FORM 10-KSB
(Mark One)

/X/  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934 [FEE REQUIRED]

For the fiscal year ended   December 31, 1996

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

For the transition period from            to

                         Commission file number 1-11784

                 THE NETPLEX GROUP, INC. (f/k/a COMPLINK, LTD.)
                 (Name of small business issuer in its charter)

             New York                                11-2824578
---------------------------------                 -------------------
(State or other jurisdiction of                   (I.R.S. employer
 incorporation or organization)                   identification no.)

8260 Greensboro Drive, 5th Floor, McLean, VA          22102
--------------------------------------------------------------------------------
(Address of principal executive offices)             (Zip code)

Issuer's telephone number, including area code: (703) 356-3001

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


 Title of Each Class                  Name of Each Exchange on Which Registered
 -------------------                  -----------------------------------------

Common Stock, $.001 par value         Boston Stock Exchange and
                                      The OTC Electronic Bulletin Board

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

                                      None

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes U No .

         Check 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  registrant's  knowledge,  in definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         State issuer's revenues for its most recent year. $33,524,679

         State  the  aggregate   market  value  of  the  voting  stock  held  by
non-affiliates  computed by  reference to the price at which the voting stock as
sold,  or the average bid and asked prices of such stock,  as of March 21, 1997.
(See definition of affiliate in Rule 12b-2 of the Exchange Act). $ 16,184, 291

Note:  If  determining  whether  a  person  is  an  affiliate  will  involve  an
unreasonable  effort and expense,  the issuer may calculate the aggregate market
value of the Common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

As of March 21, 1997, there are 6,944,903  shares  outstanding of the Company' s
Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE:

The  information  required  by Part III will be  incorporated  by  reference  to
certain  portions of a definitive  proxy statement which is expected to be filed
by the Company within 120 days after the close of its fiscal year.

         This report consists of consecutively  numbered pages (inclusive of all
exhibits and including this cover page). The Exhibit Index appears on page .

<PAGE>
                                     Part I.


ITEM 1.  BUSINESS

GENERAL

Netplex builds,  manages,  and protects networked  information systems for major
corporations.  Demand for the types of services the Company  provides is rapidly
growing as commercial  enterprises become increasingly  dependent upon networked
systems and  solutions.  In meeting  these needs,  the Company seeks to bring to
every  assignment  a  unique  life-cycle  awareness:  When  contracted  to build
systems,  the Company strives to assure that they can be effectively managed and
protected,  manage systems  consistent with their  underlying  architecture  and
security requirements, and protect systems in line with the client's approach to
technology deployment and management.

Netplex  provides  clients the  benefits of our  specialized  expertise  through
broadly focused "Network Enabling  Services" -- including  network  integration,
information security systems, management, mobile  communications,  and technical
staffing capabilities -- and the tightly targeted "Expert Series" of solutions.

The  Company  has  organized   these  service   offerings  under  three  primary
categories:  Information  System Solutions (ISS),  which provides  organizations
networked systems solutions in several specialized  technology areas;  Technical
Staffing Services (TSS),  which provides highly skilled  Information  Technology
(IT) consultants on a contract basis to organizations;  and Independent Employee
Services (IES) which provides payroll,  billing, and other financial services to
former independent consultants who have become employees of the Company.

More than 300 of the Company's information technology employees are currently on
assignment with clients,  assisting them in implementing  networked  information
systems  in  such  areas  as  distributed  network  design,  enterprise  network
management,  database design, legacy conversion,  and client/server development.
The Company's  clients are primarily  Fortune 1,000 companies and law firms with
significant  information  technology  budgets and recurring staffing and systems
integration needs.

Using technology, industry experts, automated processing, and a recruiting team,
Netplex believes it can provide customers with professional  technical  services
efficiently  and at very fair rates.  The Company's  approach to attracting  and
retaining  talent  provides it with it believes is a  competitive  advantage  in
accessing scarce human  resources.  The Company's  proprietary  automated skills
database currently contains more than 25,000 professionals  available to work on
a  contract-to-contract  basis.  The Company  has sought to create an  extremely
entrepreneurial  environment in which its employees can control their individual
financial and professional  growth with minimal risk. The Company encourages and
enables contract workers or independent  business associates to build a business
through Netplex.

HISTORY
The Company was incorporated in 1986. From 1986 to June 1996, the Company, under
the name  CompLink,  Ltd.,  developed  and  marketed a  communications  software
product.

On June 7, 1996, the Company  (formerly  known as CompLink,  Ltd. or "CompLink")
acquired and merged with The Netplex  Group,  Inc. and America's  Work Exchange,
Inc.  (combined  referred to as  "Netplex") by issuing  approximately  3,245,000
shares of Common  Stock.  The  agreement  also  provided  for  CompLink to issue
1,691,000

                                      -1-
<PAGE>

options to purchase its Common Stock in exchange for the  1,691,000  outstanding
options to purchase the Common Stock of Netplex. The mergers have been accounted
for under the  purchase  method of  accounting  as a reverse  merger,  since the
shareholders  of the  acquirees,  who have common  control,  received the larger
percentage of the voting rights of the combined entity.  The mergers resulted in
a recapitalization  of the Company, so that the resulting  capitalization  after
the mergers will be that of CompLink's,  giving effect to the new share issuance
and the elimination of CompLink's  accumulated  deficit.  The acquisition of the
assets and liabilities of CompLink have been accounted for at book value,  which
approximates fair value.

On September 19, 1996, the Company  raised  approximately  $3,000,000  through a
private  placement  offering of units of equity  securities  (the "1996  Private
Placement").  Each unit of equity  securities  consists of one share of $.01 par
value class A convertible preferred stock (the "preferred stock") and one Common
Stock  warrant to purchase  one share of the  Company's  $0.001 par value Common
Stock ("Common Stock")at an exercise price of $2.50.

Each share of preferred  stock is convertible  into one share of Common Stock at
any time, at the discretion of the holder.  The preferred stock earns cumulative
dividends  at 10% per annum,  payable  in either  cash or  additional  shares of
preferred stock at the Company's option.  Subject to the conversion  rights, the
Company  may redeem the  preferred  stock at its stated  value  (which is $2 per
share) plus all accrued  and unpaid  dividends  upon:  (1)  registration  of the
shares  underlying the preferred  stock, and (2) 30 days written notice given at
any time upon the common stock  attaining  certain per share trading  prices and
maintaining  such prices for a specified  period.  The preferred stock has a per
share  liquidation  preference of the greater of: (i) two times the stated value
(plus any accrued and unpaid dividends,  or (ii) the amount that would have been
received if such shares  were  converted  to Common  Stock on the  business  day
immediately prior to liquidation.

Each warrant issued in connection with the private placement became  exercisable
on March 19, 1997,  and expires on September 19, 2001. The Company has the right
to call the  warrants (a total of 1,750,000  warrants) at a redemption  price of
$.01 per share upon: (1)  registration of the shares  underlying the warrant (2)
30 days written notice given at any time upon the common stock  attaining $5 per
share trading prices and sustaining such prices for twenty (20) trading days.

On October 21, 1996, the Company filed an application  for the re-listing of its
Common  Stock on the  NASDAQ  SmallCap  Market  ("NASDAQ").  While  the  Company
believes it meets the requirements for listing its Common Stock on NASDAQ, there
can be no assurance  that such listing will be approved.  The  Company's  Common
Stock is currently traded on the OTC Electronic Bulletin Board and on the Boston
Stock Exchange.

In order to focus on the Company's  core business and reduce  corporate  losses,
the Company  completed the sale of its  WorldLink  technology  product  business
("WorldLink")to  XcelleNet, Inc. in December 1996 for a sale price of $3 million
in cash.

As a result of this sale,  the  Company  has  redirected  most of the  technical
talent from the WorldLink team to the  Information  Systems  Solutions  practice
group.

MARKET AND INDUSTRY OVERVIEW
To compete in world markets, the Company believes that corporations must be able
to:  (i)  effectively  deploy  and  use  networked   information  systems;  (ii)
anticipate and manage the dynamic trends of the technical  workforce;  and (iii)

                                      -2-
<PAGE>

master  the  complexity  and  breakneck  pace  of  technological   change.  Many
corporations find these information  technology (IT) functions critical to their
ability to compete,  but not a part of their core competencies.  Confronted with
the  challenge  of  building,  integrating,   managing  and  protecting  complex
information   systems  without   expanding   corporate  staff,   businesses  are
increasingly  turning  to IT service  providers  to augment  their  in-house  IT
operations.

Historically,  businesses  turned  to  staffing  companies  to  meet  short-term
personnel  requirements during peak production periods or to temporarily replace
workers out due to illness,  vacation,  or abrupt termination.  Since the 1980s,
the staffing  services  industry has evolved  into a permanent  and  significant
component  of  the  human  resource  plans  of  many   corporations.   Corporate
restructuring,  downsizing,  government regulations, advances in technology, and
the desire by many  companies  to shift  employee  costs from fixed to  variable
expenses have all  contributed to  businesses'  increased use of a wide range of
staffing alternatives.

IT staffing  represents a significant,  and growing,  portion of the IT services
industry.  A 1996  report by  Dataquest,  Incorporated,  on the  demand  for the
supplemental  IT staffing  services such as those provided by Netplex  estimated
the U.S. market for these services at $9.5 billion in 1994 and projected  growth
to $16.1 billion in 1999.

This growth is a result of numerous factors including: (i) an increased focus on
core business  operations by organizations;  (ii) the need to access specialized
IT skills to keep pace with  rapidly  changing  technologies;  (iii) the growing
trend towards  flexible  staffing  which  provides a variable cost solution to a
fixed  cost  problem;  and (iv) the  desire  to reduce  the cost of  recruiting,
training and terminating employees as IT requirements change.

As a result of the these and other trends, the complexion of the IT workforce is
shifting from a one-employer career to a flexible consulting environment. Source
EDP reports  the IT  industry  workforce  currently  consists  of 70%  permanent
employees and 30%  consultants  and that these  proportions  will reverse by the
year  2000.  The  Company  believes  that it is  positioned  to  grow by  taking
advantage of these changes in the IT industry.

BUSINESS STRATEGY
The  Company's  mission is to provide  technical  talent  and  services  to help
businesses  deliver  reliable,  timely and secure  information  across networked
systems.

Netplex believes it: (i) helps  organizations  keep pace with technology through
our  leading  industry  experts;  (ii)  leverages  our  technology   integration
experience  to more  quickly  build and better  manage a  networked  information
system;  (iii) provides quick access to highly skilled IT consultants as needed;
(iv) reduces the cost and effort of maintaining a trained,  qualified  technical
workforce;  (v)  enables  customers  to  focus  on their  core  business,  while
outsourcing  non-core IT  functions  to the  Company;  and,  (vi)  transitioning
workforce fixed costs to variable costs.

Netplex believes it helps businesses  develop and leverage such  capabilities by
providing  technical  talent and  know-how  through a highly  skilled  technical
workforce.  To retain and support the technical workforce,  the Company attempts
to provide  consultants  with: (i) an  entrepreneurial  reward system;  (ii) the
ability to develop a career within  specialized  technology  service teams (iii)
greater income than the traditional  one-company employee;  (iv) a wide range of
employee benefits and career counseling;  (v) new and exciting projects

                                      -3-
<PAGE>
on which to  develop  their  technical  skills;  and (vi)  skills  training  and
professional  development.  The Company believes it will be better positioned to
compete in the tight IT labor  market if it can  provide  these  benefits  to IT
consultants.

