exchange  Commission)  between
any of the directors, and/or any of the executive officers.




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                                                        18

<PAGE>



                         ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth, for fiscal 1996, the  compensation  awarded
to Dr.  Ernest  Rutherford.  No  executive  officer of the Company  received any
salary or bonus for fiscal 1995.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                       LONG TERM COMPENSATION
                                                                         -------------------------------------------------------
                                      ANNUAL COMPENSATION                         Awards                 PAYOUTS
                                                                         -------------------------     ----------
      (A)           (B)         (C)           (D)           (E)             (F)             (G)            (H)            (I)
                                                           OTHER                        SECURITIES
    NAME AND                                              ANNUAL         RESTRICTED     UNDERLYING                     ALL OTHER
   PRINCIPAL                                              COMPEN-          STOCK         OPTIONS/         LTIP          COMPEN-
    POSITION       YEAR      SALARY($)     BONUS($)      SATION($)      AWARD(S)($)       SARS(#)      PAYOUTS($)     SATION ($)
<S>                <C>       <C>                <C>           <C>              <C>            <C>            <C>            <C>
Dr. W. Ernest      1996      40,000(1)          --            --               --             --             --             --
Rutherford
CEO/COB
<FN>

(1)      Dr. Rutherford's salary is anticipated to increase to $273,500 in 1997.
</FN>
</TABLE>



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                                                          19

<PAGE>



     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following  table sets forth  information  regarding the  beneficial
ownership  of Class A and  Class B Common  Stock as of March 31,  1997,  by each
person or group who owned, to the Company's knowledge, more than five percent of
the Common Stock, each of the Company's directors, the Company's Chief Executive
Officer, and all of the Company's directors and executive officers as a group.
<TABLE>
<CAPTION>

                                                             SHARES BENEFICIALLY OWNED           SHARES BENEFICIALLY OWNED
                                                             PRIOR TO THE OFFERING(1)           AFTER THE OFFERING(1)
                                     TITLE OF CLASS        ------------------------------      --------------------------------
                                      OF COMMON                                PERCENT                               PERCENT
             NAME                        STOCK                NUMBER          OF CLASS(2)         NUMBER            OF CLASS(3)
                                                              ------          -----------         ------            -----------

<S>                                     <C>                <C>                 <C>             <C>                   <C> 
Dr. W. Ernest Rutherford(4)             Class A               200,000(5)       87.0%              200,000(5)          1.3%
                                        Class B            75,189,358          99.7            75,189,358            78.8
Ileta Rutherford                          --                    --             --                   --                 --
Dr. Joan Blondin                          --                    --             --                   --                 --
Robert L. Boyle, Jr.                      --                    --             --                   --                 --
Dr. David Raines, Jr.                   Class B               200,000           *                 200,000               *
All directors and executive                                                                       200,000             1.3
officers as a group                     Class A               200,000          87.0            75,389,358(2)         79.0
(5 persons)                             Class B            75,389,358(2)       99.9
----------------
*Represents less than one percent.
<FN>

(1) Beneficial   ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission (the  "Commission")  and generally  includes
voting or investment  power with respect to the securities.  Except as indicated
in the  footnotes  to this table and subject to  applicable  community  property
laws, the persons named in the table have sole voting and investment  power with
respect to all shares of Common Stock beneficially owned.

(2) Based on 230,000 shares of Class A  Common Stock outstanding  and 75,902,528
shares of Class B Common Stock. 

(3) Based  on  15,230,000  shares  of  Class  A  Common  Stock  outstanding  and
95,427,058 shares of Class B Common Stock. 

(4) Includes 74,875,882 shares of Common Stock that Dr. Rutherford has agreed to
hold in escrow  pursuant  to certain  state  blue-sky  requirements.  The escrow
agreement  provides that the shares will be held in escrow until the earliest of
(i) the Company achieving in each of two consecutive  fiscal years fully diluted
net earnings per share of at least $.10, (ii) the Company  achieving  during any
five consecutive  fiscal years  accumulated fully diluted net earnings per share
of at least $.30,  (iii) the Company's Common Stock trading in a reliable public
market  at a price  per  share of at  least  $1.75  for a period  of at least 90
consecutive  days  after at  least  one year  from  the  effective  date of this
offering, (iv) subject to certain restrictions, a tender offer or offer to merge
or otherwise  acquire the Company's Common Stock (occurring after the 18th month
anniversary of the Company's  initial offering) in which all stockholders of the
Company receive cash or publicly traded securities, or (v) the sixth anniversary
of the Company's initial offering (and on each anniversary  thereafter) at which
time 20% of the escrowed shares will be released.

