<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 ---------------
                                    FORM 10-K
                                 ---------------

(MARK ONE)
[X]
                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999, OR

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

                        FOR THE TRANSITION PERIOD FROM TO

                         COMMISSION FILE NUMBER 0-21485

                    SUPERIOR CONSULTANT HOLDINGS CORPORATION
             (Exact name of registrant as specified in its charter)

             DELAWARE                                 38-3306717
 (State or other jurisdiction of         (I.R.S. Employer Identification No.)
  incorporation or organization)

4000 TOWN CENTER, SUITE 1100, SOUTHFIELD, MICHIGAN         48075
     (Address of principal executive offices)            (Zip Code)

       Registrant's telephone number, including area code: (248) 386-8300

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

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

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filings
requirements for the past 90 days. Yes [X] No [ ]

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

    The aggregate market value of voting stock held by non-affiliates of the
registrant based upon the closing sale price of the stock as reported on the
Nasdaq National Market on March 27, 2000 was $109,110,690.

    At March 27, 2000, 10,427,762 shares of the registrant's Common Stock were
outstanding.

                       DOCUMENT INCORPORATED BY REFERENCE

The registrant's definitive proxy statement for the annual meeting of
stockholders, to be held in June 2000, expected to be filed with the Commission
not later than April 21, 2000, is incorporated by reference into Part III of
this Form 10-K.
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                                     PART I

ITEM 1. BUSINESS

SUMMARY

    Superior Consultant Holdings Corporation (the "Company") is a leading
provider of Digital Business Transformation(TM) services to the healthcare
industry, connecting online technologies to business processes that have
traditionally been conducted offline. The Company provides healthcare
enterprises with comprehensive end-to-end technology solutions that incorporate
brand management, business to business (B2B) and business to consumer (B2C)
e-commerce, as well as multi-disciplinary e-health business solutions. The
Company conducts its business in three segments through its primary operating
subsidiary, Superior Consultant Company, Inc. ("Superior").

    Throughout most of 1999, Superior was organized in the three business
segments of healthcare consulting, enterprise-wide communications, and
e-commerce / systems integration. The healthcare consulting segment provides
information technology, as well as strategic and operations management
consulting and outsourcing services to a broad cross-section of healthcare
industry participants and information systems vendors. The enterprise-wide
communications segment assists companies in various industries, including
healthcare, with network and telecommunication design and acquisition,
enterprise messaging, intranet and web strategies and design, workgroup
consulting, as well as software and application development solutions. The
e-commerce / systems integration segment, established effective July 1, 1999,
has a national focus on promoting the use of the Internet and other electronic
information exchange to address the opportunities and challenges of the
healthcare industry. The e-commerce / systems integration segment assists
hospitals, payers, physician networks, Internet-based healthcare companies, and
ancillary healthcare providers in developing and implementing strategic business
objectives as they relate to e-commerce / systems integration and the efficient
use of the Internet in healthcare.

    The term "Company" as used herein refers collectively to the Company
together with its principal operating subsidiary, Superior.

    The Company serves clients across a broad cross-section of the healthcare
industry. From January 1, 1998 through December 31, 1999, the Company provided
services to over 1,100 healthcare clients on over 3,700 engagements. The Company
believes that its long-term relationships, in-depth knowledge of its clients'
needs, strategic partnerships, and its continually expanding range of service
offerings endow the Company with significant advantages over its competitors in
marketing additional services and winning new engagements. The Company's goal is
to be the preferred, if not sole, provider of a broad range of solutions for
each of its clients. Because of these assets, the Company is uniquely positioned
to help healthcare providers bridge traditional services to the new digital
environment, and capitalize on the inherent market, care delivery, and
efficiency benefits.

INDUSTRY BACKGROUND

General

    The United States healthcare industry continues to undergo rapid, profound
change. In recent years, healthcare expenditures have increased at approximately
twice the rate of inflation and are expected to exceed $1.3 trillion in 2000,
according to a Health Care Financing Administration ("HCFA") report on the
healthcare industry. The Company believes that the effects of the Balanced
Budget Act ("BBA"), the Health Insurance Portability and Accountability Act
("HIPAA"), slowed growth of Medicare payments, the aging of the U.S. population,
and the growing acceptance of the Internet spurred by the increasingly vocal
demands of consumers for quality care, will result in continued dramatic change
in the healthcare industry. With Y2K initiatives complete, health systems can
now focus on harnessing technology to adapt to these changes. The growth and
acceptance of the Internet present an important avenue for healthcare providers
to pursue solutions in the changing healthcare marketplace. Healthcare providers
today face external and internal pressures to meet the competitive demands of
the marketplace, pursue Internet-related strategic initiatives, comply with
increasing government regulations, and cope with the financial realities of
managed care. Applying Internet technology to the care process, as well as the
components of healthcare delivery, will enable organizations to reduce costs
through supply chain and clinical efficiencies, enhance communications with
patients, payers, and other constituencies, improve care, and streamline
activities such as claims processing and eligibility verification.

         Transformation to the new digital economy is necessary to combat the
cost-containment pressures from BBA, and to meet the strict privacy/standards
mandates of HIPAA and related regulations that will affect every segment of the
industry as they unfold. With all these pressures, hospitals, health systems,
and providers have to become more efficient in this new economy.


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Information Technology and E-health

    E-health solution spending is driven by healthcare providers' desire to
leverage the strategic opportunities presented by the Internet. The increased
demand for tools to collect, analyze and interpret clinical, operational and
financial information rapidly, flexibly, and in a technological framework that
supports today's diverse healthcare environment and takes advantage of the
Internet is intensifying the reliance of the healthcare industry on IT and
Internet and web-based (e-health) solutions. As a result, the healthcare
industry is rapidly increasing its spending for IT and e-health solutions.
Healthcare IT spending is being driven not only by the heightened need for
better management information systems, but also continued price-performance
improvements in hardware and software, the ability to develop increasingly
user-friendly software applications and the emergence of better application
development tools without additional capital expenditures.

    The healthcare IT environment has grown increasingly complex, costly and
burdensome as a result of the challenges of deploying new technology,
maintaining older systems, and meeting staffing requirements in a market with an
insufficient pool of qualified IT professionals. The growing emphasis on
e-health only accentuates this trend. As e-commerce opportunities arise, the
healthcare industry seeks expertise in developing and implementing e-health
strategies. At the same time, external economic factors have forced
organizations to focus on their primary competencies and trim work forces. The
Company believes that healthcare participants will continue to turn to outside
consultants, external management of internal information systems, application
support and full outsourcing arrangements with technology leaders as a means of
coping with the financial and technical demands of information systems
management and Internet integration. The Company believes this dynamic is also
occurring across other industries as organizations look to external management
and outsourcing of their information systems and Internet-related initiatives in
order to remain focused on their primary businesses, and avoid further capital
outlay.