GROWTH STRATEGY

EXPAND EXISTING BRANCH DEVELOPMENT AND OPENING NEW BRANCHES
The Company believes it can significantly increase revenues in its four existing
branch  locations.  The Company will attempt to achieve this growth by expanding
the sales and  recruiting  organization  in each of the locations and increasing
sales to existing customers. From each location the Company also intends to sell
more  "productized" or packaged service  offerings in its new "Expert" Series of
solutions.

The  Company  will also open  locations  in cities that it believes to have high
growth and market potential. The Company intends to accomplish this goal in part
by recruiting a skilled Area Manager and  Recruiting  Manager for each location.
These two  managers  will be  responsible  for  developing  local  accounts  and
expanding  the  location  by hiring  sales  people,  technical  recruiters,  and
administrators.

STRATEGIC ACQUISITIONS The Company believes that acquisitions are a valuable and
important means of achieving critical mass,  enhancing market share,  increasing
capabilities to deliver large,  complex  solutions,  and supplementing  internal
growth.  The  Company  will seek to  acquire  companies  in the IT  professional
services industry to facilitate its expansion into new territories or to acquire
businesses  that  offer  services   complementary  to  those  of  the  Company's
Information  Systems  Solutions  practice  group.  Acquisitions  in the staffing
industry will  primarily  focus on  profitable  regional  staffing  companies in
markets with attractive growth opportunities.

The Company's  ability to expand  successfully  by  acquisition  depends on many
factors,  including the successful  identification and acquisition of businesses
and   management's   ability  to  integrate  and  operate  the  new   businesses
effectively.  The anticipated  benefits from any acquisition may not be achieved
unless the operations of the acquired  business are  successfully  combined with
those of the Company in a timely manner. The Company's senior management team is
experienced  in  identifying   acquisition  targets  and  integrating   acquired
businesses into the Company's  existing  infrastructure.  The integration of the
Company's  acquisitions  requires  substantial  attention from  management.  The
diversion of  management  attention,  and any  difficulties  encountered  in the
transition  process,  could have an adverse impact on the Company's revenues and
operating  results.  In  addition,   the  process  of  integrating  the  various
businesses  could  cause the  interruption  of, or a loss of  momentum  in,  the
activities  of some or all of these  businesses,  which  could  have an  adverse
effect on the Company's operations and financial performance.

                                      -4-
<PAGE>

EXPAND NATIONAL ACCOUNTS
The Company  intends to focus its sales  efforts on certain  customers("National
Accounts"). These National Accounts include major telecommunications, financial,
and software and hardware development companies.  The Company intends to offer a
full range of services to National Accounts,  ranging from staff augmentation to
entire IT department outsourcing.

DEVELOP NEW "PRODUCTIZED"  SERVICE OFFERINGS The Company intends to increase its
service offerings for technology projects and specialized  consulting  services.
The underlying resources for these "productized"  service offering products will
either  be  developed  by the  Company's  internal  technical  staff  or will be
purchased through a strategic acquisition.

BUILD CENTRAL RECRUITING  SERVICES AND ON-LINE  RECRUITING  SERVICES The Company
has built a centralized  national technical database at its McLean headquarters.
From this  database,  the Company will develop the Central  Recruitment  Center,
which will help qualify and identify  consultant  and employee  candidates  on a
worldwide  scale.  The database will also be linked to the Company's  World Wide
Web site where  candidates can review all of the Company's job  requirements and
easily apply for the  assignments in which they are  interested.  Providing such
quality  content on its Web site is one way the  Company  believes it will build
strategic value in the highly competitive  staffing services market. The Company
will also advertise available positions on other recruiting sites throughout the
World Wide Web.

NETPLEX SERVICES
Information Systems Solutions
The Netplex  Information  Systems  Solutions (ISS) practice group specializes in
building,  managing,  and protecting networked  information systems. The group's
blend of methodologies and experience  enables Netplex to provide customers with
a suite of strategic  solutions.  These  systems  solutions are designed by ISS'
subject matter experts and incorporate best-of-breed technology products.

Areas of ISS core expertise include:
o           Virtual Network Integration
o           Networked Systems Management
o           Support Center Management
o           Contingency Planning
o           Information Security

ISS has forged  marketing  and  support  partnerships with   leading  technology
manufacturers -- such as Microsoft, Hewlett Packard,  IBM, Novadigm,  XcelleNet,
and Unisys -- to develop and design leading edge networked systems solutions.

ISS can build large complex information networks;  implement and manage a remote
workforce automation system; reduce the cost of managing a several-thousand-node
computing  environment while  dramatically  improving the system's service level
performance; consolidate distributed Help Desk functions into one remote central
support facility;  implement  state-of-the-art  information security protection;
and prepare an  organization  to quickly  recover from a major system  disaster,
whether natural, man-made, or caused by the Year 2000 date change problem.

TECHNICAL STAFFING SERVICES
Technical Staffing Services provides clients with highly skilled IT consultants,
programmers,  systems analysts,  database developers,  project managers, network
specialist, applications developers, and software engineers on both a short- and
long-term basis. The Company's flexible staffing approach enables clients to use
the  Company's   consultants   and  employees  to  leverage  their  existing  IT
capabilities and more rapidly and cost  effectively meet peak

                                      -5-
<PAGE>

workloads,  handle special projects,  overcome  personnel  shortages,  and solve
staffing emergencies.

The Company's  consulting  assignments can be as short as a few months to over a
year in  duration.  Customers  are  billed  for the  actual  time  worked by the
Company's consultants.  Therefore,  clients are better able to manage their work
flow,  while  reducing  the expenses -- such as taxes and benefits -- of hiring,
terminating, and maintaining full-time employees.

Many  consultants  who work for Technical  Staffing  Services do so on an hourly
contract  with the Company as Netplex  "Contract  Associates".  To encourage the
most  qualified  professionals  to choose  Netplex,  the  Company  provides  all
Contract Associates with access to benefits such as medical, dental, 401(k), and
flexible spending accounts. Consultants are recruited by the Company's Technical
Recruiting  organization,  which  is  supported  by a  database  of over  25,000
qualified candidates.

INDEPENDENT EMPLOYEE SERVICES
IES  provides  payroll,  billing,  support  services,  and other  benefits to IT
consultants,  whether they find  consulting  assignments on their own or through
the  Company's  Technical  Staffing  Services  group.  Joining IES enables these
consultants  to spend  less time on  paperwork  and  record  keeping so they are
better able to focus on serving their clients,  marketing  their  services,  and
keeping pace with technology.

These  consultants  also  join  the  IES  group  to  access  the  advantages  of
affiliating  with the  Company  which  includes  the  following:  (i) the stable
environment  needed to create and maintain an extensive  employment  history and
financial  creditability;  (ii) a wide  array of  back-office  services  such as
payroll,  billing,  and federal,  state and local tax  filings;  (iii) review of
contracts;  (iv) a group medical and dental plan more  affordable than coverages
available  to  them  on  their  own;  (v)  medical  and   dependent   care  cost
reimbursement  plans;  (vi)  401(k)  and  pension  program;  and  (vii)  general
liability  insurance.  Using these and other services  reduces the  consultant's
cost of purchasing similar benefits on their own.

Finally,  joining IES also gives  consultants  access to previously  unavailable
opportunities by removing a difficult  tax-related obstacle to their employment.
IRS Section 1706 imposes severe  penalties on companies that  mis-classify  1099
employees  (referring  to the IRS form for  reporting  payments  to  independent
contractors).  Therefore,  many  companies  choose  not  to  employ  independent
consultants  and risk the  penalties  inherent with IRS Section 1706 unless they
are on another company's payroll. Because Netplex's IES consultants are not 1099
workers,  clients avoid a potential tax problem and the consultants can pursue a
wider range of assignments.

SALES AND MARKETING
The Company markets its services through two complementary sales  organizations:
(i) a Local Organization, and (ii) a Sales Support Group.

Each  Location  Sales  Organization  is  managed  by an Area  Manager  with both
profitability and operations responsibility, and is staffed by one or more sales
people  and  a  location  administrator.  Area  Managers  are  compensated  by a
combination of salary plus bonus incentives based on location profitability.

The Sales Support Group consists of regional Business  Development  Managers who
assist the Location Sales  Organization  in selling and closing ISS projects and
solutions.  The Practice  Development Managers are responsible for assisting the
sales  organization  in qualifying  prospective  ISS business,  providing  sales
presentation support to the sales force, and generating proposals.

                                      -6-
<PAGE>

RECRUITING
The  Company   believes  that  identifying  and  retaining  highly  talented  IT
consultants is critical to its success.  This is achieved through the Recruiting
Organization. Each local Recruiting Organization reports to a Recruiting Manager
and is staffed by one or more Technical  Recruiters  responsible for soliciting,
recruiting  and assessing  technical  consultants,  developing  and  maintaining
consultant  relationships,  and maintaining and updating the Company's  database
(the "Database") of IT consultant profiles and resumes.

The Company offers its IT consultants a comprehensive  benefits  package,  which
the Company  believes  provides it a  competitive  advantage in  recruiting  and
retaining skilled  technical  talent.  The benefits program includes medical and
dental  insurance,  a  401(k)  retirement  program,  and  flexible  medical  and
dependent care reimbursement accounts.

The local  recruiting  offices are supported by a customized  national  database
which  currently  contains more than 25,000  resumes.  At any  particular  time,
however, only certain individuals whose resumes are included in the Database may
be  available  for  placement by the  Company.  Developed  by the  Company,  the
Database provides Technical Recruiters advanced search functions to more quickly
identify and monitor a qualified candidate for a specific position.

The  Company  recruits IT  consultants  through a number of  different  methods:
referrals,  local print  advertising,  participation in technical job fairs, and
listing a variety of job openings on recruitment  sites  throughout the Internet
and on the  Company's  World  Wide Web home  page.  The  Company  believes  this
recruiting strategy will continue to provide it with qualified IT consultants to
meet its staffing requirements.

OPERATIONS AND SUPPORT SERVICES From its headquarters in McLean,  Virginia,  the
Company  provides its locations  and practice  groups with  centralized  support
services,   including  marketing,  cental  recruitment  services  financial  and
accounting, information systems legal support, human resources, and purchasing.

All of the Company's branch locations are linked by, and can quickly communicate
over a Wide Area Network managed by a centralized Management Information Systems
department at McLean  headquarters.  Branch  locations  rely on this network for
rapid access to the Company's technical talent database.

The Company also uses numerous techniques to govern and guide sales, recruiting,
financial, and operating activities. The Company believes the investment made in
these processes will enhance its ability to grow and attract and retain superior
technical and managerial talent.

CENTRAL RECRUITMENT CENTER
The Company  plans to launch a Central  Recruitment  Center in 1997.  Located at
corporate  headquarters  in McLean,  Virginia,  the Center  will help manage the
Database of qualified candidates and provide central recruiting support in areas
where the Company  does not  maintain  offices.  Staffed by a group of dedicated
recruiters and  administrators,  the Central  Recruitment  Center will allow the
Company to send  recruiting  assistance  to new  locations or rapidly  expanding
offices.