(5) Includes  200,000  shares  issued upon  the  effectiveness of  the Company's
initial offering to Matrix Plus, Inc.  See "Item 12. Certain  Relationships  and
Related Transactions-Transactions with Matrix Plus."
</FN>
</TABLE>




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                                                          20

<PAGE>



             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MATRIX PLUS

         In November  1995,  the Company  entered into an agreement  with Matrix
Plus, Inc., a company controlled by Dr. Rutherford, the principal shareholder of
PIE, to purchase from Matrix the MR1 Clinical Record System  software  developed
by Matrix, in consideration for the issuance of 200,000 shares of Class A Common
Stock of PIE. The purchase price was determined by  negotiations  between Matrix
and PIE, based, in large part, upon the software  developer's  estimation of the
value  of  the  software  (considering  development  costs  and  expenses).  The
transaction was approved by a majority of the independent, disinterested members
of the Board of  Directors  of the  Company  on terms no less  favorable  to the
Company than could be obtained from unaffiliated parties.

         In addition,  effective  January 1996, the Company began leasing office
space on a month-to-month basis from Matrix for $585 per month.

RELATIONSHIP WITH CPA NETWORK

         In September 1996, PIE entered into a strategic alliance agreement with
the CPA Network under which the CPA Network  agreed to promote  installation  of
the  PIERS  system  by  clinics  and  physicians  for  whom the CPA  Network  is
performing its profit improvement  program. The CPA Network is rapidly expanding
through the  addition of new CPA firms  requesting  admission to the network and
active  recruitment of additional  CPA firms to the network.  As of December 31,
1996, CPA firms from five additional  states were scheduled to complete training
for the ATAC System over the next few months.

ORGANIZATION OF THE COMPANY

         The  Company was formed in November  1995 by Dr.  Rutherford,  at which
time Dr.  Rutherford was issued  75,000,000  shares of Class B Common Stock,  in
consideration of his payment of  approximately  $75,000 in costs and expenses of
the Company.

TRANSACTIONS WITH DR. RUTHERFORD

         In November 1995, the Company issued a promissory note in the aggregate
principal  amount of  $189,358 to Dr.  Rutherford  in  consideration  of certain
advances made by Dr. Rutherford to the Company,  which was exchanged for 189,358
shares of Class B Common Stock in December 1996.

         In addition,  Dr.  Rutherford has agreed to personally  fund any of the
Company's  additional  offering expenses in exchange for a non-interest  bearing
promissory note of the Company.  Dr. Rutherford and the Company have agreed that
in the event the Company sold less than $1,000,000 of its securities through the
offering,  the new  note  will be  converted  into  Class B  Common  Stock  at a
conversion  price of $1.00 per share. In the event the Company sold in excess of
$1,000,000 of its securities through the offering, Dr. Rutherford had the option
to convert the new note into Class B Common Stock or accept a cash payment.

POLICY REGARDING FUTURE TRANSACTIONS BETWEEN THE COMPANY AND RELATED PERSONS

         All future transactions between the Company and its officers, directors
and principal shareholders or affiliates of any such persons must be on terms no
less favorable to the Company than could be obtained from unaffiliated  parties,
and such  transactions  must be approved by a majority  of the  independent  and
disinterested directors of the Company.









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                                                          21

<PAGE>



    ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      Exhibits
<TABLE>
<CAPTION>

Exhibit
Number                                               Description
-------                                              -----------
<S>      <C>  
*3.1     Articles of Incorporation of the Registrant and form of amendment thereto. (3.1)

*3.2     Bylaws of the Registrant. (3.2)

*10.1    Stock Option Plan of the Registrant. (10.1)

*10.2    Non-Employee Director Stock Option Plan of the Registrant. (10.2)

*10.3    Form of Stock Escrow Agreement between Dr. W. Ernest Rutherford and Agent. (10.3)

*10.4    Purchase Agreement between the Registrant and Matrix Plus, Inc. (10.4)

*10.5    Form of Advisory Council Member Sharing Agreement. (10.5)

*10.6    Form of Clinical Abstract Data Agreement between Physician-shareholders and Registrant. (10.6)

*10.7    Form of Escrow Agreement between the Registrant and the Escrow Agent. (10.7)

*10.8    Letter of Engagement, dated February 26, 1996, between the Registrant and First Consulting Group. (10.8)

*11      Computation of Net Loss Per Common Share.