Consulting

    The changing business environment has also produced an evolving range of
strategic and operating options for healthcare entities, many of which are
unfamiliar to an industry that had long operated under a non-aligned, third
party pay environment. In response, healthcare participants are formulating and
implementing new strategies and tactics, including developing e-commerce
abilities and setting their e-health strategy, redesigning business processes
and workflows, acquiring better technology, integrating legacy systems with the
Internet, and adopting or remodeling customer service and marketing programs.
The Company believes that healthcare participants will continue to turn to
outside consultants to assist in this vast array of processes for several
reasons: the pace of change is eclipsing their own internal resources and
capacity to identify, evaluate and implement the full range of options;
consultants enable healthcare participants to develop better solutions in
shorter time frames; and purchasing consulting expertise can be more cost
effective. By employing outside expertise, healthcare providers can often
improve their ability to compete by more rapidly deploying new processes.

    In 1999, the healthcare consulting industry was highly fragmented and
consisted primarily of: (i) larger systems integration firms and Internet
consulting firms, including the consulting divisions of the national accounting
firms, which have no particular healthcare focus or offer healthcare consulting
as one of their specialty areas; (ii) healthcare information systems vendors
that focus on services relating to the software solutions they offer; (iii)
healthcare consulting firms, many of which focus on selected specialty areas,
such as strategic planning or vendor-specific implementation; and (iv) large
general management consulting firms that do not specialize in healthcare
consulting and/or offer systems implementation. Increasingly, the competitive
advantage in healthcare consulting will be gained by those consulting firms
which (i) are able to marshal the necessary expertise and resources to offer
comprehensive skill sets to clients; (ii) have the vision, strength and
consistency to advise clients along the entire service continuum (from strategy
to selection to implementation to operation); (iii) offer the flexibility to
meet the challenges of the rapidly changing healthcare, e-commerce and IT
environment; and (iv) have the ability to recruit, retain, educate and deploy a
diverse, experienced set of personnel.

THE SUPERIOR SOLUTION

    Superior specializes in Digital Business Transformation(TM) services that
enable clients to thrive in the information-driven economy. Superior uses its
intellectual capital, in-depth institutional knowledge of healthcare delivery
systems, expertise in e-commerce and information technology, strategic
relationships with digital market leaders, and nationally deployed group of
experienced colleagues to help clients plan and execute their business
strategies. Superior offers its clients a continuum of solutions, including:
strategic and e-health planning, operations management consulting, information
systems, implementation and integration, interim management, application support
and outsourcing. For each client and engagement, Superior structures a project
team that understands the impact of the changing healthcare environment on that
particular client and can address the management, operational and technical
ramifications of change and improvement. In structuring an engagement, Superior
does not impose any preordained program on its clients. Rather, utilizing the
professional judgment derived from their years of experience, Superior's
consultants work in concert with each client to develop custom-tailored
solutions. As each client relationship evolves, Superior's professionals add
their experiences to Superior's proprietary databases to accumulate a detailed
and intimate understanding of each client and its specific needs. Superior's
nationally deployed professionals are aided by instant access, via the Company's
proprietary information and communication system, to its knowledge and

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client resource databases, and to collaboration with colleagues. This unified
team approach helps to ensure high quality, consistent and geographically
seamless client service.

    Through its e-commerce / systems integration segment, Superior has a
national focus on promoting the use of electronic information exchange to
address the opportunities and challenges of the healthcare industry. Through its
healthcare consulting segment, Superior provides information technology, as well
as strategic and operations management consulting and outsourcing services to a
broad cross-section of healthcare industry participants and information systems
vendors. Through its enterprise-wide communications segment, Superior assists
companies in various industries, including healthcare, with network and
telecommunication design and acquisition, enterprise messaging, intranet and web
strategies and design, workgroup consulting, as well as software and application
development solutions. Superior also provides a bridge between existing and
emerging technologies by supplying vendors with needed knowledge to develop
innovations focused on the changing needs of the marketplace and by assisting
healthcare industry participants to assess the relative merits and risks of
selecting and implementing new technologies. This enables Superior to help its
clients take advantage of the opportunities presented by technologies such as
the Internet and intranets, local and wide area communication networks,
network medicine and document imaging solutions.

    To assist its clients in achieving the optimal strategic, operational,
e-health, and/or IT solutions for their business needs, Superior draws upon its
expertise with the products of a vast array of vendors.  Through this in-depth
product knowledge, Superior is able to fully assess the advantages and
disadvantages of each particular strategic, operational, e-health, and/or IT
solution.  Additionally, through alliances and partnerships, Superior is able
to bring an aggregation of products and services packaged to suit client needs.

    In 1999, the Company opened its first Solution Center, developed as part of
the Company's enterprise alliance relationship with Microsoft, to provide
clients with education, demonstrations and hands-on experience with advanced
technologies.  The Solution Center provides a collaborative environment where
Superior's clients can work alongside Superior's consultants, utilizing all of
Superior's consulting, systems integration, e-health, application support and
outsourcing expertise to develop components or entire frameworks for managerial
and technical solutions to the challenges facing healthcare organizations.
Providing value both from a business and a technical perspective, the Solution
Center also includes an executive briefing center where clients can learn about
technology trends in healthcare and develop strategies to implement emerging
solutions in their organizations.

SERVICES

    Superior offers its clients comprehensive healthcare consulting services,
from visioning, to strategy, to selection of appropriate solutions, to
implementation, ongoing management and outsourcing. Through its consulting,
systems integration, outsourcing, and e-health services, Superior provides all
segments of the healthcare industry with the tools and strategies they need to
effectively serve customers and capitalize on e-commerce opportunities. Superior
offers custom-tailored solutions based on an assessment of each client's needs.
Superior offers services in the following broadly defined categories:

    E-Commerce Consulting. Superior's expertise in healthcare and e-commerce
enables it to provide strategy formation, planning, business consulting, and
technology implementation services to traditional healthcare providers seeking
to mine the advantages of the Internet.  The Internet offers healthcare
providers the opportunity to achieve supply chain and customer relationship
management (CRM) efficiencies and develop new technologies and techniques for
healthcare delivery such as network medicine. Superior also assists emerging
Internet healthcare companies in need of business plan development and
architecture design.

    Information Technology Consulting. Superior provides high quality services
in developing long-term IT strategy; systems implementation, integration and
management; and contract negotiation. Superior's consultants have a wide variety
of skills, the majority with concentrated capabilities in IT, combined with
process and business operations experience. This expertise is derived from a
combination of work for Superior clients as well as experience gained prior to
joining Superior and includes evaluation, implementation, operational or other
experience with one or more established and emerging healthcare information
systems or technologies offered by a vast array of information system vendors.

    Management Consulting. Superior's management consulting services include
strategy development and business planning, operations and financial performance
services, facility planning, health information management and imaging, and
post-acute services. Superior offers its clients RAPIDS(TM) (Resource Allocation
Planning for Innovative Delivery Systems), a service that is a logical starting
point for clients pursuing e-health initiatives by developing a strategic
foundation on which to build their digitally driven enterprises. RAPIDS(TM)
helps healthcare systems reallocate scarce resources to improve their bottom
lines by evaluating the balance between quality of care, customer service,
provider productivity, ongoing operational efficiency, and initial and long-term
capital costs.

    Information Technology Outsourcing. Superior's flexible Capitated
Consulting(TM) program enables healthcare providers to simplify their management
agenda, improve their return on information systems investment and strengthen
their technology management by ensuring client access to Superior's skilled
labor pool. Superior's outsourcing program offers the client an array of
services, functions, and economic elements that can be tailored to the specific
client program/agenda, including IT management, IT planning and budgeting,
applications support, applications implementation, IT operations, network and
financial management and risk sharing.