CUSTOMERS
The  Company's  goal  is to  provide  technical  talent  and  services  to  help
businesses  deliver reliable,  timely,  and secure  information across networked
systems.  To accomplish  this,  the Company  places great emphasis in developing

                                      -7-
<PAGE>
long-term  client   relationships.   Positioning   itself  as  a  specialist  in
strategically  selected  networked  technology,  Netplex  strives  to  reinforce
clients'  image of the  Company as being  uniquely  qualified  to provide a wide
range of systems  solutions.  This is increasingly  important as clients seek to
reduce the number of vendors with which they do business.  For this reason,  the
Company  has  begun  to  focus  significant  efforts  on  qualifying  for -- and
remaining  on --  multiple  clients'  vendor  lists.  The  Company is  currently
approved on several vendor lists of Fortune 500 companies. The Company maintains
a broad and  well-balanced  client base: no single  customer  accounted for more
than 10% of the Company's revenues over the past year.

COMPETITION
The IT services industry is fragmented and highly  competitive at both the local
and national levels. Many participants in the information  technology consulting
market have significantly greater financial,  technical, and marketing resources
-- and generate greater revenues -- than the Company.  Some of these competitors
have a nationwide presence equivalent to, or greater than, that of the Company.

The information technology services market includes participants in a variety of
market   segments,   including   systems   consulting  and  integration   firms,
professional   services  companies,   application   software  firms,   temporary
employment  agencies,  professional  services  groups of computer  equipment and
software companies,  accounting firms, and general consulting firms. Some of the
firms with which the Company competes in various  geographic and service markets
are Electronic Data Systems,  ISSC (the consulting division of IBM Corporation),
Computer Sciences Corp.,  Andersen Consulting,  Cap Gemini America,  Booz-Allen,
Computer Horizons Corp., Analysts International Corp., Computer Task Group, Inc.
and The Registry, Inc.

The  Company  believes  the  principal  competitive  factors in the IT  services
industry  include  responsiveness  to  fulfill  client  needs,  speed of systems
integration,   quality  of  service,  technical  expertise,  project  management
capabilities, and price.

In staffing for client  projects,  the Company  competes for IT consultants with
many of those same  companies as well as other local and regional  technology or
staffing  service  providers.  Several  competitive  factors  affect a company's
success  in  recruiting   and  retaining   such   professionals:   compensation,
availability of benefits, a continuous flow of quality  assignments,  and access
to advanced  training and  technical  support.  The Company  believes it is well
positioned in all of these areas to attract the highest quality IT talent.

INTELLECTUAL PROPERTY
The Company does not hold any patents or  registered  trademarks.  However,  the
Company considers its Database to be highly proprietary.

EMPLOYEES
As of March 21, 1996, the Company  employed  approximately  100 full-time  staff
employees and 250 contract employees.

The  Company  is  responsible  for,  and pays the  employer's  share of,  Social
Security  taxes  (FICA),   federal  and  state  unemployment   taxes,   worker's
compensation  insurance,  and other costs relating to all of its employees.  The
Company offers a suite of benefits to its contract employees;  it is a different
selection  than  offered  permanent  employees.  The Company  believes  that its
relations with its employees are good.

                                      -8-
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY

         The  Company's  leases  approximately  10,000  square  feet of space in
McLean,  Virginia for its corporate offices and the operations of ISS and TSS in
the  Mid-Atlantic  Region at a monthly rental rate of $15,554.  The Company also
leases  office  space in New York City,  Central  and Western New Jersey and the
Greater  Chicago area to serve as the branch  offices of its  operations.  These
leases expire on different dates from May 2000 to June 2001.

         Prior to the Merger,  the  Company's  primary  operating  facility  and
corporate  headquarters was located in Great Neck, NY. As a result of the Merger
the Company's  corporate  offices moved from these  facilties to its McLean,  VA
headquarters.  The Company settled the remaining obligation under the Great Neck
office lease in March 1997 for approximately $320,000.

         The  Company  believes  that the space in its  existing  corporate  and
branch facilities  should be adequate for the foreseeable  future to support the
growth of its existing  operations in the geographic areas in which it currently
operates.  The  Company  expects to expand its  operations  into new  geographic
regions  in the  future  and will need to lease  additional  branch  offices  to
support operations in those regions.

ITEM 3.  LEGAL PROCEEDINGS

         From  time  to  time,   disagreements  with  individual  employees  and
disagreements  as to the  interpretation,  effect or  nature  of the  individual
agreements  arise in the  ordinary  course of  business  and may result in legal
proceedings being commenced against the Company.  On December 31, 1996, ACS (UK)
LTD.,  a software  distributor  based in the United  Kingdom,  filed a complaint
against Technology  Development Systems,  Inc., a wholly owned subsidiary of the
Company ("TDS"),  in the Circuit Court of Cook County,  Illinois.  The plaintiff
alleges  that TDS  breached  its  obligations  under the  Distributor  Agreement
between  the  plaintiff  and TDS for the  WorldLink  product  when  TDS sold the
WorldLink  technology  to a  third  party.  The  plaintiff  is  demanding  a sum
exceeding  one  million  dollars for the breach of  contract.  In the opinion of
management and the Company's  legal counsel,  the lawsuit has little merit,  and
the outcome of the pending litigation will not have a material adverse effect on
the  Company's  financial  condition,  liquidity or results of  operations.  The
Company intends to vigorously defend against the lawsuit.

         The Company is not currently  involved in any litigation or proceedings
which if decided  against  the  Company  would have a material  adverse  affect,
either  individually  or in the  aggregate,  and,  except  as set  forth  in the
preceding  paragraph to the  Company's  knowledge,  no other legal  proceedings,
which, if decided  against the Company would have a material  adverse affect are
currently contemplated by any individuals, entities or governmental authorities.

         The  principal  risks that the Company  insures  against  are  workers'
compensation, personal injury, property damage, professional malpractice, errors
and omissions,  and fidelity  losses.  The Company  maintains  insurance in such
amounts and with such  coverages  and  deductibles  as  management  believes are
reasonable and prudent.

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

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

                                      -9-

<PAGE>
                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The  Common  Stock  of the  Company  is  traded  on the OTC  Electronic
Bulletin board and on the Boston Stock  Exchange.  Effective June 7, 1996,  upon
completion of the merger with Netplex, the Company was de-listed from NASDAQ.

         The Company filed an  application  for  re-listing on October 21, 1996.
This  application  was still being  reviewed by NASDAQ as of March 21, 1997. The
Company believes that it meets the  requirements for re-listing,  although there
can be no assurances that the Company's application will be approved by NASDAQ.

The  quotations  set forth in the table  reflect  inter-dealer  prices,  without
retail  mark-up,  mark-down or  commission,  and may not  necessarily  represent
actual transactions:

                          Fiscal 1995       High            Low
                          -----------       ----            ---
1st Quarter..............................   $4.63          $1.75
2nd Quarter..............................   $4.23          $1.88
3rd Quarter..............................   $4.00          $2.00
4th Quarter..............................   $3.38          $2.06


                          Fiscal 1996
                          -----------
1st Quarter..............................   $3.50          $2.38
2nd Quarter (OTC Electronic Bulletin Board
              commencing June 7,1996).      $3.38          $2.77
3rd Quarter.............................    $3.38          $2.31
4th Quarter.............................    $4.00          $3.25

         (b) The Company has not paid any cash dividends on its Common Stock and
does not intend to pay cash  dividends on its Common  Stock for the  foreseeable
future. The Company intends to retain future earnings, if any, to finance future
development.

         (c) As of March 21, 1997, there were approximately 85 holders of record
of the Company's Common Stock. The Company believes that at such date there were
in excess of 500 beneficial owners of the Company's Common Stock.


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

OVERVIEW

         On June 7, 1996,  the Company  (formerly  known as "CompLink,  Ltd." or
"CompLink")  acquired and merged(the  "Merger") with America's Work Exchange and
The Netplex  Group,  Inc.  (collectively  referred to as "Netplex") in a reverse
merger transaction by issuing approximately 3,245,000 shares of Common Stock, or
50.4% of the Company's then outstanding Common Stock after giving effect for the
Merger.  The merger  agreement also provided for the Company to assume 1,691,000
outstanding Common Stock options of Netplex. As a result,  Netplex is considered
the acquirer for accounting purposes.

         The assets and liabilities of CompLink and its wholly owned subsidiary,
he  Technology  Development  Systems  (TDS) were  recorded by the Company on the
merger date at book value which approximates fair value.

                                      -10-
<PAGE>
         On December 31, 1996, the Company completed the sale of its interest in
WorldLink to  Xcellenet,  Inc. for an  aggregate  sale price of $3 million.  The
Company's gain on the disposal of this business  segment of  approximately  $1.8
million  and the net loss from this  segment's  operations  from the merger date
(June  1,  1996  for  accounting  purposes)  through  the  date of  disposal  of
approximately  $1.3  million was  reported  as  discontinued  operations  in the
Company's statement of operations.

         As  of  December  31,  1996,  all  of  the  Company's   operations  are
concentrated in the Networked  Computer Systems and Services  business  segment.
The statement of operations  for the year ended  December 31, 1996 reflect those
of Netplex for the full year and those of CompLink  commencing  on June 1, 1996.
The operations of TDS,  commencing on June 1, 1996 are reported as  discontinued
operations. The December 31, 1995 balance sheet and the statements of operations
and of cash flows for the year ended  December  31, 1995  reflect the  financial
position, the results of operations and cash flows of Netplex.

         On  September  19, 1996,  in order to fund the new entity,  the Company
raised approximately $3 million through the 1996 Private Placement(See "Business
- General").

RESULTS OF CONTINUING OPERATIONS

FISCAL YEAR ENDED DECEMBER 31,1996 COMPARED
TO FISCAL YEAR ENDED DECEMBER 31, 1995.

         The Company,  after the  disposition  of the software  development  and
distribution segment, operates in a single business segment,  Networked Computer
Systems and Services.  However,  to aid in the  discussion of the results of the
Company's  operations,  this segment is subdivided into three service  offerings
(as  described  in  the  "Business").   These  service   offerings  consist  of:
Information  Systems  Solutions("ISS");Technical  Staffing  Services("TSS")  and
Independent Employee Services("IES").

         Revenues   for  the  year  ended   December  31  ,1996   increased   to
approximately  $33.5  million as compared to $6.1 million for the same period in
1995, an increase of $27.4 million.  This increase is primarily  attributable to
the  inclusion  of  a  full  year  of  operations  of  a  subsidiary  (the  "IES
Subsidiary"),  acquired by AWE in December 1995, that provides the Company's IES
services.  This  subsidiary  accounted for  approximately  $26.4 million of this
increase.  The  remaining  increase  of  $945,OOO  includes  an increase of $1.5
million  in TSS  project  revenues  and is offset by a decrease  in ISS  project
revenues of $550,000.

         Gross  Profit  for the  year  ended  December  31,  1996  decreased  by
approximately $100,000 to approximately $2.6 million as compared to $2.7 million
for the same period of 1995.  This  decrease is primarily  due a decrease in ISS
gross profit of $1.8 million resulting from the combined effects of a decline in
ISS  revenues  ($550,000  as  discussed  above)  and  a  $1.2  million  decrease
attributable  to the sale of services which  generated  lower gross profits than
those in the prior year.  The majority of this  decrease was offset by increases
in gross profit of approximately $1.7 million, that includes an increase of $1.1
million from the inclusion of a full year of  operations  of the IES  Subsidiary
and an increase in gross profit of  approximately  $600,000  stemming  primarily
from the increase in TSS sales.