+27      Financial Data Schedule
<FN>

         *  Incorporated  by  reference  to the  exhibit  shown  in  parenthesis
         contained in the Company's Registration Statement on Form SB-2 (Reg. No
         333-3618).

         +  Filed herewith.
</FN>
</TABLE>

(b)      Financial Statements
         --------------------

         Independent Auditor's Report                                   F-2

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

         Statements of Operations                                       F-4
                  For  the  Year  Ended  December 31,  1996
                  and For the Period from November 10, 1995
                  (Date of Inception ) to December 31, 1995

         Statements  of  Changes  in  Stockholders'  Equity             F-5
                  (Deficit)     For    the    Year    Ended
                  December 31, 1996 and For the Period from
                  November 10, 1995 (Date  of  Inception to
                  December 31, 1995




CORPDAL:63070.2  29375-00001
                                                          22

<PAGE>




         Statement of Cash Flows                                        F-6
                  For the Year Ended December 31, 1996 and
                  For the  Period  from November  10, 1995
                  (Date of Inception) to December 31, 1995

         Notes to Financial Statements                                  F-7


(c)      Form 8-K

The  Company  did not file any  reports on Form 8-K during the Fiscal Year ended
December 31, 1996.



CORPDAL:63070.2  29375-00001
                                                          23

<PAGE>



                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  the Registrant has duly caused this Annual Report on Form 10-KSB to be
signed on its behalf by the undersigned thereto duly authorized.


                                      PHYSICIANS INFORMATION EXCHANGE, INC.


                                      By:/s/W.Ernest Rutherford
                                         ----------------------------
                                         W. Ernest Rutherford
                                         President and
                                         Chief Executive Officer


         In accordance with the requirements of the Securities Act of 1933, this
report was signed by the following  persons in the  capacities  and on the dates
stated.

<TABLE>
<CAPTION>

           SIGNATURE                                          CAPACITY                                DATE
           ---------                                          --------                                ----
<S>                                                   <C>                                          <C>
/s/W. Ernest Rutherford                                   
--------------------------------------------------    President, Chief Executive Officer and       April 15, 1997
W. Ernest Rutherford                                  Chairman of the Board (Principal
/s/Ileta Rutherford                                   Executive Officer)
--------------------------------------------------    Vice President Operations/Secretary and      April 15, 1997
Ileta Rutherford                                      Director (Principal Financial and
/s/Philip Ratcliff                                    Accounting Officer)
--------------------------------------------------    Vice President-Marketing and Director        April 15, 1997
Philip Ratcliff
/s/Joan Blondin
--------------------------------------------------    Director                                     April 15, 1997
Joan Blondin

--------------------------------------------------    Director                                     April 15, 1997
Robert L. Boyle, Jr.
/s/David Raines, Jr.
--------------------------------------------------    Director                                     April 15, 1997
David Raines, Jr.
/s/Roger H. Shannon
--------------------------------------------------    Director                                     April 15, 1997
Roger H. Shannon
/s/Clarke Williams
--------------------------------------------------    Director                                     April 15, 1997
Clarke Williams
</TABLE>


CORPDAL:63070.2  29375-00001

<PAGE>


                                INDEX TO EXHIBITS




                           Financial Data Schedule







CORPDAL:63070.2  29375-00001

<PAGE>

                      PHYSICIANS INFORMATION EXCHANGE, INC.

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                          Page

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

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

Statements of Operations
         For the Year Ended  December 31, 1996
         and For the Period from  November 10, 1995
         (Date of Inception) to December 31, 1995..........................................................F-4

Statements of  Changes  in  Stockholders'  Equity  (Deficit)
         For the Year Ended December 31, 1996 and
         For the Period from November 10, 1995
         (Date of Inception) to December 31, 1995..........................................................F-5

Statement of Cash Flows
         For the Year Ended  December 31, 1996 and
         For the Period from  November 10, 1995
         (Date of Inception) to December 31, 1995..........................................................F-6

Notes to Financial Statements..............................................................................F-7
</TABLE>


                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Physicians Information Exchange, Inc.