    Operations Consulting. Superior provides business process workflow and
operations improvement as methods to help clients eliminate organizational
redundancy, reduce cost and implement changes in the areas of patient care,
post-acute care, administrative services, clinical resource allocation, quality
management, finance, physician support and nursing. Superior can provide
executive and staff education, interim management and operational assistance.

    In order to offer its clients a depth of proficiency and experience,
Superior organizes its services by its 31 national practice areas that work
together synergistically to serve its clients, many of whom have consulting
needs in multiple areas. The national practice areas operate in conjunction with
Superior's client service executives who coordinate how Superior's specialty
areas can work together to achieve optimal productivity and cost effectiveness.
Superior has developed methodologies for delivering these skills in a


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consistent, coordinated manner through: (i) full project teams, (ii) joint
client-consultant or joint vendor-consultant project teams, (iii) selected
individual expertise, or (iv) as part of a seminar or workshop.

    Set forth below is a list of the healthcare consulting services and skills
offered by the Company:

                       CATEGORY                    DESCRIPTION OF SERVICES
               --------------------------    -----------------------------------
               Information Technology
               Consulting                    - Strategic information system
                                               planning, budgeting, development
                                               and implementation
                                             - Systems and departmental audits
                                               and assessments
                                             - Interim management and facilities
                                               management
                                             - Data warehousing and Data Mart
                                             - Remote network administration
                                             - Executive Planning Systems (EPS)
                                             - Executive and technical education
                                               and end user training
                                             - Legacy system maximization
                                             - Vendor selection and negotiation
                                             - Applications testing and quality
                                               assurance
                                             - System implementation and
                                               integration, including products
                                               of SMS, Cerner, McKessonHBOC,
                                               MEDITECH and others
                                             - Network and client-server
                                               planning and design
                                             - Imaging system feasibility
                                               studies, design and
                                               implementation

               E-Health Consulting           - E-commerce strategy development
                                               and implementation
                                             - Business and transformation plan
                                               development
                                             - Executive education
                                             - E-commerce transformation
                                               services
                                             - Internet architecture design
                                             - HIPAA compliance
                                             - Network Medicine
                                             - Value chain management
                                             - Customer relationship management
                                             - Business application development
                                             - Application hosting and support

               Strategic and Operations
               Management Consulting         - Case management program
                                               development and implementation
                                             - Strategic and tactical planning
                                             - HIPAA strategy and planning
                                             - Collaboration strategies,
                                               mergers, acquisitions and
                                               affiliations
                                             - Executive and departmental
                                               interim management
                                             - Operational and executive
                                               assessment
                                             - Reengineering and business
                                               process improvement and redesign
                                             - Project management
                                             - State and local comparative data
                                               analysis/benchmarking
                                             - Decision Support and Executive
                                               Information Systems (DSS/EIS)
                                             - Computerized patient record (CPR)
                                               planning and implementation
                                             - Productivity and quality
                                               improvement
                                             - Payer and customer surveys and
                                               profiles
                                             - Market and competitive landscape
                                               research and analysis
                                             - Facility planning and programming
                                             - Post-acute care services
                                             - Clinical resource allocation
                                             - Clinical program planning
                                             - Market and financial feasibility
                                               assessment
                                             - Cardiology services
                                             - Disease management

               Outsourcing                   - IT planning, budgeting and
                                               management
                                             - Operations and management
                                               staffing and resources
                                             - Project management
                                             - Applications implementation
                                             - Data center operations
                                             - Network monitoring and
                                               maintenance
                                             - Application service provider

               Integrated Delivery
               Network
                (IDN) Consulting             - IDN planning and development
                                             - Managed care seminars
                                             - Network formation planning
                                             - Market analysis and business
                                               planning
                                             - Managed care contracting
                                               strategies
                                             - Insurance company partner
                                               selection
                                             - Community health information
                                               network planning and development
                                             - Capitation and risk contracting
                                             - Base management/utilization
                                               management


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                                             - Managed care systems assessment,
                                               evaluation and implementation
                                             - Medicare and Medicaid risk
                                               contracting
                                             - Purchasing and Materials
                                               Management
                                             - System Implementation

               Health Information
               Management Consulting         - Medical Records Department
                                               review/utilization review
                                             - Health information network
                                               planning and development
                                             - Clinical data repositories/
                                               longitudinal patient records
                                             - Interim management
                                             - Coding and grouping

               Financial Consulting          - Revenue enhancement
                                             - Business Office review
                                             - Revenue cycle management/cash
                                               acceleration
                                             - Interim management
                                             - System implementation support
                                             - Accounts management, including
                                               admissions, billing and
                                               collections
                                             - Reimbursement analysis/ charge
                                               capture analysis
                                             - Diagnostic review
                                             - Capital and financial planning

               Clinical Consulting           - Patient care and nursing care
                                               system design
                                             - Clinical systems implementation
                                             - Patient-focused care planning
                                             - Clinical workflow analysis and
                                               reengineering
                                             - Information systems selection and
                                               implementation
                                             - Interim management
                                             - Clinical benchmarking
                                             - Quality measurement and outcomes
                                               management
                                             - Clinical protocol and pathway
                                               development
                                             - Departmental operations analysis
                                             - Redefining nursing and ancillary
                                               services
                                             - Post-acute care services
                                             - Laboratory operation/information
                                               management consulting services
                                             - JCAHO compliance

               Ambulatory Practice
               Management Consulting         - Ambulatory care strategic
                                               planning
                                             - Operations assessment and
                                               re-engineering
                                             - Systems selection and
                                               implementation
                                             - Practice revenue analysis
                                             - Facilities management
                                             - Integration strategies
                                             - Communications linkage

               Physician Services            - Primary care network development
                                             - Medical staff strategic planning
                                             - Multi-specialty group practice
                                               formation
                                             - PHO restructuring
                                             - MSO development and improvement
                                             - IPA development/restructure
                                             - Physician practice merger and
                                               acquisition
                                             - Financial modeling, budgeting and
                                               financial performance improvement
                                             - Practice valuations and
                                               appraisals improvement
                                             - Managed care and market research
                                             - Proprietary health plan
                                               development



DEVELOPMENTS IN 1999

In pursuit of its growth strategies, in 1999 Superior entered into outsourcing
and management contracts, acquired the assets of a consulting group, entered
into several strategic alliances and made substantial equity investments in two
companies.

-    In January 1999, Superior signed a five-year outsourcing agreement with
     Eisenhower Medical Center. Under this agreement, Superior assumed
     responsibility for information systems management and leadership in the
     areas of planning and strategy; financial management; applications support;
     computer operations; PC and desktop support; network management; help desk;
     and project services.



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-    In January 1999, Superior acquired assets of the Integration Services Group
     ("ISG") of Healthdyne Information Enterprises. ISG provides strategic,
     tactical and technical consulting expertise to solve practical problems for
     healthcare organizations. The purchase price was approximately $2.2 million
     in cash and is being recorded using the purchase method of accounting.