         Gross margins  decreased to 8% for the year ended  December 31, 1996 as
compared to 44% for the same period of 1995.  This  decrease is due primarily to
(i) the inclusion of a full year of operations of the IES  Subsidiary  which are
performed at lower gross margins than the other service offerings of the

                                      -11-
<PAGE>

Company and (ii) an erosion of the ISS margin(as discussed above).

         Selling,  general  and  administrative  expenses  for  the  year  ended
December 31, 1996 increased by  approximately  $2.4 million to $5.2 million from
$2.8 million for the comparable 1995 period. This increase includes $1.1 million
in selling, general and administrative costs from the inclusion of the full year
of operations of the IES Subsidiary, a $850,000 net increase in costs of AWE and
Netplex  comprised  primarily of  significant  increases in sales and recruiting
headcount  during  1996  for TSS and a  $525,000  increase  resulting  from  the
inclusion of the post merger CompLink selling, general and administrative cost.

         Operating  losses for the year ended  December  31, 1996  increased  by
approximately  $2.5  million to $2.6  million  from  $56,000  for the year ended
December 31, 1995.  This  increase in operating  losses is due  primarily to the
aforementioned increases in selling, general and administrative expenses.

         Other income(expense) for the year ended December 31, 1996 increased by
approximately $55,000 to $38,000 in other income from ($17,000) of other expense
in the comparable 1995 period. This increase is primarily due to interest income
received from investments of excess cash balances in money market accounts.

         The  Company  had an income tax  benefit of $34,000  for the year ended
December  31,  1996  compared  to a income  tax  provision  of  $12,000  for the
comparable 1995 period.  The 1996 income tax benefit was generated from a change
in the Company's deferred tax asset valuation allowance.

         Income from discontinued  operations of approximately $488,000 resulted
from the Company's  discontinuance of its software  development and distribution
business.  This  income  includes a gain from the  disposal  of the  business of
approximately  $1.8  million  which  resulted  primarily  from  the  sale of the
WorldLink   product   technology  to  XcelleNet,   Inc.   offset  by  losses  of
approximately $1.3 million from the operations of this business from the date of
its  acquisition  in the  merger  with  CompLink  (June 1,  1996 for  accounting
purposes) through the disposal date.

LIQUIDITY AND CAPITAL RESOURCES

         In 1996, the Company experienced  improved  liquidity,  particularly in
the third and fourth quarters.  The improvement in liquidity  resulted primarily
from  the  completion  of  several  transactions  including,  the  1996  Private
Placement  which  generated  net proceeds of  approximately  $3.0  million;  the
completion  of the  sale of  WorldLink  which  generated  proceeds  net of costs
related to the sale and disposal of the business of approximately  $2.5 million,
and the Merger of the Company with  CompLink,  Ltd. and its  Subsidiary in which
the Company received approximately $1.2 million in cash.

         The improvement in liquidity from the above  transactions was partially
offset by the use of $3.1  million  in  operating  activities.  This use of cash
includes the Company's net loss for 1996 of  approximately  $2.0 million and the
net  effect of  increased  accounts  payable  and  accrued  expenses,  increased
depreciation  expense  and  increased  accounts  receivable  stemming  from  the
combined  effects of increased  business  volume,  the Company's  acquisition of
CompLink and Subsidiary, as well as the inclusion of the full year of operations
of the IES  Subsidiary.  The  Company  also  used  cash in  1996  to  repay  the
outstanding  balance  under its line of credit with a bank,  repay certain loans
and to purchase property and equipment.

                                      -12-
<PAGE>
         The Company  maintains a line of credit facility with a bank. Under the
terms of this line of credit  facility,  the Company may borrow up to the lesser
of $750,000 or 75% of eligible  accounts  receivable.  The line of credit  bears
interest at the bank's prime rate plus 1%. This line of credit facility  expires
in June 1997.  This line of credit is  personally  guaranteed  by the  Company's
Chief Executive Officer.  Management believes that it will be able to renew this
line of credit upon its expiration.

         At December 31, 1996 Company had approximately $3.7 million in cash and
no outstanding balance on its $750,000 line of credit facility with a bank.

         The Company is  expecting to incur  operating  losses until it achieves
full productivity of the majority of its sales force. While it cannot be certain
as to when such levels of productivity can be attained,  the Company anticipates
that its sales force will operate at levels below full  productivity  through at
least the first half of 1997.  The Company  will  continue  to make  significant
investments in marketing,  training and infrastructure to increase productivity,
build its core  competency  practice  unit skill base and product  offerings and
foster growth of its operations.  Despite the expectation of continued operating
losses,  management  believes that its current cash balance and credit  facility
will be sufficient to meet operating  requirements  for at least the next twelve
months.

INFLATION

         The Company  does not expect  inflation to have a  significant  adverse
impact on its operations.

FORWARD-LOOKING STATEMENTS

         This Form 10-KSB contains certain forward-looking statements within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities  and Exchange Act of 1934, as amended,  which are intended
to be covered by the safe harbors created thereby.  Investors are cautioned that
all  forward-looking  statements involve risks and uncertainty,  (including with
out limitation,  the growth of the Company, future financings,  acquisitions and
expenses and general market conditions).  A1though the Company believes that the
assumptions  underlying  the  forward-looking  statements  contained  herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this Form 10-KSB
will prove  accurate.  In light of the  significant  uncertainties  inherent  in
forward-looking  statements  included herein,  the inclusion of such information
should not be regarded as a  representation  by the Company or any other  person
that the objectives and plans of the Company will be achieved.

ITEM 7.     FINANCIAL STATEMENTS

         See Consolidated  Financial Statements listed in the accompanying index
to Consolidated Financial Statements on Page F-1 herein.

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

            Not applicable.

                                      -13-
<PAGE>

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

            The  information  required  by this  item  will be  filed  with  the
Securities and Exchange Commission not later than 120 days after the fiscal year
covered by this form.

ITEM 10.    EXECUTIVE COMPENSATION

            The  information  required  by this  item  will be  filed  with  the
Securities and Exchange Commission not later than 120 days after the fiscal year
covered by this form.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The  information  required  by this  item  will be  filed  with  the
Securities and Exchange Commission not later than 120 days after the fiscal year
covered by this form.


ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            The  information  required  by this  item  will be  filed  with  the
Securities and Exchange Commission not later than 120 days after the fiscal year
covered by this form.

                                      -14-

<PAGE>
Item 13.    Exhibits and Reports on Form 8-K.

(a)  EXHIBIT
     NO.

          2.1       Agreement and Plan of Reorganization  and Merger dated as of
                    November 20,  1995,  by and among The Netplex  Group,  Inc.,
                    America's  Work  Exchange,  Inc. and the  Company.** 3.1 The
                    Company's    Amended    and    Restated    Certificate    of
                    Incorporation.***
          3.2       The Company's By-laws.***
          3.3       Amendment to the Company's Amended and Restated  Certificate
                    of Incorporation.*
          4.1       Form of Common Stock Certificate.***
          4.5       Form of Warrant issued to investors in connection  with 1992
                    bridge financing.***
          4.6       Form of Unit Purchase  Option granted to the  Underwriter of
                    the Company's initial public offering.***
          4.7       Form of  Purchase  Option  granted  to  Placement  Agent  in
                    connection with the 1996 Private Placement.****
          4.8       Form of Warrant  issued in connection  with the 1996 Private
                    Placement.****
          4.9       Certificate of Designation for the preferred stock.****
         10.5       1992 Incentive and Non-Qualified Stock Option Plan.**
         10.6       Amendment to 1992 Incentive and  Non-Qualified  Stock Option
                    Plan.*
         10.9       Form of  Indemnification  Agreement between the Officers and
                    Directors of the Company and the Company.**
         10.10      1995 Directors' Stock Option Plan.*****
         10.11      1995 Consultant's Stock Option Plan.*****
         10.12      Employment Agreement between the Company and Gene Zaino.*
          23        Consent of the KMPG Peat Marwick LLP.*
          27        Financial Data Schedule.*

(b)      The  Company  filed one  report on Form 8-K during  the  quarter  ended
         December 31, 1996 under Item 2. Acquisition or Disposition of Assets.

----------------------

*           Filed Herewith.
**          Incorporated  by reference to the Company's  Current Report on Form
            8- K,  filed  with the  Securities  and  Exchange  Commission  (the
            "Commission") on June 7, 1996, as amended.
***         Incorporated by reference to the Company's Registration Statement on
            Form SB-2, filed with the Commission on January 29, 1993 (Commission
            File No. 33-57546), as amended.
****        Incorporated by reference to the Company's Registration Statement on
            Form S-3, filed with the Commission on November 18, 1996, as amended
            (Commission File No. 333-16423).
*****       Incorporated by reference to the Company's Registration Statement on
            Form  S-8,   filed  with  the   Commission  on  December  31,  1996,
            (Commission File No. 333-19115).

                                      -15-
<PAGE>

                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned,  thereunto duly  authorized in the City of McLean,  Commonwealth of
Virginia on the 27th day of March, 1997.

                             The Netplex Group, Inc.


                             By: /s/ Gene Zaino
                                 --------------
                                     Gene Zaino
                                     Chairman, President and C.E.O.

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant  and in the capacities on
the dates indicated.

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

  /s/ Gene Zaino                   Chairman, President         March 27, 1997
-----------------------------      and Chief Executive
      Gene Zaino                   Officer, [Principal
                                   Executive Officer]

  /s/ Matthew G. Jones             Chief Financial Officer
-----------------------------      and Treasurer [Principal
                                   Accounting Officer]         March 27, 1997


  /s/ Neil Luden                   Vice President & Director   March  27 ,1997
------------------------------
      Neil Luden

  /s/ Richard Goldstein            Director                    March  27  ,1997
------------------------------
      Richard Goldstein

 /s/  Howard Landis                Director                    March  27  ,1997
------------------------------
     Howard Landis

 /s/  Deborah Schondorf-Novick     Director                    March   , 1997
------------------------------
      Deborah Schondorf-Novick
<PAGE>
Item 7. Consolidated Financial Statements

                    THE NETPLEX GROUP, INC. AND SUBSIDIARIES
                   Index to Consolidated Financial Statements




                                                                            Page
                                                                            ----

Independent Auditors' Report......................................          F-2


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


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


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


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



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

<PAGE>



                          Independent Auditors' Report

Board of Directors
and Stockholders of:
The Netplex Group, Inc. :

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

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

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


                                                /s/ KPMG Peat Marwick  LLP
                                                --------------------------
                                                    KPMG Peat Marwick  LLP

McLean, Virginia
March  21, 1997

                                      F-2
<PAGE>

                    THE NETPLEX GROUP, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                           December 31, 1996 and 1995

<TABLE>
<CAPTION>

                          Assets
                                                                               1996                   1995
                                                                        ---------------         ----------------
 Current assets:
<S>                                                                     <C>                     <C>
    Cash and cash equivalents                                           $    3,691,099          $       840,711
    Accounts receivable, net of allowance for doubtful
       accounts of $177,477 and $46,000, respectively                        4,304,662                3,299,308
    Prepaid expenses and other current assets                                  350,074                   78,250
                                                                        ---------------         ----------------
        Total current assets                                                 8,345,835                4,218,269