We have  audited  the  accompanying  balance  sheets of  Physicians  Information
Exchange,  Inc. (a  development  stage company) as of December 31, 1996 and 1995
and the  related  statements  of  operations,  changes in  stockholders'  equity
(deficit)  and cash flows for the year ended  December  31,  1996 and the period
from November 10, 1995 (date of inception) to December 31, 1995. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  Physicians  Information
Exchange,  Inc. (a development  stage company) as of December 31, 1996 and 1995,
and the results of its operations and its cash flows for the year ended December
31, 1996 and the period from  November 10, 1995 (date of  inception) to December
31, 1995 in conformity with generally accepted accounting principles.


                                                                               
                                             Jackson & Rhodes P.C.



Dallas, Texas
March 13, 1997 (except as to Note 7, which
                is as of April 14, 1997)

                                      F-2
<PAGE>
                      PHYSICIANS INFORMATION EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1995


                                                  ASSETS
<TABLE>
<CAPTION>

                                                                                     1996             1995
                                                                          ----------------------------------

Current assets:
<S>                                                                         <C>              <C>           
     Cash                                                                   $        1,686   $      100,000

Deferred offering costs                                                             50,000           18,933

Organization costs                                                                     750            1,000
                                                                          ----------------------------------

                                                                            $       52,436   $      119,933
                                                                          ==================================
</TABLE>



                              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>

Current liabilities:
<S>                                                                          <C>             <C>           
     Accounts payable - trade                                                $     124,060   $            -
     Accounts payable - stockholder                                                765,013          189,358
                                                                          ----------------------------------
             Total current liabilities                                             889,073          189,358
                                                                          ----------------------------------

Commitments and contingencies (Note 5)                                                   -                -

Stockholders' equity (deficit):
     Preferred stock, $.001 par; 5,000,000 shares
                authorized; none issued                                                  -                -
Common stock:
            Class A, $.001 par; 250,000,000 shares authorized;
            351,000 and 10,000 shares issued and outstanding                           351               10
            Class B, $.001 par; 250,000,000 shares authorized;
            75,902,528 and 75,240,000 shares issued and outstanding                 75,903           75,240
     Additional paid-in capital                                                  1,075,215          249,750
     Stock subscriptions receivable                                                                (25,000)
                                                                                         -
     Deficit accumulated during the development stage                          (1,988,106)        (369,425)
                                                                          ----------------------------------
            Total stockholders' equity (deficit)                                 (836,637)         (69,425)
                                                                          ----------------------------------

                                                                            $       52,436   $      119,933
                                                                          ==================================
</TABLE>




                 See accompanying notes to financial statements.
                                       F-3
<PAGE>



                      PHYSICIANS INFORMATION EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                                                                          Period from               Period from
                                                                                       November 10, 1995         November 10, 1995
                                                              Year Ended             (Date of Inception)to     (Date of Inception)to
                                                           December 31, 1996           December 31, 1995         December 31, 1996
                                                    ----------------------------   ------------------------  -----------------------


<S>                                                         <C>                    <C>                        <C>                   
General and administrative expenses                         $          1,618,681   $              369,425     $            1,988,106
                                                    ----------------------------   ------------------------  -----------------------

Net loss                                                    $        (1,618,681)   $            (369,425)     $          (1,988,106)
                                                    ============================   ========================  =======================

Net loss per common share                                   $             (0.02)   $               (0.00)
                                                    ============================   ========================

Weighted average shares outstanding                                   75,568,761               75,250,000
                                                    ============================   ========================
</TABLE>















                 See accompanying notes to financial statements.
                                       F-4

<PAGE>

                      PHYSICIANS INFORMATION EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
             STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
            FOR THE PERIOD FROM NOVEMBER 10, 1995 (DATE OF INCEPTION)
                     TO DECEMBER 31, 1995 AND THE YEAR ENDED
                                DECEMBER 31, 1996