-    In May 1999, Superior entered into a strategic alliance with Microsoft
     Corp. to accelerate the adoption of line-of-business health-care solutions,
     including e-commerce, data warehousing, enterprise resource planning (ERP)
     and enterprise infrastructure solutions based on the Microsoft(R) platform.
     As part of Superior's Microsoft enterprise alliance relationship, in
     December 1999 Superior opened a Solution Center in Alpharetta, Georgia,
     which provides Superior's clients with education, demonstration and
     hands-on experience with advanced technologies.

-    In May 1999, Superior entered into a relationship with WebMD, Inc., a
     leading healthcare portal and a provider of Web-based solutions for
     healthcare professionals and consumers. Superior also made a strategic
     investment of $10 million in convertible preferred stock of WebMD. The
     investment was initially recorded using the cost method of accounting. In
     November 1999, Superior's investment was converted into common stock of
     Healtheon/WebMD Corporation as a result of the merger of WebMD, Inc. and
     Healtheon Corporation. Therefore, Superior's investment in Healtheon/WebMD
     is reflected at fair value at December 31, 1999.

-    In November 1999, Superior signed a three-year strategic agreement with
     Neoforma.com, a leading provider of business-to-business e-commerce
     services in the healthcare marketplace. Under this agreement, Neoforma.com
     and Superior collaborate to bring Internet-based supply chain management
     and medical product procurement solutions to healthcare clients. Superior
     also made an investment of $5.0 million in convertible preferred stock of
     Neoforma.com. The investment was recorded using the cost method of
     accounting. In January 2000, Superior's investment was converted into
     Common Stock of Neoforma.com, Inc. in connection with Neoforma.com's
     initial public offering.

-    In November 1999, Superior entered into an agreement with OrganicNet, Inc.,
     which changed its name in January 2000 to Velocity.com, Inc., provider of
     Internet-enabled software solutions for clinical management, under which
     Superior is designated as Velocity.com's exclusive international provider
     of healthcare consulting and business integration services to its clients.
     Superior assists clients as they deploy Velocity.com's clinical management
     applications.

-    In December 1999, Superior entered into a strategic alliance with Rockwell
     Electronic Commerce to provide call center technology and customer
     relationship management (CRM) solutions to the rapidly growing U.S.
     healthcare customer contact marketplace. Under the agreement, Superior
     provides consulting and integration services on select healthcare related
     Rockwell EC technology implementations, including facility design or
     enhancement, network upgrades, "back-end" applications integration, and
     other information technology consulting and support elements. The agreement
     also spans vertical market application development, product integration and
     training.

Since the beginning of 2000, Superior has entered into a three-year strategic
agreement with VidiMedix Corporation, provider of telemedicine systems that
assist physicians in the delivery of quality medical care and patient education.
Under the agreement, Superior provides Digital Business Transformation(TM),
Internet development, implementation and support services to VidiMedix clients.
Also, Superior signed a four-year information system outsourcing agreement with
Garden City Hospital in Garden City, Michigan.  Under the agreement, Superior
assumes responsibility for information system management and leadership in the
areas of planning and strategy, health programs and application development,
financial management, applications support, computer operations, PC and desktop
support, network management, help desk and project services.

EMPLOYEES

    The Company believes that one of its key strengths lies in its ability to
attract, develop, motivate and retain a talented, creative and highly skilled
work force of senior-level professionals who are specialists in one or more
areas of healthcare, e-commerce and/or information technology. The Company's
consultants are highly experienced, and many have established their credentials
as healthcare executives and senior management of healthcare entities, business
office managers, medical records administrators, nurse administrators, nurses,
laboratory technicians, physician assistants, medical technologists, physicians,
hospital admissions directors,

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and information management and information systems technical personnel. As of
December 31, 1999, the Company employed over 1,425 employees, 1,133 of whom were
consultants.

    The Company believes it has a unique corporate culture built upon open
communication across geographic regions and practice areas fostered by the
Company's proprietary information and communications system (the "electronic
hallway"), and a motivational and interactive work environment that features
extensive professional development opportunities and productivity incentives.
Through the establishment of its Superior Institute, the Company's education and
training encompasses multiple approaches to professional development. As part of
this effort, the Company provides training curricula in new trends in
healthcare, information technology, business management and worklife topics.
Each consultant may choose from a variety of managerial, technical and personal
courses which are designed to provide sound fundamental principles for each
subject. Many of the courses have advanced editions. These education offerings
are delivered through multiple settings including: distance learning,
self-study, group classroom, individual mentorship and case study.

    An integral part of the on-going education process at the Company takes
place through its proprietary electronic hallway system. This allows the
Company's consultants to continue to upgrade their skills while remaining
deployed in the field. In addition, the Company has developed an employee
orientation program that features a sophisticated presentation to provide new
employees with a comprehensive understanding of the Company's structure and
approach to consulting. The Company also maintains a formal and active network
of former employees; these alumni provide expertise on projects, introduce the
Company to new client leads, and in many cases have returned to the Company from
experiences elsewhere in the healthcare industry.

SALES AND MARKETING

    The Company's business development efforts are based upon a highly
organized, company-wide, consistent approach. All personnel are trained and
reinforced in the Company's marketing methods and philosophy, and are encouraged
to identify, develop and pursue client service opportunities. The Company's
marketing efforts are directed by senior management and the Company's strategic
services group leaders. The strategic service group leaders focus on client
development strategies, geographic market penetration and cross-selling clients.
Business development is an integral part of the formal responsibilities at all
levels of the Company's management, including its national practice area
leaders, and the Company sets business development goals on both a departmental
and individual basis.

    The Company's business development efforts focus primarily on identifying
key decision makers in the healthcare industry, determining the value to be
provided to each potential client and then managing the sales process to
completion through a sophisticated client resource database, developed and
maintained internally. Each potential client lead is entered into the database,
and that profile is updated for subsequent developments and information
throughout the entire life of the Company's relationship with the potential
client, as well as after a client retains the Company for services. At any given
time, numerous Company professionals are active in the development of business
from either a new or existing client, and the client resource database enables
all Company personnel to access up-to-date information on the Company's efforts
with respect to a client or client prospect, identify other Company contacts
with that client, and highlight the particular needs expressed by the client to
date.

    The Company furthers its business development efforts through its reputation
in the marketplace, the personal contacts and networking of the Company's
professionals, direct industry marketing programs, trade shows, the Company's
Internet web site (www.superiorconsultant.com), and the industry presence
maintained by Company professionals to enhance its business development efforts.
The Company's marketing profile within the healthcare industry is enhanced by
its employees' speaking engagements and publications on topics affecting
healthcare. The Company's views on a wide range of healthcare and IT topics are
frequently solicited and quoted for articles in major industry journals and
books. The Company's healthcare consultants have been published extensively on
current and emerging topics in healthcare information and management and have
participated in external speaking engagements and presentations to industry
associations and client audiences internationally.

    The Company operates its healthcare consulting business through a
combination of its national presence, regional relationships and its 31 national
practice areas. Each national practice area offers a selected variety of the
Company's healthcare consulting services and often two or more of these areas
work synergistically to provide solutions to clients. Each area is managed by a
national practice area leader who is responsible for achieving performance based
goals for the specific area and is responsible for its growth. As the Company
adds to its services through internal growth and acquisition, it will evaluate
adding new practice areas or augmenting the services of its existing national
practice areas. The Company actively markets the subject-matter expertise of its
national practice areas through the focus of its strategic services groups. Each
strategic services group is responsible for developing and enhancing knowledge
of local regulation and market factors, as well as developing and nurturing
relationships with specific client organizations. The Company then combines the
expertise of its national practice areas to form solutions that are responsive
to local conditions and of value to specific clients.