 Property and equipment, net                                                 1,090,617                  206,405
 Other assets                                                                   78,988                   22,334
 Excess cost over fair value of net assets acquired, net                       373,180                  399,838
                                                                        ---------------         ----------------

       Total assets                                                     $    9,888,620           $    4,846,846
                                                                        ===============         ================

                      Liabilities and Stockholders' Equity

 Current liabilities:
    Accounts payable                                                           936,865          $       628,321
    Accrued expenses                                                         5,166,184                2,850,928
    Deferred revenue                                                           329,267                  399,437
    Obligation under capital lease, current installments                       106,347                      -
    Due to affiliates                                                              -                    250,000
    Notes payable                                                                  -                    100,000
    Loan payable                                                                   -                     59,870
    Deferred income taxes                                                          -                     34,000
                                                                        ---------------         ----------------
       Total current liabilities                                             6,538,663                4,322,556

 Obligation under capital lease, net of current installments                   110,669                      -
                                                                        ---------------         ----------------

       Total liabilities                                                     6,649,332                4,322,556
                                                                        --------------          ---------------

 Stockholders' equity:
    Class A cumulative convertible preferred stock, $.01 par
       value;  liquidation preference of the greater of: (i)
       two times the  stated  value of $2 per share plus all
       accrued and unpaid dividends, or (ii) the amount that
       would  have  been   received   if  such  shares  were
       converted   to  common  stock  on  the  business  day
       immediately  prior  to  the  liquidation;   2,000,000
       shares authorized; 1,750,000
       shares issued and outstanding in 1996                                    17,500                      -
    Common stock, $.001and $.01 par value for 1996 and 1995,
       respectively, 20,000,000 authorized: 6,442,903 and 3,197,608
       shares issued and outstanding in 1996 and 1995, respectively              6,443                   31,976
    Additional paid in capital                                               5,301,542                  579,124
    Accumulated deficit                                                     (2,086,197)                 (86,810)
                                                                        ---------------         ----------------

       Commitments and contingencies

       Total stockholders' equity                                            3,239,288                  524,290
                                                                        --------------          ---------------

       Total liabilities and stockholders' equity                       $    9,888,620           $    4,846,846
                                                                        ===============         ================
</TABLE>


         See accompanying notes to the consolidated financial statements

                                      F-3
<PAGE>
                     THE NETPLEX GROUP, INC AND SUBSIDIARIES
                      Consolidated Statements of Operations
                     Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>


                                                                   1996                 1995
                                                                   ----                 ----

<S>                                                           <C>                  <C>
Revenues                                                      $ 33,524,679         $   6,139,319

Cost of revenues                                                30,878,166             3,416,045
                                                              -------------        --------------

   Gross profit                                                  2,646,513             2,723,274

Operating expenses
   Selling, general and administrative expenses                  5,205,906             2,778,967
                                                              -------------        --------------

Operating loss                                                  (2,559,393)              (55,693)

Other income/(expenses)
   Interest income/(expense), net                                   33,119               (17,096)
   Other income                                                      4,808                      -
                                                              -------------        --------------
                                                                    37,927               (17,096)
Loss from continuing operations
   before income taxes                                          (2,521,466)              (72,789)

Income tax (benefit) provision                                     (34,000)               12,000
                                                              -------------        --------------

   Loss from continuing operations                              (2,487,466)              (84,789)

Discontinued operations:
   Loss from operations of discontinued segment                 (1,332,050)                     -
   Net gain from disposal                                        1,820,129                      -
                                                              -------------        --------------

   Income from discontinued operations                             488,079                      -

   Net loss                                                   $ (1,999,387)        $     (84,789)
                                                              =============        ==============


Earnings(loss) per common share:
   Continuing operations                                      $      (0.51)        $        (0.03)
   Discontinued operations                                    $       0.09         $            -
                                                              -------------        --------------

      Total                                                   $      (0.42)        $        (0.03)
                                                              =============        ==============
</TABLE>


         See accompanying notes to the consolidated financial statements

                                      F-4
<PAGE>

                    The Netplex Group, Inc. and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
                     Years ended December 31, 1996 and 1995

<TABLE>
<CAPTION>
                                                              Class A cumulative,
                                                          convertible preferred stock                     Common stock
                                                          -----------------------------------  -----------------------------------
                                                          Shares                   $                Shares               $
                                                          --------------  -------------------  ----------------- -----------------
<S>                                                           <C>          <C>                        <C>             <C>
 Balance at December 31, 1994                                         -    $               -          2,769,037       $    27,690

    Net loss for the year ended December 31, 1995

    Merger with SRNJ                                                                                    428,571             4,286
                                                          --------------  -------------------  ----------------- -----------------

 Balance at December 31, 1995                                         -    $               -          3,197,608       $    31,976

    Reduction in par value resulting from the
       merger of the Company with Netplex
       from $0.01 per share to $0.001 per share                                                                           (28,778)

    Issuance of shares in the merger of
       the Company with Netplex                                                                       3,245,295             3,245

    Private placement of Class A cumulative, convertible
        preferred stock                                       1,750,000               17,500

    Net loss for the year ended December 31, 1996

    Declaration of dividend on Class A cumulative,
       convertible preferred stock
                                                          --------------  -------------------  ----------------- -----------------

 Balance at  December 31, 1996                                1,750,000      $        17,500          6,442,903      $      6,443
                                                          ==============  ===================  ================= =================
</TABLE>

         See accompanying notes to the consolidated financial statements

<TABLE>
<CAPTION>
                                                            Additonal
                                                             paid in           Accumulated
                                                             capital               deficit              Total
                                                            -------------- --------------------  -----------------
<S>                                                          <C>               <C>                    <C>
 Balance at December 31, 1994                                $    298,410      $        (2,021)       $   324,079

    Net loss for the year ended December 31, 1995                                      (84,789)           (84,789)

    Merger with SRNJ                                              280,714                                 285,000
                                                            -------------- --------------------  -----------------

 Balance at December 31, 1995                                $    579,124       $      (86,810)       $   524,290

    Reduction in par value resulting from the
       merger of the Company with Netplex
       from $0.01 per share to $0.001 per share                    28,778                                       -

    Issuance of shares in the merger of
       the Company with Netplex                                 1,767,488                               1,770,733

    Private placement of Class A cumulative, convertible
        preferred stock                                         3,024,346                               3,041,846

    Net loss for the year ended December 31, 1996                                   (1,999,387)        (1,999,387)

    Declaration of dividend on Class A cumulative,
       convertible preferred stock                                (98,194)                                (98,194)
                                                            -------------- --------------------  -----------------
                                                                                                                 -
 Balance at  December 31, 1996                                $ 5,301,542         $ (2,086,197)        $3,239,288
                                                            ============== ====================  =================
</TABLE>

         See accompanying notes to the consolidated financial statements

                                      F-5
<PAGE>
                    The Netplex Group, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                     Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>


                                                                             1996                   1995
                                                                       -------------           ------------
Operating activities:
<S>                                                                    <C>                     <C>
   Net loss                                                            $ (1,999,387)           $   (84,789)
   Adjusments to reconcile net loss to net cash
   used in operating activities:
      Depreciation and amortization                                         587,902                 19,058
      Gain on sale of WorldLink product technology                       (1,820,129)                     -
      Compensation expense associated with stock awards                            -                 4,000
      Deferred income taxes                                                 (34,000)                12,000
      Changes in assets  and  liabilities,  net of  effects of
         acquisition:
         Accounts receivable                                               (789,955)              (774,680)
         Prepaid expenses and other current assets                         (117,496)                51,621
         Other assets                                                        (9,404)               (14,095)
         Accounts payable and accrued expenses                            1,190,669                164,039
         Deferred revenue                                                  (131,643)               325,335
                                                                       -------------           ------------

            Net cash used in operating activities                        (3,123,443)              (297,511)
                                                                       -------------           ------------

Investing activities:
   Capital expenditures                                                    (631,983)              (115,692)
   Net proceeds from the sale of WorldLink product technology             2,492,795                      -
   Cash acquired in acquisition                                           1,245,062                690,935
                                                                       -------------           ------------

            Net cash provided by investing activities                     3,105,874                575,243
                                                                       -------------           ------------

Financing activities:
   Proceeds from private placement                                        3,041,846                      -
   Line of credit advances                                                  650,000                475,000
   Line of credit repayments                                               (650,000)              (375,000)
   Payments of obligation under capital lease                               (14,019)                     -
   (Repayment) Proceeds from note payable                                  (100,000)               250,000
   Repayments of loan payable                                               (59,870)                     -
                                                                       -------------           ------------

            Net cash provided by financing activities                     2,867,957                350,000
                                                                       -------------           ------------

            Increase in cash and equivalents                              2,850,388                627,732

Cash and cash equivalents at beginning of period                            840,711                212,979
                                                                       -------------           ------------

Cash and cash equivalents at end of period                             $  3,691,099             $  840,711
                                                                       =============           ============

Supplemental Information:

Cash paid (received) during the period for:
      Interest                                                         $     24,247            $    18,080
                                                                       =============           ============
      Income taxes                                                     $     12,985            $   (13,025)
                                                                       =============           ============
</TABLE>

         See accompanying notes to the consolidated financial statements

                                      F-6
<PAGE>
                    THE NETPLEX GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                           December 31, 1996 and 1995


(1)   The Business and Basis of  Presentation:

      THE BUSINESS:
      The Netplex  Group,  Inc.  ("the  Company")  was  incorporated  in 1986 to
      provide  professional  technical  services  primarily to large  commercial
      organizations.  The Company  builds,  manages and protects large networked
      systems,   with  service   offerings   including   information   security,
      contingency planning, mobile communication technology, network and systems
      management and temporary technical staffing services.

      BASIS OF PRESENTATION:

      MERGER WITH NETPLEX:
      On June 7,  1996,  the  Company  (formerly  known as  "CompLink,  Ltd." or
      "CompLink")  acquired  and merged with  America's  Work  Exchange  and The
      Netplex Group, Inc.  (collectively  referred to as "Netplex") in a reverse
      merger  transaction by issuing  approximately  3,245,000  shares of common
      stock,  or 50.4 % of the Company's  outstanding  stock after giving effect
      for the merger.  The merger  agreement  also  provided  for the Company to
      assume 1,691,000 outstanding common stock options of Netplex.

      The  mergers  have  been  accounted  for  under  the  purchase  method  of
      accounting as a reverse merger,  since the shareholders of Netplex,  which
      have  common  control,  received  the larger of the  voting  rights of the
      combined  entity.  As a result,  Netplex is  considered  the  acquirer for
      accounting purposes.

      The mergers resulted in a re-capitalization of the acquirers,  so that the
      resulting  capitalization  of the  Company  after  the  merger  is that of
      CompLink's  giving effect to the issuance of new shares and elimination of
      CompLink's  accumulated  deficit.  In  addition,  the  par  value  of  the
      Company's  common stock was  decreased  from $0.01 per share to $0.001 per
      share in  connection  with the  merger.  The  assets  and  liabilities  of
      CompLink  were  recorded by the  Company at book value which  approximates
      fair value.  The total assets and  liabilities  of CompLink at merger date
      amounted to approximately $2,524,000 and $753,000, respectively.