<TABLE>
<CAPTION>

                                                                                                                Deficit
                                                                                                              Accumulated
                                                         Common Stock                 Additional  Stock       During the
                                         -------------------------------------------
                                               Class A                 Class B          Paid-in  Subscriptions Development
                                         -------------------------------------------
                                          Shares        Amount     Shares    Amount     Capital  Receivable    Stage           Total
                                         -------------------------------------------------------------------------------------------

Issuance of common stock:
<S>                                       <C>        <C>       <C>         <C>        <C>        <C>           <C>         <C>      
     For notes receivable and services    10,000     $    10       40,000  $     40   $   49,950 $ (25,000)    $       -   $  25,000
                                                                                                                                    
     For payment of costs                      -           -   75,000,000    75,000            -          -            -      75,000
                                         
     For cash and services                     -           -      200,000       200      199,800          -            -     200,000
                                       
Net loss                                       -           -            0         0            -          -    (369,425)   (369,425)
                                         ---------------------------------------------------------------------------------------
Balance, December 31, 1995                10,000          10   75,240,000    75,240      249,750   (25,000)    (369,425)    (69,425)
Collection of stock subscription               -           -            -         -            -     25,000            -      25,000
                                                                                  -
Sale of stock                            141,000         141      550,750       551      680,432          -            -     681,124
Stock issue costs                                                                                                                   
                                               -           -            -         -    (166,433)          -            -   (166,433)
Common stock issued for
   Payment of costs and services         200,000         200      111,778       112      311,466          -            -     311,778
Net loss                                                                                                                            
                                               -           -            -         -            -          -  (1,618,681) (1,618,681)
                                         -------------------------------------------------------------------------------------------
                                          
Balance, December 31, 1996               351,000     $   351   75,902,528  $ 75,903  $ 1,075,215    $     - $(1,988,106  $ (836,637)
                                         ===========================================================================================
</TABLE>





                 See accompanying notes to financial statements.
                                       F-5
<PAGE>



                      PHYSICIANS INFORMATION EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                       November 10,    November 10, 1995
                                                                                           1995
                                                                     Year Ended          (Date of          (Date of
                                                                                      Inception) to      Inception) to
                                                                 December 31, 1996     December 31,1995 December 31, 1996           
                                                                ----------------------------------------------------------

Cash flows from developmental activities:
<S>                                                                  <C>                <C>               <C>            
    Net loss                                                         $   (1,618,681)    $   (369,425)     $   (1,988,106)
    Adjustments to reconcile net loss
      to net cash used in developmental activities:
      Amortization                                                               250                                  250
                                                                                                    -
      Common stock issued for software                                       200,000                              200,000
                                                                                                    -
      Common stock issued for payment of costs                                13,169
                                                                                               75,000              88,169
      Common stock issued for payment of services                             98,609          125,000             223,609
      Changes in assets and liabilities:
         Organization costs
                                                                                   -          (1,000)             (1,000)
         Accounts payable - trade                                            124,060                              124,060
                                                                                                    -
                                                                ----------------------------------------------------------          
            Net cash used in developmental activities                    (1,182,593)        (170,425)         (1,353,018)
                                                                ----------------------------------------------------------

Cash flows from financing activities:
    Sale of common stock                                                     706,124          100,000             806,124
    Deferred offering costs                                                (197,500)         (18,933)           (216,433)
    Accounts payable - stockholder                                           575,655          189,358             765,013
                                                                ----------------------------------------------------------          
         Net cash provided by financing activities                         1,084,279          270,425           1,354,704
                                                                ----------------------------------------------------------

Net change in cash and cash equivalents                                     (98,314)          100,000               1,686

Cash and cash equivalents:
    Beginning of period                                                      100,000                -                   -          
                                                                ----------------------------------------------------------

    End of period                                                 $            1,686    $     100,000         $     1,686
                                                                ==========================================================
</TABLE>













                 See accompanying notes to financial statements.
                                       F-6

<PAGE>



                      PHYSICIANS INFORMATION EXCHANGE, INC.

                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995




1.   DESCRIPTION OF BUSINESS

     Physicians  Information Exchange,  Inc. ("the Company" or "PIE") was formed
     November  10, 1995.  The Company was formed to  introduce a new  technology
     service that saves the physician time while collecting clinical information
     at the "point of care". This clinical  information will provide  structured
     outcomes and  clinical  data  necessary  to improve  quality care and lower
     treatment cost. This technology  service  integrates the latest  pen-based,
     handheld,  data collection and wireless data transfer  technologies  with a
     robust knowledge database.