                                       8
<PAGE>   9


    The Company provides a compensation system designed to foster an active
focus at all levels within the organization on growth and business development
from a company-wide perspective. Management earns incentive compensation on a
quarterly and/or annual basis based on group and company-wide performance goals.

COMPETITION

    The market for the Company's services is highly fragmented, highly
competitive and is subject to rapid change. The Company believes that it
currently competes principally with systems integration firms, national
consulting firms, including the consulting divisions of the national accounting
firms, Internet consulting firms, information system vendors, service groups of
computer equipment companies, facilities management companies, general
management consulting firms and regional and specialty consulting firms. Many of
the Company's competitors have significantly greater financial, technical and
marketing resources than the Company, generate greater revenues and have greater
name recognition than the Company. Moreover, those competitors that sell or
license their own software may in the future attempt to limit or eliminate the
use of third party consultants, such as the Company, to implement and/or
customize such software. In addition, vendors whose systems may enjoy wide
market acceptance and large market share could enter into exclusive or
restrictive agreements with other consulting firms which could eliminate or
substantially reduce the Company's implementation work for those systems. There
are relatively low barriers to entry into the Company's markets, and the Company
has faced and expects to continue to face additional competition from new
entrants into its markets. In addition, combinations and consolidations in the
consulting industry will give rise to larger competitors, whose relative
strengths are impossible to predict. The Company also competes with its clients'
internal resources, particularly where these resources represent a fixed cost to
the client. This internal client competition may heighten as consolidation of
healthcare providers creates organizations large enough to support internal
information management capabilities.

    The Company believes that the principal competitive factors in its market
include reputation, highly experienced workforce, industry expertise, full array
of offerings, project management expertise, price, quality of service,
responsiveness and speed of implementation and delivery. There can be no
assurance that the Company will be able to compete effectively on pricing or
other requirements with current and future competitors or that competitive
pressures faced by the Company will not cause the Company's revenue or operating
margins to decline or otherwise materially adversely affect its business,
financial condition and results of operations.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

    The Company's success is in part dependent upon its proprietary internal
information and communications systems, databases, tools and the methods and
procedures that it has developed specifically to serve its clients. In addition,
The Company has and will continue to develop proprietary groupware tools and
applications. Through acquisitions, the Company has acquired numerous
development tools and methodologies. The Company has no patents; consequently,
it relies on a combination of non-disclosure and other contractual arrangements
and copyright, trademark and trade secret laws to protect its proprietary
systems, information, and procedures. There can be no assurance that the steps
taken by the Company to protect its proprietary rights will be adequate to
prevent misappropriation of such rights or that the Company will be able to
detect unauthorized use and take appropriate steps to enforce its proprietary
rights. The Company believes that its systems and procedures and other
proprietary rights do not infringe upon the proprietary rights of third parties.
There can be no assurance, however, that third parties will not assert
infringement claims against the Company in the future or that any such claims
will not require the Company to enter into materially adverse license
arrangements or result in protracted and costly litigation, regardless of the
merits of such claims.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

    The Company's executive officers are as follows:

    Richard D. Helppie, Jr., age 44, has served as Chief Executive Officer and
Chairman, and as a Director, of the Company since its inception. Prior to
January 1999, Mr. Helppie also served as President of the Company. Mr. Helppie
has served as Superior's President and Chief Executive Officer since he founded
Superior in May 1984. Mr. Helppie has more than 25 years of experience in the
healthcare and information systems industries.

    Charles O. Bracken, age 50, currently serves as Vice Chairman and Executive
Vice President, and is a Director, of the Company. Mr. Bracken joined Superior
in March 1987 and has from that time served as Executive Vice President of
Superior. Mr. Bracken has more than 28 years of experience in the healthcare and
information systems industries. Prior to joining Superior, Mr. Bracken spent
three years as vice president of marketing of a healthcare software firm,
preceded by 10 years of related experience in healthcare information systems
management including positions as Chief Information Officer for single and
multi-hospital corporations.


                                       9
<PAGE>   10


    Robert R. Tashiro, age 44, currently serves as President and Chief Operating
Officer of the Company. Prior to January 1999, Mr. Tashiro served as a Senior
Vice President and Chief Operating Officer of the Company. Mr. Tashiro joined
Superior in 1985 as a Systems Consultant, was appointed Vice President in 1990,
Senior Vice President in 1992 and Chief Operating Officer in June 1996. Mr.
Tashiro has more than 20 years of experience in the information systems industry
and more than 15 years of experience in the healthcare industry.

    James T. House, age 38, joined Superior in 1988 as its Controller. Since
that time, he has held various positions with the Company and Superior and
became Vice President in January 1995 and is currently the Vice President and
Chief Financial Officer of Superior and the Company.

ITEM 2. PROPERTIES

    The Company's headquarters is located in approximately 35,000 square feet of
leased office space in Southfield, Michigan. Superior also leases an aggregate
of approximately 153,000 square feet of additional office space in Alpharetta,
Georgia; Atlanta, Georgia; Plano, Texas; San Diego, California; Woodland Hills,
California; Ann Arbor, Michigan; Chicago, Illinois; Houston, Texas; New York,
New York; San Francisco, California; Nashville, Tennessee; Kansas City,
Missouri; Burlington, Massachusetts; Wallingford, Connecticut; Cheshire,
Connecticut; Englewood, Colorado; Beaverton, Oregon; Minneapolis, Minnesota; and
Pittsburgh, Pennsylvania. The Company has also purchased an approximately 6,200
square foot building in Safety Harbor, Florida, for use as an office and
training facility and a 24,000 square foot building in Southfield, Michigan, for
use as office space. The Company believes that its facilities are adequate for
its current needs and that additional facilities can be leased or acquired to
meet future needs.

ITEM 3. LEGAL PROCEEDINGS

    The Company is not now a party to, and is not aware of, any pending or
threatened litigation that would have a material adverse effect on the Company
and its business.

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

    At the Company's 1999 Annual Meeting in May 1999, the stockholders of the
Company approved an amendment to the Company's Long-Term Incentive Plan to
increase the aggregate number of shares that may be issued under the Plan from
2,400,000 Shares to 4,000,000 Shares and to approve the Long-Term Incentive Plan
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended.
Such amendment was approved by the holders of greater than a majority of the
Company's then outstanding Common Stock.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company's common stock is traded on the Nasdaq National Market under the
symbol SUPC. The following table shows high and low closing prices as reported
by Nasdaq for the fiscal years 1998 and 1999.

                   FISCAL 1998
                      First Quarter        38.750     27.750
                      Second Quarter       45.500     33.500
                      Third Quarter        47.000     30.563
                      Fourth Quarter       43.500     33.688
                   FISCAL 1999
                      First Quarter        47.250     26.188
                      Second Quarter       39.500     21.625
                      Third Quarter        29.750     11.063
                      Fourth Quarter       16.188     10.625

    At March 27, 2000, there were approximately 123 stockholders of record.