      The statement of operations  for the year ended  December 31, 1996 reflect
      those of Netplex for the year and those of CompLink  and its  wholly-owned
      subsidiary, TDS, commencing on June 1, 1996. The merger has been accounted
      for assuming that it occurred on May 31, 1996.  The  operating  results of
      CompLink  and TDS from June 1, 1996 up to June 7, 1996 (the  merger  date)
      have  been  included  in the  Company's  1996  consolidated  statement  of
      operations,  as such  amounts  are not  material.  The  December  31, 1995
      balance sheet and the  statements of operations  and of cash flows for the
      year ended December 31, 1995 reflect the financial  position,  the results
      of operations and cash flows of Netplex.

      Coincident  with the mergers the Company's name was changed from CompLink,
      Ltd. to The Netplex Group, Inc. and the entity known as the Netplex Group,
      Inc.  prior to the merger  changed its name to Netplex  Systems,  Inc. The
      Company's  fiscal year end was changed  from July 31 to December  31. Upon
      completion of the merger , the Company consists of Netplex Systems,  Inc.;
      America's Work Exchange ("AWE") and its wholly- owned subsidiary, Software
      Resources of New Jersey ("SRNJ");  and The Netplex Group,  Inc.  (formerly
      known  as  CompLink  Ltd.)  and its  wholly-owned  subsidiary,  Technology
      Development Systems ("TDS").

                                      F-7

<PAGE>

      ACQUISITION OF  SRNJ:
      On December 28, 1995,  America's  Work  Exchange  purchased all of the net
      assets of SRNJ in exchange for 2,262,500  shares of its common stock.  The
      fair value of the common  stock of $285,000  was  determined  based on the
      price per share  received for the most recent sale of Netplex  stock in an
      arm's length transaction.  The acquisition was accounted for as a purchase
      whereby the acquisition costs were allocated to the underlying assets. The
      total  assets and  liabilities  of SRNJ at  acquisition  date  amounted to
      approximately  $2,771,000 and  $2,886,000.  The  acquisition was deemed to
      close  on  December  31,  1995 for  accounting  purposes,  therefore,  the
      operating  results of the Company for the year ended  December 31, 1995 do
      not reflect the operations of SRNJ. The  acquisition  resulted in costs in
      excess of the fair value of the net assets acquired of $399,838.

      The following  unaudited  pro forma  results of operations  present on the
      purchase basis of accounting  the  consolidated  operating  results of the
      Company from  continuing  operations for the years ended December 31, 1996
      and 1995 as if the  mergers  with  CompLink  and SRNJ had  taken  place on
      January 1, 1995 and reflect the  historical  results of  operations of the
      purchased  businesses  adjusted for goodwill  amortization  and  increased
      common shares  outstanding  from the merger.  The pro forma results do not
      include the operations of the discontinued business segment (see note 3).

                                                                  Unaudited
                                                       Years Ended
                                                      December 31,
                                          --------------------------------------
                                               1996             1995
                                          --------------------------------------
                                          (in thousands except per share data)

   Revenues                                  $33,995          $27,318
                                             ========         ========

   Net loss from continuing operations       ($2,652)         ($3,407)
                                             ========         ========

   Net loss per share
     from continuing operations               ($0.41)          ($0.52)
                                             ========         ========

   Weighted average common
     shares outstanding                        6,443            6,443
                                             ========         ========

      The pro forma results of operations are not necessarily  indicative of the
      actual  results of  operations  that would have  occurred had the purchase
      been made at the  beginning of the period,  or the results which may occur
      in the future.

(2)   SUMMARY OF  SIGNIFICANT ACCOUNTING POLICIES:

      BUSINESS SEGMENTS:
      The  Company's  sole  business  segment at December 31, 1996 was networked
      computer services. Prior to December 31, 1996 the Company also operated in
      the software development and distribution business. Upon completion of the
      sale of the WorldLink product technology, the Company ceased operations in
      this business segment (note 3).

      PRINCIPLES OF CONSOLIDATION:
      The accompanying  financial  statements  include the accounts of America's
      Work Exchange and Netplex Systems, Inc. (formerly the Netplex Group, Inc.)
      prior to the  merger on June 7,  1996,  and the  accounts  of The  Netplex
      Group, Inc. (formerly  CompLink,  Ltd.) and its wholly-owned  subsidiaries
      Netplex Systems,  Inc. (formerly the Netplex Group, Inc.),  America's Work
      Exchange,  Software  Resources of New Jersey,  and Technology  Development

                                      F-8
<PAGE>

      Systems,  subsequent to the merger. All significant  intercompany balances
      and transactions have been eliminated.

      REVENUE RECOGNITION:
      The  majority  of the  Company's  revenues  are from  time  and  materials
      contracts.  These revenues are recognized  when the services are performed
      and the costs are incurred.  Revenues related to fixed price contracts are
      recognized on a percentage of completion  basis.  Revenues for maintenance
      contracts are recognized ratably over the service period of the underlying
      contract.  Deferred revenue represents the unearned portion of maintenance
      contracts  and  amounts  billed in  advance  of  customer  acceptance,  in
      accordance  with the  terms of the  contract.  The  Company  records  loss
      provisions  for its contracts,  if required,  at the time that such losses
      are identified.

      CASH AND CASH EQUIVALENTS:
      The Company  considers all highly liquid  investments with a maturity,  at
      date of  purchase,  of three months or less to be cash  equivalents.  Cash
      equivalents  at December 31, 1996 are comprised of money market  accounts,
      and at December  31, 1995 are  comprised  of money  market  accounts and a
      demand deposit and mutual fund account. Substantially all of the Company's
      cash and cash equivalents at December 31, 1996 are invested in two banks.

      PROPERTY AND EQUIPMENT:
      Property and equipment is recorded at cost.  Depreciation and amortization
      are provided for using the straight-line  method over the estimated useful
      lives of the assets which range from 3 to 7 years.  Property and equipment
      under capital  leases are stated at the present value of the minimum lease
      payments  and are  amortized  using the  shorter  of the lease term or the
      estimated  useful  life.  Expenditures  for  repairs and  maintenance  are
      charged to operations as incurred.

      Depreciation  and  amortization  expense related to property and equipment
      was $318,865 and $19,058 for the years ended December 31, 1996 and 1995.

      IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF:
      The Company  adopted the provisions of SFAS No. 121,  "Accounting  for the
      Impairment of Long-Lived  Assets and for Long-Lived  Assets to Be Disposed
      Of ", on January 1, 1996. This Statement  requires that long-lived  assets
      and certain  identifiable  intangibles be reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset may not be recoverable. Recoverability of assets to be held and used
      is measured by a comparison  of the carrying  amount of an asset to future
      net cash flows  expected to be generated by the asset.  If such assets are
      considered to be impaired,  the impairment to be recognized is measured by
      the  amount by which the  carrying  amount of the  assets  exceed the fair
      value of the assets. Assets to be disposed of are reported at the lower of
      the  carrying  amount or fair  value less cost to sell.  Adoption  of this
      Statement  did not  have a  material  impact  on the  Company's  financial
      position, results of operations, or liquidity.

      EXCESS COSTS OVER NET ASSETS ACQUIRED:
      Excess  costs over net assets  acquired  (goodwill)  resulting  from AWE's
      acquisition of SRNJ is being amortized on a straight-basis over a recovery
      period of 15 years.  The Company  assesses the  potential  impairment  and
      recovery  of goodwill on an annual  basis and more  frequently  if factors
      dictate.  Management  forecasts  are  used to  evaluate  the  recovery  of
      goodwill through determining  whether  amortization of the goodwill can be
      recovered  through  the  undiscounted   operating  cash  flow  (cash  flow
      excluding  goodwill  amortization,  non  recurring  charges  and  interest
      expense)  . If  an  impairment  of  goodwill  appears  to  have  occurred,
      impairment is measured based on projected  discounted  operating cash flow
      (excluding  goodwill  amortization,  non  recurring  charges and  interest
      expense) using a discount rate reflecting the Company's cost of funds. The
      assessment of the recoverability of goodwill will be impacted if estimated
      future  operating cash flows are not achieved.  The Company may assess the
      net  carrying  amount  of  goodwill  using  internal  and  or  independent
      valuations.

                                      F-9
<PAGE>

      Accumulated  amortization  of goodwill  related to the purchase of SRNJ at
      December 31, 1996 was $26,656 and none at December 31, 1995. In connection
      with the Company's  decision to discontinue  its software  development and
      distribution segment (note 3), the Company wrote off the remaining balance
      of the goodwill of $255,407 associated with CompLink's acquisition of TDS.

      INCOME TAXES:
      Income taxes are accounted for under the asset and liability method. Under
      this method,  deferred tax assets and  liabilities  are recognized for the
      future tax  consequences  of differences  between the financial  statement
      carrying  amounts of existing assets and liabilities and their  respective
      tax bases and operating  loss and tax credit  carryforwards.  Deferred tax
      assets and  liabilities  are measured by applying  enacted  statutory  tax
      rates,  that are  applicable to the future years in which the deferred tax
      assets or liabilities  are expected to be settled or realized.  Any change
      in tax rates on deferred tax assets and  liabilities  is recognized in net
      income in the period in which the tax rate change is enacted.

      EARNINGS (LOSS) PER SHARE:
      Earnings  (loss)  per common  share  amounts  were  computed  by  dividing
      earnings  (loss)  after  deduction  of  preferred  stock  dividends by the
      weighted  average  number  of common  shares  outstanding.  The  effect of
      average common stock equivalents (stock options and warrants)  outstanding
      has not  been  considered,  as  their  effect  on the  computation  is not
      dilutive.  Weighted  average common shares  outstanding were 5,026,306 and
      3,197,306 for the years ended December 31, 1996 and 1995, respectively.

      STOCK OPTIONS:
      Prior to January 1, 1996,  the Company  accounted  for its 1992  Incentive
      Stock Option plan ("ISO Plan") and the 1995  Director's  Stock Option plan
      (the  "Director's  Plan") in accordance with the provisions of APB Opinion
      No. 25 ("APB 25")  "Accounting  for Stock Issued to Employees" and related
      interpretations.  As such,  compensation  expense would be recorded on the
      date of grant only if the current  market  price of the  underlying  stock
      exceeded the exercise  price. On January 1, 1996, the Company adopted SFAS
      No. 123, "Accounting for Stock-Based Compensation", which permits entities
      to recognize,  as expense over the vesting  period,  the fair value of all
      stock-based awards on the grant date.  Alternatively,  SFAS No. 123 ("SFAS
      123") also allows  entities to continue to apply the  provisions of APB 25
      and  provide  pro  forma  net  income  and pro  forma  earnings  per share
      disclosures  for employee  stock option  grants made in 1995 and in future
      years  as if the  fair-value-based  method  defined  in SFAS  123 had been
      applied.  The Company has elected to continue to apply the  provisions  of
      APB Opinion 25 and provide the pro forma disclosure provisions of SFAS 123
      for the ISO and Director's Plans.

      The Company's 1995 Consultant's Plan (the " Consultant's Plan") allows for
      the  granting of options to both  employees  and  individuals  who are not
      employees of the Company.  The Company accounts for the options granted to
      non-employees based on the provisions of SFAS 123.