     The Company is presently attempting to raise equity funds in the in private
     market through strategic alliance partners.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation

     The Company's financial statements have been presented on the basis that it
     is a going concern,  which  contemplates  the realization of assets and the
     satisfaction  of liabilities in the normal course of business.  The Company
     is in the development stage and is reporting a net loss of $1,988,106 since
     inception through December 31, 1996, and has excess liabilities over assets
     at that date.

     As explained in Note 1, the Company is in the process of raising capital to
     continue to develop its technology and the Company has recently  obtained a
     $1,000,000  line of credit with a bank (Note 7).  Management  believes  the
     line of credit will provide any needed  liquidity until it is able to raise
     the needed capital and, thus, will be able to continue as going concern.

     Use of Estimates and Assumptions

     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 reported  amounts of revenues and expenses during
     the reporting period. Actual results could differ from those estimates.

     Cash and Cash Equivalents

     For purposes of reporting  cash flows,  cash and cash  equivalents  include
     cash and  certificates  of deposit with  original  maturities  of less than
     three months.




                                      F-7
<PAGE>



                      PHYSICIANS INFORMATION EXCHANGE, INC.

                          NOTES TO FINANCIAL STATEMENTS


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Deferred Offering Costs

     Costs  incurred as of December 31, 1996 in  connection  with the  Company's
     prospective  private offering are being deferred and will be offset against
     the proceeds.

     Organization Costs

     Costs  incident  to the  creation  of the  corporation,  including  various
     accounting and legal fees,  have been  capitalized  and are being amortized
     over a five-year period.

     Net Loss Per Common Share

     Net loss per common  share has been  computed  using the  weighted  average
     number of shares outstanding during the period. Weighted average shares for
     the period  ended  December  31, 1995  include  all shares of common  stock
     issued for the entire period (cheap stock).

     Income Taxes

     The Company  accounts for income  taxes  pursuant to Statement of Financial
     Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
     objective of this asset and liability  method is to establish  deferred tax
     assets and liabilities for the temporary  differences between the financial
     reporting  basis and the tax basis of the Company's  assets and liabilities
     at  enacted  tax rates  expected  to be in effect  when  such  amounts  are
     realized or settled.

3.   INCOME TAXES

     The Company has  recorded no income tax benefit for the periods  because it
     has no ability to carry back its  operating  loss.  For tax  purposes,  the
     Company  is  required  to defer  its  operating  losses  until it begins to
     receive  operating  revenues.  These  operating  losses  for  tax  purposes
     amounted to  approximately  $1,600,000 and $52,000 at December 31, 1996 and
     1995,  respectively.  A valuation allowance has been recorded to offset the
     related deferred tax asset for this temporary difference.

4.   STOCKHOLDERS' EQUITY

     Common Stock

     With respect to all matters  submitted to a vote of the  shareholders,  the
     record  holders of the Class A common  stock are  entitled  to one vote per
     share and the record holders of Class B common

                                      F-8
<PAGE>



4.   STOCKHOLDERS' EQUITY (CONTINUED)

     Common Stock (Continued)

     stock are  entitled  to 10 votes per  share.  Except  as may  otherwise  be
     required  by law or by the  Articles of  Incorporation,  the holders of the
     Class A and Class B common stock vote together as a single class. The Class
     B common stock may be held only by licensed medical doctors.

     Upon its  formation  on November 10, 1995,  the Company  issued  75,000,000
     shares of Class B common stock to its founder,  Dr. Ernie  Rutherford,  and
     recorded $189,358 in accounts payable to Dr. Rutherford in exchange for Dr.
     Rutherford's payment of $264,358 in costs and expenses for the Company. Dr.
     Rutherford  has continued to loan funds to the Company  during 1996 to fund
     its operations.

     As of December  31,  1995,  the Company  issued  200,000  shares of Class B
     common stock to a shareholder of Matrix Plus,  Inc.  ("Matrix"),  a company
     owned by Dr.  Rutherford,  for  $100,000  in  cash.  The  Company  recorded
     $100,000 in compensation for this transaction.