    The Company has not paid cash dividends to the holders of its Common Stock.
It is the Company's present intention to retain earnings for use in the growth
of the Company's business. Accordingly, the Company does not anticipate that
cash dividends will be paid in the foreseeable future.


                                       10
<PAGE>   11


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The following historical financial data as of and for the years ended
December 31, 1995, 1996, 1997, 1998 and 1999 have been derived from the audited
consolidated financial statements of the Company as reported by Grant Thornton
LLP, independent certified public accountants. This information is qualified in
its entirety by reference to the Company's consolidated financial statements and
related notes included elsewhere in this report.

<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31,
                                                                                    ------------------------
                                                                                           PRO FORMA
                                                               1995        1996       1996 (1)    1997 (2)    1998 (2)    1999 (2)
                                                               ----        ----       --------    --------    --------    --------
                                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                                         <C>         <C>          <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Revenues                                                    $  42,494   $  51,835    $  51,835   $  76,895   $ 124,746   $ 149,349
Cost of services                                               19,730      25,524       25,524      39,260      65,026      91,714
Selling, general and administrative
  expenses                                                     18,422      21,891       21,891      30,378      47,425      64,590
Costs incurred in connection with new business initiative           -           -            -           -           -       4,840
Executive compensation expense (3)                              3,730       4,579        1,060         858         908       1,007
                                                            ---------   ---------    ---------   ---------   ---------   ---------
Earnings (loss) from operations                                   612        (159)       3,360       6,399      11,387     (12,802)
Interest and other (expense) income                              (113)         84           84       2,728       4,572       1,874
Costs incurred in connection with mergers                           -           -            -        (917)          -           -
                                                            ---------   ---------    ---------   ---------   ---------   ---------
Earnings (loss) before income taxes (benefit)
  and extraordinary item                                          499         (75)       3,444       8,210      15,959     (10,928)
Provision for income taxes (benefit)                              185         689        1,364       3,625       6,331      (3,967)
                                                            ---------   ---------    ---------   ---------   ---------   ---------
Earnings (loss) before extraordinary item                         314        (764)       2,080       4,585       9,628      (6,961)
Extraordinary gain on early extinguishment of
  debt, net of income taxes                                         -         231          231           -           -           -
                                                            ---------   ---------    ---------   ---------   ---------   ---------
Net earnings (loss)                                         $     314   ($    533)   $   2,311   $   4,585   $   9,628   ($  6,961)
                                                            =========   =========    =========   =========   =========   =========


Net earnings (loss) per share - basic                       $    0.06   $   (0.09)   $    0.38   $    0.54   $    0.94   $   (0.67)

Net earnings (loss) per share - diluted                     $    0.06   $   (0.09)   $    0.38   $    0.53   $    0.91   $   (0.67)

Shares used in calculating net
  earnings (loss) per share - basic                             5,138       6,014        6,014       8,519      10,266      10,340

Shares used in calculating net
  earnings (loss) per share - diluted                           5,162       6,014        6,080       8,670      10,580      10,340
</TABLE>



<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31,
BALANCE SHEET DATA:                                         1995        1996        1997       1998        1999
                                                            ----        ----        ----       ----        ----
<S>                                                         <C>         <C>         <C>        <C>         <C>
Working capital                                             $ 1,273     $39,962     $ 97,632   $ 78,445    $ 61,811
Total assets                                                 12,606      55,324      119,401    133,726     186,597
Total debt                                                    2,110       2,448          189         61           -
Total stockholders' equity                                    1,240      41,370      108,363    121,494     150,935
</TABLE>

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

(1)  The pro forma statement of operations information for 1996 has been
     computed for the pro forma period to adjust the Company's net earnings to
     (i) eliminate executive compensation expense for such period in excess of
     the amount of executive compensation (including the full amount of
     potential bonus) that would have been paid had the executive compensation
     agreements, which became effective upon the closing of the Company's
     initial public offering in October 1996 ("IPO"), been effective throughout
     such period; and (ii) record income taxes, assuming an effective tax rate
     of 39.6% for the year ended December 31, 1996, which would have been
     recorded had Superior been a C Corporation during such period.

(2)  Statement of operations data for fiscal 1997, 1998 and 1999 includes
     results of acquired businesses as described in Note 2 to the Company's
     consolidated financial statements included elsewhere in this report.

(3)  Executive compensation expense includes salary and bonuses for Richard D.
     Helppie, Jr., Charles O. Bracken and Robert R. Tashiro, and reflects
     compensation agreements implemented in connection with closing of the IPO.
     These compensation agreements did not apply to limit amounts paid to these
     three officers on or prior to the closing of the IPO.


                                       11
<PAGE>   12


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

OVERVIEW

    Superior is a leading provider of Digital Business Transformation(TM)
services to the healthcare industry. Prior to July 1, 1999, the Company
conducted business in two segments through its two primary operating
subsidiaries, Superior and Enterprise Consulting Group, Inc. Effective July 1,
1999, the Company conducts business in three segments through its primary
operating subsidiary, Superior. Superior's services assist clients to compete in
the information driven economy. Through consulting, application support,
outsourcing, systems integration and e-commerce services, Superior provides all
segments of the healthcare and other industries with the tools and strategies
needed to effectively serve customers and capitalize on e-commerce
opportunities. The healthcare consulting segment provides information
technology, as well as strategic and operations management consulting,
application support, and outsourcing services to a broad cross-section of
healthcare industry participants and information systems vendors. The
enterprise-wide communications segment assists companies in various industries,
including healthcare, with network and telecommunication design and acquisition,
enterprise messaging, intranet and web strategies and design, workgroup
consulting, as well as software and application development solutions. The
e-commerce / systems integration segment, which was established effective July
1, 1999, has a national focus on promoting the use of electronic information
exchange to address the opportunities and challenges of the healthcare industry.
The e-commerce / systems integration segment assists hospitals, payers,
physician networks, Internet based healthcare companies, and ancillary
healthcare providers in developing and implementing strategic business
objectives as they relate to e-commerce / systems integration and the efficient
use of the Internet in healthcare.

    In 1999, the Company expands its e-commerce and systems integration areas.
As healthcare and other sectors move increasingly to Internet and web-based
technologies and applications, and as the Company continues to innovate services
and solutions to develop and capitalize on this growing market, the Company will
incur risks related to its participation in such untested opportunities in
markets and quickly evolving lines of business. Such risks can include, but are
not limited to, new and unforeseen technologies superseding development of the
Internet and/or the systems integration platforms in which the Company invests;
the e-commerce and/or systems integration markets taking turns not foreseen by
the Company and adverse to the positioning and investments undertaken by the
Company; and increased competition for consultant talent in the e-commerce
field, increasing the Company's cost of providing services.

    The Company derives substantially all of its revenues from fees for
professional services, the majority of which are billed at contracted hourly
rates. The Company establishes standard billing guidelines based on the type and
level of service offered. Actual billing rates are established on a
project-by-project basis and may vary from the standard guidelines. Billings are
generally contracted to be made on a bi-weekly basis to monitor client
satisfaction and manage outstanding accounts receivable balances. Revenue on
time and materials contracts is recognized as the services are provided. A
portion of the Company's projects are billed on a fixed-fee basis, often on a
monthly fee basis. The Company recognizes revenue on fixed fee projects in a
manner similar to the percentage of completion basis. As of December 31, 1999,
the Company has increased the number of projects billed on a fixed-fee basis.
Increased use of fixed-fee contracts subjects the Company to increased risks,
including cost overruns. For outsourcing engagements, the Company recognizes
revenue in the amount billable under the contract, which is typically billable
on a monthly basis. As of December 31, 1999, the Company has five significant
contracts to provide healthcare IT outsourcing services. There can be no
assurance that the Company will be able to achieve profit margins on outsourcing
contracts which are consistent with its historical levels of profitability.