      USE OF ESTIMATES:

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

(3)   DISCONTINUANCE OF  BUSINESS SEGMENT:
      In  December  1996,  the Company  made the  decision  to  discontinue  its
      software development and distribution  segment,  through the sale of TDS's
      interest in its  WorldLink  product  technology  ("WorldLink").  WorldLink
      represented   the  primary  asset  offering  of  the  Company's   software
      development  and  distribution  segment.  The  operations  of the software
      development  and  distribution  segment have been treated as  discontinued
      operations in  accordance  with the  provisions  of Accounting  Principles
      Board Opinion No. 30 (APB 30). Pursuant to APB 30, the revenue,  costs and
      expenses  have

                                      F-10
<PAGE>

      been excluded from their respective captions in the Company's consolidated
      statements of operations and the net results have been reported separately
      as income from discontinued operations.

      On December 31, 1996,  the Company  completed  the sale of its interest in
      WorldLink to Xcellenet,  Inc. for an aggregate sale price of approximately
      $2.5 million,  net of expenses  paid related to the sale of  approximately
      $500,000.  The  remaining net assets of TDS were written down to their net
      realizable  values  and  consist  primarily  of  accounts  receivable  and
      furniture and equipment,  which the Company plans to use in its continuing
      operations.

(4)   PROPERTY AND EQUIPMENT:
      Property and equipment consists of the following:

                                                           December 31,
                                                    ----------------------------
                                                         1996           1995
                                                    ------------   ----------

      Computer software                             $   464,318    $  21,750
      Computer and office equipment                     460,422      190,475
      Furniture and fixtures                            212,561            -
      Equipment under capital leases                    247,100            -
      Leasehold Improvements                             46,934       16,033
                                                    ------------   ----------
                                                      1,431,335      228,258

      Accumulated depreciation and amortization
                                                      (340,718)     (21,853)
                                                    ------------   ----------

      Property and equipment, net                    $1,090,617     $206,405
                                                    ============   =========

      Computer software at December 31, 1996, includes $407,337 of software that
      was developed for internal  usage.  Such software was placed in to service
      in  January  1997  and  will  be  amortized  over  a 3 year  useful  life.
      Accumulated  depreciation includes $29,125 related to assets under capital
      leases at December 31, 1996 and none at December 31, 1995.

(5)   ACCRUED EXPENSES:
      Accrued expenses consists of the following:

                                                        December 31,
                                             -----------------------------
                                                      1996         1995
                                             ---------------   ------------

      Payroll and employee benefits          $    3,592,795    $ 2,646,141
      Costs of discontinued segment                 704,890
                                                                         -
      Merger costs                                  466,432
                                                                         -
      Other                                         402,067        204,787
                                             ---------------   ------------

                                             $    5,166,184    $ 2,850,928
                                             ===============   ============

 (6)  NOTES PAYABLE TO BANK:
      The  Company  entered  into a line of  credit  facility  with a bank  that
      expires  on July 1,  1997.  This  line of  credit  facility  provides  for
      advances  of  75% of  eligible  accounts  receivable  (as  defined  in the
      agreement)  up to $750,000.  Amounts  borrowed bear interest at the bank's
      reference  rate of prime (8.5%) plus 1% . The line of credit is personally
      guaranteed by the Company's  Chief Executive  Officer.  The Company had no
      outstanding advances on the line of credit at December 31, 1996.

                                      F-11
<PAGE>

      The Company entered into a $500,000 bank line of credit  agreement in 1995
      that expired on June 28, 1996.  This line of credit  provided for advances
      on the line of  credit  of 80% of the  eligible  accounts  receivable  (as
      defined) up to $500,000. Under this agreement, the Company was required to
      maintain  certain  levels of tangible  net worth,  among  other  financial
      covenants.  The Company  was not in  compliance  with  certain of its debt
      covenants  at December  31, 1995 and the line of credit was due on demand.
      The borrowing agreement was collateralized by the Company's assets and was
      personally  guaranteed  by two  stockholders  of the  Company.  The amount
      outstanding under the line of credit at December 31, 1995 was $100,000.

(7)   INCOME TAXES:
      The  components  of the  income  tax  expense  (benefit)  consists  of the
      following for the years ended December 31, 1996 and 1995:

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

          Deferred         $(34,000)             $12,000
                            -------           ---------

      The  reconciliation  between the actual  income tax expense and income tax
      computed by applying  the  statutory  federal  income tax rate to earnings
      before provision for income taxes for the year ended December 31, 1996 and
      1995 is as follows:

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

      Computed "expected" tax (benefit) on income
          from continuing operations                       $(857,298)  $(24,748)
      Change in valuation allowance for deferred tax
         assets allocated to income tax expense              823,298          -
      Net operating loss carryforward                              -     34,948
      Other                                                        -      1,800
                                                            --------    --------
                                                           $(34,000)    $12,000
                                                            --------     -------

<PAGE>

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

<TABLE>
<CAPTION>
                                                               1996          1995
                                                           -----------   ----------
Deferred tax assets:
<S>                                                        <C>              <C>
     Net operating loss carryforwards                      $3,000,372       $51,000
     Research and development credit carryforwards            187,186
                                                                                  -
     Excess tax basis over book of  net assets acquired       199,920
                                                                                  -
     Allowance for doubtful accounts receivable                74,540        18,000
                                                                                  -
     Accrued liabilities, not presently deductible            496,133
                                                                                  -
     Other                                                     69,804        16,000
                                                           -----------   -----------
          Total gross deferred tax assets                   4,027,955        85,000
          Less valuation allowance                         (3,995,875)      (85,000)
                                                           ------------  -----------
             Net deferred tax asset                            32,080             -
                                                           ===========   ===========

Deferred tax liabilities:
     Obligation under capital leases                         (12,852)             -
     Other                                                   (19,228)       (34,000)
                                                           ===========   ===========
          Total deferred tax liabilities                     (32,080)       (34,000)
                                                           ===========   ===========

          Net deferred tax asset (liability)               $       -       ($34,000)
                                                           ===========   ===========
</TABLE>

      The net change in the valuation allowance was an increase of $3,910,875 in
      1996 and an  increase  of  $73,000 in 1995.  The  Company  has  provided a
      valuation  allowance  for the  majority  of its  deferred  tax  assets  at
      December 31, 1996 and 1995 since the Company  could not  conclude  that it
      was  more  likely  than  not  that  it  would  realize  these  assets  due
      principally to the Company's history of losses.

<PAGE>
      As of December 31, 1996 the Company has net operating  loss carry forwards
      (NOL's) for federal  income tax purposes of  approximately  $10,400,000  .
      Additionally,  the Company has  $187,000 of research and  development  tax
      credits  available to offset future taxable  income.  The NOL's and credit
      carryforwards  expire  primarily in 2007 through  2011.  The future annual
      usage of  approximately  $9,600,000 these NOL's and credits for income tax
      purposes are subject to annual  limitations  and may not be fully utilized
      for tax  purposes  due to the  change  in  ownership  resulting  from  the
      Company's merger in 1996. In addition,  approximately  $9,600,000 of these
      NOL's and credits and may only be used to offset future  taxable income of
      the accounting acquiree.

(8)   COMMITMENTS:

      EMPLOYMENT AGREEMENTS:
      On June 7,1996, in connection with the closing of the merger, the Board of
      Directors approved three-year  employment agreements with the Chairman and
      Chief  Executive  Officer  and three  executives  of Netplex  and AWE that
      provide for aggregate base salaries ranging from $110,000 to $150,000 with
      annual  bonuses up to 60% of base salary based of the Company's  financial
      and operating  performance,  subject to Board approval.  These  agreements
      expire on June 6, 1999.

      In November 1995, the Company approved a consulting  agreement between the
      Company  and its Chief  Executive  Officer  (CEO),  Mr.  Gene  Zaino,  for
      services to be rendered to  CompLink in  connection  with the merger.  Mr.
      Zaino  received  $5,425  per  month  under  this  agreement   through  its
      termination upon the completion of the merger.

      OBLIGATIONS UNDER LEASES:
      The Company  leases  computer  equipment,  furniture,  vehicles and office
      facilities under long-term lease  agreements.  The following is a schedule
      of future minimum lease payments for capital and non cancelable  operating
      leases (with initial terms in excess of one year) as of December 31, 1996:

                                                    Capital        Operating
         Year ending December 31:                    leases           leases
                                                     ------           ------

                            1997                    $106,347      $   556,354
                            1998                      78,787          534,401
                            1999                      60,090          523,484
                            2000                           -          428,925
                         Thereafter                        -          124,364
                                                    ---------     -----------

         Total  minimum lease payments               245,224       $2,167,528
                                                                  ============

         Less: amount representing interest           28,208
                                                    ---------

         Present value of minimum lease payments    $217,016
                                                    =========

      Total rent expense was  approximately  $577,250 and $166,229 for the years
      ended December 31, 1996 and 1995, respectively.

(9)   CLASS A CUMULATIVE, CONVERTIBLE PREFERRED STOCK:
      0n September 19, 1996, the Company raised approximately $3,000,000 through
      the  completion  of a  private  placement  offering  of  units  of  equity
      securities.  Each unit of equity securities consists of one share of Class
      A cumulative,  convertible preferred stock (the "preferred stock") and one
      common stock warrant to purchase one share of the  Company's  common stock
      at an exercise price of $2.50.

      Each  share of preferred stock is convertible  into one share of common at
      any time,  at the  discretion  of the holder.  The  preferred  stock earns
      cumulative  dividends  at  10%  per  annum,  payable  in  either  cash  or
      additional shares of preferred stock at the Company's  option.  Subject to
      the conversion  rights,  the Company may redeem the preferred stock at its
      stated value plus all accrued and unpaid  dividends upon: (1) registration
      of the shares  underlying  the  preferred  stock,  and (2) 30 days written
      notice given at any time upon  attaining  certain per share trading prices
      and sustaining such prices for a specified period.

                                      F-14

<PAGE>

      The preferred stock has a per share liquidation  preference of the greater
      of: (i) two times the stated value of the preferred stock (stated value is
      $2 per share) plus any accrued  and unpaid  dividends,  or (ii) the amount
      that would have been  received  if such shares  were  converted  to common
      stock on the business day immediately prior to liquidation.

      Each warrant  issued  in  connection  with the private  placement  becomes
      exercisable  on March 19,  1997 and expires on  September  19,  2001.  The
      Company has the right to call the warrants at a  redemption  price of $.01
      per share upon: (1) registration of the shares underlying the warrant, and
      (2) 30 days written  notice given at any time upon  attaining  certain per
      share trading prices and sustaining such prices for a specified period.

      On   December  31,  1996,  the  Company  declared  a  dividend  payable of
      approximately  $0.056 per share to all holders of record of the  preferred
      stock on January 15,  1997.  Accordingly,  the Company  accrued a dividend
      payable of approximately $98,000 at December 31, 1996.

(10)  COMMON STOCK AND WARRANTS:
      Pursuant to an agreement  dated March 25,  1992,  the Company sold 100,000
      units each consisting of one share of common stock and one warrant with an
      aggregate  purchase  price of $250,000  and issued an  additional  120,000
      warrants,  with provisions  identical to those issued with the units. Each
      warrant is  exercisable  at any time through March 23, 1997,  and entitles
      the holder to purchase one share of common  stock at $3.00 per share.  All
      of these warrants are exercisable at December 31, 1996. On March 27, 1997,
      the term of 170,000 of these warrants was extended until March 27, 1998.