     As of December 31, 1995, the Company issued 40,000 shares of Class B common
     stock and  10,000  shares of Class A common  stock to two  shareholders  of
     Matrix for $25,000 in cash. The Company  recorded  $25,000 in  compensation
     for this transaction.

     During 1996,  the Company has issued an additional  311,778 shares of stock
     for payment of costs and services valued at $311,778.

     Stock Option Plans

     In February  1996,  the Board of Directors  adopted the 1996  Employee Plan
     (the "1996  Employee  Plan".  The purpose of the 1996  Employee  Plan is to
     advance the interests of the Company by providing additional  incentives to
     attract and retain qualified and competent employees and consultants of the
     Company and directors of the Company's subsidiaries, upon whose efforts and
     judgment  the  success of the  Company is  largely  dependent.  Nonemployee
     directors  of the  Company  are not  eligible  to  participate  in the 1996
     Employee  Plan.  A total of  6,000,000  shares of Class B Common Stock have
     been reserved for sale upon exercise of Employee  Options granted under the
     1996 Employee Plan. To date, no Employee Options have been granted.

     In February  1996,  the Board of Directors  adopted the 1996 Director Plan.
     The purpose of the 1996  Director  Plan is to advance the  interests of the
     Company  by  providing  an  incentive  to retain as  independent  directors
     persons of  training,  experience  and  ability,  to  encourage  a sense of
     proprietorship  of such persons,  and to stimulate  the active  interest of
     such  persons in the  development  and  financial  success of the  Company.
     Options under the 1996 Director Plan ("Director  Options") are granted only
     to nonemployee directors of the Company. Director

                                      F-9
<PAGE>


4.   STOCKHOLDERS' EQUITY (CONTINUED)

     Stock Option Plans (Continued)

     Options are  automatically  granted to each  nonemployee  director upon his
     election  as a  director.  Each of the four  nonemployee  directors  of the
     Company  on the date of  adoption  of the 1996  Director  Plan  received  a
     Director Option under the 1996 Director Plan  exercisable for 75,000 shares
     of Class B Common Stock at an exercise price of $1 per share.Each  Director
     Option expires ten years after its date of grant. An aggregate of one-third
     of the total number of shares subject to such Director Options vest on each
     anniversary date of the date of grant.  Shares subject to a Director Option
     vest  as to all  shares  then  subject  to the  Director  Option  upon  the
     occurrence  of a Major  Corporate  Event.  A total of  2,000,000  shares of
     Common  Stock have been  reserved for  issuance  upon  exercise of Director
     Options granted under the 1996 Director Plan.  Director Options are granted
     with an exercise  price per share  equal to the fair  market  value of such
     shares on the date of grant.

5.   COMMITMENTS AND CONTINGENCIES

     Concentration of Credit Risk

     The  Company  invests its cash  primarily  in  deposits  with major  banks.
     Certain  deposits  have been in excess of  federally  insured  limits.  The
     Company has not incurred losses related to its cash on deposit with banks.

6.   RELATED PARTY TRANSACTIONS

     In November 1995,  the Company  entered into an agreement with Matrix Plus,
     Inc. ("Matrix"),  a company controlled by Dr. Rutherford,  to purchase from
     Matrix the MRI Clinical  Record  System  software  developed by Matrix,  in
     consideration for the issuance of 200,000 shares of Class A common stock of
     PIE.  The  agreement  was  contingent  upon the  success  of the  Company's
     proposed public offering. The purchase price was determined by arm's-length
     negotiations  between  Matrix  and  PIE,  based,  in large  part,  upon the
     software developer's  estimation of the value of the software  (considering
     development costs and expenses). The 200,000 shares were valued at $200,000
     and the charge is included in general and administrative expense in 1996.

     The Company also leases  office space from Matrix under terms of a sublease
     which expires in August 1997.  Future  minimum lease  payments for the year
     ending  December 31, 1997 are $5,600.  Rent expense  amounted to $5,725 for
     the year ended December 31, 1996.

                                      F-10
<PAGE>


7.   SUBSEQUENT EVENTS

     Subsequent to December 31, 1996, the Company has obtained a $1,000,000 line
     of credit  with a bank.  The line is  guaranteed  by two  directors  of the
     Company, carries interest at the prime rate and matures in April 1998.













                                      F-11