    The Company's historical revenue growth is attributable to various factors,
including an increase in the number of projects for existing and new clients and
expanded geographic presence. In addition, the Company seeks to increase
revenues by expanding its range of specialty services. The Company manages its
client development efforts through several strategic services groups, each
having specific geographic responsibility and focus.

    The Company's most significant expense is cost of services, which consists
primarily of consultant salaries and benefits. In recent years, consultant
compensation expense has grown faster than consultant billing rates, resulting
in an increase in the Company's cost of services as a percentage of revenues.
The Company foresees this trend continuing as competition for recruiting and
retaining skilled consultants intensifies, particularly in the area of
e-commerce services. The Company has sought to address this issue by adding an
additional variable portion of compensation payable upon the achievement of
measurable performance goals, including practice specific and company-wide
revenue and earnings targets. In addition, the Company has sought to address
compensation expense pressures through increased use of stock options as an
overall part of its compensation package. These efforts have been hampered
recently by the impact of the Company's current market price.

    The Company's cost of services as a percentage of revenues is also impacted
by its consultant utilization. The Company attempts to optimize utilization by
monitoring project requirements and timetables. The number of consultants
assigned to a project will vary

                                       12
<PAGE>   13

according to the size, complexity, duration and demands of the project. Project
terminations, completions and scheduling delays have and can result in periods
when consultants are not fully utilized. An unanticipated termination of a
significant project has and can cause the Company to experience lower consultant
utilization, resulting in a higher than expected number of unassigned
consultants. During 1999, the healthcare industry experienced a slow-down in
consulting expenditures as fiscal constraints imposed by factors such as the
Balanced Budget Act and Y2K transition concerns combined forces to dampen
overall industry demand for new IT service consulting PROJECTS. In addition, the
Company's establishment of new practice areas, lines of business, hiring of
consultants in peak hiring periods and further geographic expansion have and can
from time to time adversely affect utilization. For example, the Company intends
to grow its e-health / systems integration segment to capture increased client
demand expected to occur in this area, and this growth will impact utilization
as these new areas come online. Also, seasonal factors, such as vacation days
and total business days in a quarter, as well as the timing of the annual
employees' meeting have and can result in lower consultant utilization.
Variations in consultant utilization result in quarterly variability of the
Company's cost of services as a percentage of revenues. The Company's
consultants are generally employed on a full-time basis, and therefore the
Company will, in the short run, incur substantially all of its employee-related
costs even during periods of low utilization, as the majority of employment
costs of these personnel are fixed.

    Selling, general and administrative expenses include the costs of
recruiting, continuing education, marketing, facilities, administration,
including compensation and benefits, outside professional fees, equipment
depreciation and amortization of goodwill.

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, selected
statement of operations data expressed as a percentage of revenues. The trends
illustrated in the following table may not necessarily be indicative of future
results.

<TABLE>
<CAPTION>
                                                                                   PERCENTAGE OF REVENUES
                                                                                   ----------------------
                                                                                  YEARS ENDED DECEMBER 31,
                                                                                  ------------------------

                                                                                 1997        1998       1999
                                                                                 ----        ----       ----

           <S>                                                                 <C>         <C>        <C>
           Revenues ........................................................     100.0%      100.0%     100.0%
           Cost of services ................................................      51.1%       52.1%      61.4%
           Selling, general and administrative expenses ....................      39.2%       37.4%      42.3%
           Amortization of goodwill ........................................       0.3%        0.7%       1.0%
           Costs incurred in connection with new business initiative .......       0.0%        0.0%       3.2%
           Executive compensation expense ..................................       1.1%        0.7%       0.7%
                                                                               --------    --------   ---------
           Earnings (loss) from operations .................................       8.3%        9.1%      (8.6%)
           Interest and other income .......................................       3.5%        3.7%       1.2%
           Costs incurred in connection with mergers .......................      (1.2%)       0.0%       0.0%
                                                                               --------    --------   ---------
           Earnings (loss) before income taxes (benefit) ...................      10.6%       12.8%      (7.4%)
           Provision for income taxes (benefit)  ...........................       4.7%        5.1%      (2.7%)
                                                                               --------    --------   ---------
           Net earnings (loss) .............................................       5.9%        7.7%      (4.7%)
                                                                               ========    ========   =========
</TABLE>

1999 COMPARED TO 1998

         Revenues. Revenues in the healthcare consulting segment increased by
$27.7 million, or 26.2%, to $133.3 million for the year ended December 31, 1999,
as compared to $105.6 million for the year ended December 31, 1998. The revenue
increase was due primarily to continued growth in core lines of business,
activity from the Company's acquisitions and revenue realized from the
outsourcing contracts consummated after the second quarter of 1998. Revenues in
the enterprise-wide communications segment decreased by $3.8 million, or 19.8%,
to $15.3 million for the year ended December 31, 1999, as compared to $19.1
million for the year ended December 31, 1998. The revenue decrease was
attributable to lower consultant utilization for this segment. Revenues from the
e-commerce / systems integration segment for the year ended December 31, 1999
were $0.7 million.

         Cost of Services. Cost of services in the healthcare consulting segment
increased by $23.8 million, or 43.4%, to $78.6 million for the year ended
December 31, 1999, as compared to $54.8 million for the year ended December 31,
1998. The increase was due to the additional number of consultants required to
support the larger revenue base, as well as increases in their compensation
levels. Cost of services as a percentage of revenue for the healthcare
consulting segment increased to 59.0% for the year ended December 31, 1999, as
compared to 51.9% for the year ended December 31, 1998. The increase was
attributable to lower consultant utilization for this segment. Cost of services
in the enterprise-wide communications segment increased by $2.2 million, or
21.6%, to $12.4 million for the year ended December 31, 1999, as compared to
$10.2 million for the year ended December 31, 1998. Cost of services as a
percentage of revenue for this segment increased to 80.7% for the year ended
December 31, 1999, as compared to 53.5% for the year ended December 31, 1998.
The increase is

                                       13
<PAGE>   14


attributable to lower consultant utilization in this segment. Cost of services
in the e-commerce / systems integration segment were $0.7 million for the year
ended December 31, 1999.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $17.3 million, or 35.7%, to $65.6 million
for the year ended December 31, 1999, as compared to $48.3 million for the year
ended December 31, 1998. The increase was due to incentive and other
compensation expenses associated with the addition of key personnel, as well as
higher recruiting, marketing, outside professional fees, costs associated with
investment and acquisition activities, continuing education, and training
expenses relating to the new lines of business. Selling, general and
administrative expenses as a percentage of revenues increased to 43.9% from
38.7%. The increase was due to the launch of new lines of business, higher
recruiting, marketing and outside professional fee expenses, as well as a lower
revenue base than anticipated. In addition, goodwill amortization as a
percentage of revenues increased to 0.9% in 1999, as compared to 0.7% in 1998.