      In an initial public offering (IPO), effective March 10, 1993, the Company
      sold 1,150,000 units, each consisting of one share of common stock and one
      redeemable  common  stock  purchase  warrant  (Warrant)  at  an  aggregate
      purchase price of $5,750,000. Net proceeds to the Company were $4,666,367.
      Each Warrant entitled the holder to purchase,  through March 10, 1999, one
      share of common stock at $5.25 per share.  In September  1993, the Company
      called for redemption its publicly  traded  warrants  issued in connection
      with its initial  public  offering.  The Company  received net proceeds of
      $5,996,838 from the exercise of 1,143,690 common stock warrants.

      In connection with the IPO, the Company sold to the  underwriters for $100
      the right to purchase up to an aggregate of 100,000 unit purchase  options
      (Units).  The Units are  exercisable  initially  at $6.00 per Unit through
      March 1998.  The Units are identical to those  offered in the IPO,  except
      that the warrants may not be redeemed by the Company.  The Units  contains
      anti-dilution  provisions  providing for adjustments to the exercise price
      upon the occurrence of certain  events.  In connection  with the merger of
      the Company with Netplex,  the Unit exercise  price was reduced from $6.00
      to $2.40 per share from the effects of this anti-dilution  provision.  The
      exercise price of the underlying warrants remained at $5.25 per share. All
      of these units are exercisable at December 31, 1996.

      In connection with the merger of the Company with Netplex, effective April
      11, 1996, the Company provided its underwriters  with warrants to purchase
      up to 125,000 shares of the Company's common stock.  Each warrant entitles
      the holder to purchase,  through April 10, 2001, one share of common stock
      at an  exercise  price of $3.50  per  share.  All of  these  warrants  are
      exercisable  at December  31,  1996.  The fair value of these  warrants of
      approximately  $170,000 at the date of grant was  recorded in  conjunction
      with the merger and as a result,  did not have an impact on the  Company's
      equity.

      In connection with the merger of the Company with Netplex,  effective June
      7, 1996, the  shareholders of Netplex were granted warrants to purchase up
      to 150,000 shares of the Company's common stock. Each warrant entitles the
      holder to purchase,  through June 6, 2001, one share of common stock at an
      exercise price of $2.50 per share.  These warrants  became  exercisable on
      October  7,  1996.  The  fair  value of these  warrants  of  approximately
      $270,000 at the date of grant was recorded in conjunction  with the merger
      and as a result, did not have an impact on the Company's equity.

                                      F-15
<PAGE>

      In connection  with the Class A cumulative,  convertible  preferred  stock
      private  placement,  the Company provided the underwriters for the private
      placement with the option to purchase up to 87,500 units,  each consisting
      of one share of $.01 par value Class A cumulative,  convertible  preferred
      stock and one common stock purchase  warrant.  These units are exercisable
      at $2.00 per share and are  identical in all respects to the units sold in
      the private placement transaction. The 87,500 units are all exercisable at
      December 31, 1996. The common stock purchase  warrants became  exercisable
      on March 19, 1997.

(11)  STOCK OPTIONS:
      As of December 31, 1996, the Company  maintains  three stock option plans;
      the 1992 Incentive Stock Option Plan (ISO Plan), the 1995 Director's Stock
      Option Plan (Director's Plan) and the 1995 Consultant's  Stock Option Plan
      (Consultant's Plan).

      The ISO Plan includes both incentive and non-qualified stock options.  The
      Board of Directors  may grant stock options to employees to purchase up to
      3,000,000  shares of the Company's  authorized but unissued  common stock.
      Stock options are granted with an exercise price equal to the market price
      on the date of grant. All stock options expire 10 years from grant date (5
      years in the case  that the  optionee  is a holder of more than 10% of the
      voting  stock  of  the  Company).   The  options  vest  and  become  fully
      exercisable  after 3 years from the date of grant.  At December  31, 1996,
      there were 587,500 shares available for grant under this plan.

      The per share  weighted-average  fair value of the ISO Plan stock  options
      granted in 1996 and 1995 was $1.83 and $2.06,  on the grant date using the
      Black-Scholes  option-pricing  model with the following  weighted  average
      assumptions: 1996 - expected dividend yield 0.0%, expected volatility 44%,
      risk-free interest rate of 6.70%, and an expected life of 10 years; 1995 -
      expected dividend yield 0.0 %, expected volatility 44%, risk-free interest
      rate of 6.14%, and an expected life of 10 years.

      The  Director's  Plan  authorizes  the Board of  Directors  to grant  each
      director  options  to  purchase  up to  15,000  shares  of  the  Company's
      authorized  but unissued  common stock,  upon  election to the Board,  and
      award aggregate  options to purchase up to 100,000 shares of the Company's
      authorized but unissued  common stock.  The terms of option grants for the
      Director's  Plan are  identical to those of the ISO plan,  except that the
      vesting  period  for the  Director's  Plan is at the  Board's  discretion.
      Option grants under this Plan from inception to date have contained  three
      year  vesting  periods.  At  December 31 ,1996,  there were 40,000  shares
      available for grant under this Plan.

      The per share  weighted-average  fair value of the  Director's  Plan stock
      options  granted in 1996 and 1995 was $1.67 and  $2.35,  on the grant date
      using the Black-Scholes  option-pricing  model with the following weighted
      average  assumptions:  1996  -  expected  dividend  yield  0.0%,  expected
      volatility 44%,  risk-free interest rate of 6.81%, and an expected life of
      10 years;  1995 - expected dividend yield 0.0%,  expected  volatility 44%,
      risk-free interest rate of 6.48%, and an expected life of 10 years.

      The  Consultant's   Plan  authorizes  the  Board  of  Directors  to  grant
      individuals  who are not  eligible for the ISO or  Director's  Plans stock
      options to purchase up to 800,000  shares of the Company's  authorized but
      unissued common stock.  The exercise price,  terms of the option grant and
      vesting period for the Consultant's  Plan stock options are at the Board's
      discretion.  As of December 31,  1996,  the Company had granted no options
      under this Plan.

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

                                      F-16
<PAGE>

                                             1996         1995
                                          ---------      -------
                                      (in thousands except per share data)

      Net loss - As reported              ($1,999)      ($  85)
                                          =========     ========
      Net loss - Pro forma                ($3,462)       ($353)
                                          =========     ========

      Net loss per share - As reported     ($0.41)      ($0.03)
                                          =========     ========
      Net loss per share - Pro forma       ($0.71)      ($0.11)
                                          =========     ========

      Weighted average common
        shares outstanding                  5,026        3,197
                                          =========     ========

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

      Stock option  activity  for the Plans  during the periods  indicated is as
      follows:

<TABLE>
<CAPTION>
                                                                                                     Weighted - Average
                                                                     Number of shares                  Exercise Price
                                                            ------------------------------------------------------------------
                                                                  ISO            Director's         ISO          Director's
                                                                 Plan               Plan            Plan            Plan
                                                            ----------------    -------------   -------------   --------------

<S>                                                               <C>                 <C>               <C>          <C>
                 Balance at December 31, 1994                       370,000                            $5.32         $      -
                                                                                           -

                        Granted                                     464,500           30,000            2.00             3.56
                        Exercised
                                                                          -                -               -                -
                        Forfeited/Canceled                        (110,000)                             6.13
                                                                                           -                                -
                        Expired
                                                                          -                -               -                -
                                                            ----------------    -------------   -------------   --------------

                 Balance at December 31, 1995                       724,500           30,000           $3.07            $3.56

                        Assumed in Merger                         1,691,000                             2.95
                                                                                           -                                -
                        Granted                                     233,000           30,000            2.75             2.50
                        Exercised
                                                                                           -               -                -
                        Forfeited/Canceled                        (236,000)                             5.50
                                                                                           -                                -
                        Expired
                                                                                           -               -                -
                                                            ----------------    -------------   -------------   --------------

                 Balance at December 31, 1996                     2,412,500           60,000           $2.86            $3.03
                                                            ================    =============   =============   ==============
</TABLE>

      ISO PLAN OPTIONS:
      At December 31 ,1996, the range of exercise prices for the options granted
      under the ISO plan was  $2.00-$6.13  and the  weighted  average  remaining
      contractual  life of those  options was 6 years.  At December 31, 1996 and
      1995, the number of options exercisable under the ISO Plan totaled 867,167
      and 150,000,  respectively.  The weighted  average exercise price of those
      options was $3.00 and $4.13, respectively.

                                      F-17
<PAGE>

      DIRECTOR'S PLAN OPTIONS:
      At December 31,  1996,  the range of exercise  prices for options  granted
      under  the  Director's  Plan was  $2.50-  $3.56  and the  weighted-average
      remaining  contractual  life of those options was 8 years. At December 31,
      1996, the number of options  exercisable under the Director's Plan totaled
      15,000 and the weighted-average exercise price of those options was $3.56.
      No options  were  exercisable  under the  Director's  Plan at December 31,
      1995.

(12)  RELATED PARTY TRANSACTIONS:
      The  Company  contracted  with an  entity  owned by a  shareholder  of the
      Company,  for the development of a certain  software used in the Company's
      technical staffing  operations.  The Company paid the shareholder $150,000
      in 1996 and has a remaining  obligation  of $62,000  (recorded as accounts
      payable)  at  December  31,  1996,  related  to the  development  of  this
      software.

      A director  of the  Company, is a Vice President of the  underwriter  (the
      "Underwriter")  of the  private  placement  completed  by the  Company  on
      September 19, 1996 (see note 9). The Company paid the Underwriter $432,500
      for fees associated with the completion of this transaction.

      The Company paid $17,900 for  accounting,  tax and consulting  services in
      1996 to a CPA firm in which a partner  of this firm is a  director  of the
      Company since July 1996.

(13)  LITIGATION:
      The Company is subject to a number of lawsuits  and claims  arising out of
      the   conduct  of  its   business,   including   those   relating  to  the
      discontinuance  of its  software  development  and  distribution  segment.
      Management  believes that the probable resolution of such matters will not
      materially  affect the financial  position,  results of operations or cash
      flows of the Company.

(14)  EMPLOYEE BENEFIT PLANS:
      During 1996, the Company  sponsored a 401(k)  retirement plan ("the Plan")
      under  which  substantially  all  full-time  employees  were  eligible  to
      participate. The Company made no matching contributions to the Plan during
      1996.

      The Company's  subsidiary provided a profit sharing plan and a 401(k) plan
      for its  employees  during 1996.  The  subsidiary  contributed  10% of the
      employees  salary  to the  profit  sharing  plan and  matched  100% of the
      employees  voluntary  contributions  to the  401(k)  plan.  The  Company's
      contributions  to the profit  sharing  plan and to the 401(k)  plan during
      1996 were  $1,653,964  and  $628,333,  respectively.  The Company  made no
      contributions to these plans in 1995.

      On January 1, 1997, the Company's and the  subsidiary's  401(k) plans were
      merged.  Under the merged  Plan,  all full time  employees  with over 1000
      hours of  service to the  Company  or its  subsidiaries  are  eligible  to
      participate.  The  Company  matches  one-half of the  employees  voluntary
      contributions   up  to  a  maximum   Company   contribution  of  5%  of  a
      participant's salary.

      The Company does not provide any post  retirement  or any post  employment
      benefits.