         Costs incurred in connection with new business initiative. The Company
incurred approximately $4.8 million of costs in connection with the start-up of
a new business initiative, of which approximately $4.4 million were non-cash
charges primarily related to the issuance of warrants. See Note 10 to the
Company's 1999 consolidated financial statements for a description of the costs
incurred.

         Other income and expense. Other income was $1.9 million for the year
ended December 31, 1999, as compared to $4.6 million of other income for the
year ended December 31, 1998. The change was due to reduced interest earned on
the Company's short-term investments. The Company's short-term investments were
lower as of December 31, 1999, in comparison to December 31, 1998, due primarily
to acquisitions, equity investments and additions to property and equipment.

1998 COMPARED TO 1997

         Revenues. Revenues in the healthcare consulting segment increased by
$42.1 million, or 66.3%, to $105.6 million for the year ended December 31, 1998,
as compared to $63.5 million for the year ended December 31, 1997. The revenue
increase was due primarily to continued strong growth in core lines of business,
activity from the Company's acquisitions and revenue realized from five
outsourcing contracts consummated during 1998. Revenues in the enterprise-wide
communications segment increased by $5.7 million, or 42.5%, to $19.1 million for
the year ended December 31, 1998, as compared to $13.4 million for the year
ended December 31, 1997. The revenue increase was due primarily to continued
strong growth in core lines of business, as well as activity from two
acquisitions.

         Cost of Services. Cost of services in the healthcare consulting segment
increased by $24.4 million, or 80.3%, to $54.8 million for the year ended
December 31, 1998, as compared to $30.4 million for the year ended December 31,
1997. The increase was due to the additional number of consultants required to
support the larger revenue base, as well as increases in their compensation
levels. Cost of services as a percentage of revenue for the healthcare
consulting segment increased to 51.9% for the year ended December 31, 1998, as
compared to 47.8% for the year ended December 31, 1997. This increase is
attributable to the increase in the consultant base which grew by approximately
101% during 1998. This resulted in lower consultant utilization during start-up,
which was partially offset by the variable portion of compensation payable to
these consultants, which is contingent upon achievement of performance goals set
by the Company. Cost of services in the enterprise-wide communications segment
increased by $1.3 million, or 14.6%, to $10.2 million for the year ended
December 31, 1998, as compared to $8.9 million for the year ended December 31,
1997. The increase was due to the additional number of consultants required to
support the larger revenue base, as well as increases in their compensation
levels. Cost of services as a percentage of revenue for this segment decreased
to 53.5% for the year ended December 31, 1998, as compared to 66.5% for the year
ended December 31, 1997. This reduction was caused by increases in the average
consultant billing rate and their utilization factor.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $17.1 million, or 54.8%, to $48.3 million
for the year ended December 31, 1998, as compared to $31.2 million for the year
ended December 31, 1997. The increase was due to incentive and other
compensation expenses associated with the addition of key personnel, as well as
higher recruiting, marketing and continuing education expenses consistent with
the Company's growth. Selling, general and administrative expenses as a
percentage of revenues decreased to 38.7% from 40.6% primarily due to increased
operating efficiencies resulting from leveraging the Company's infrastructure
expense across its growing revenue base. This reduction in selling, general and
administrative expenses as a percentage of revenues was achieved even though
amortization of goodwill, as a percentage of revenues, increased to 0.3% in 1998
as compared to 0.4% in 1997.


                                       14
<PAGE>   15
         Other income and expense. Other income was $4.6 million for the year
ended December 31, 1998, as compared to $2.7 million of other income for the
year ended December 31, 1997. The change was due primarily to interest earned on
the investment of the majority of the net proceeds of approximately $60.3
million from the public offering held by the Company in November 1997.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary capital needs have been and will be to fund its
acquisitions, equity investments, equipment purchases and e-commerce and systems
integration initiatives. The Company believes that its current cash and cash
equivalents, marketable securities, cash generated from operations, plus
available credit under its bank credit facility will be sufficient to finance
its working capital and capital expenditure requirements for at least the next
twelve months.

         At December 31, 1999, the Company had cash and cash equivalents of
$16.7 million and working capital of $61.8 million, as compared with working
capital of $78.4 million at December 31, 1998. Currently, the Company's
remaining maximum contingency payments relating to its completed business
acquisitions total approximately $7.9 million ($2.1 million in cash and $5.8
million in common stock) payable over the next two years. The Company owns
common stock in three publicly traded companies: drkoop.com, WebMD/Healtheon and
Neoforma.com.  Liquidity of the Company's investment in these companies is
restricted under Rule 144 and under lockup agreements with the companies'
underwriters, entered into in connection with each of their initial public
offerings.

         The Company had a line of credit arrangement at Comerica Bank N.A. of
$3.0 million collateralized by all of assets of the Company. In March, 2000, the
Company increased its line of credit to $25.0 million, bearing interest at 0.25%
to 0.50% below the bank's prime rate. As of December 31, 1999, and at the time
the line of credit was modified, the Company had no amounts outstanding under
either agreement.

         Net cash provided by operations was $0.5 million for the year ended
December 31, 1999 as compared to cash used in operations of $6.5 million for the
year ended December 31, 1998. In 1998, net earnings of $9.6 million were more
than offset by a significant increase in accounts receivable, which was
primarily responsible for the net cash used in operating activities of $6.5
million. In 1999, the Company experienced a net loss of $7.0 million, which was
more than offset by $7.9 million of net non-cash expenses reflected on the
statement of operations, which was primarily responsible for the net cash
provided from operations of $0.5 million.

         Net cash of $28.5 million used in investing activities during the year
ended December 31, 1999 consists of a business acquisition, equity investments
totaling $15.1 million in WebMD and Neoforma, additions to property and
equipment and contingent payments made relating to prior acquisitions as
required by the applicable purchase agreements. The investments in the debt
security, drkoop.com, WebMD and Neoforma, which cost the Company $26.8 million,
have a combined market value of $102.0 million at February 29, 2000.

         Net cash used in financing activities was $1.1 million during the year
ended December 31, 1999 as compared to cash provided by financing activities of
$0.5 million for the year ended December 31, 1998. The increase in cash used in
financing activities is primarily due to the repurchase of 85,000 shares of
common stock, partially offset by exercises of stock options. The Company has
remaining Board authorization to purchase up to 915,000 additional shares under
its repurchase program announced in July 1999.

         The Company does not believe that inflation has had a material effect
on the results of its operations.

QUARTERLY RESULTS

    The following table sets forth certain unaudited quarterly operating
information for each of the last eight quarters. Results for any previous
quarter are not necessarily indicative of results for any future quarter.


                                       15
<PAGE>   16


<TABLE>
<CAPTION>
                                                                           QUARTERS ENDED
                                                                           --------------

                                       ---------------------------------------------------------------------------------------
                                       MAR. 31,   JUNE 30,   SEPT. 30,  DEC. 31,   MAR. 31,   JUNE 30,    SEPT. 30,   DEC. 31,
                                         1998       1998       1998       1998       1999       1999        1999        1999
                                       --------   --------   --------   --------   --------   --------    --------    --------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                    <C>        <C>        <C>        <C>        <C>        <C>         <C>         <C>
Revenues                               $ 23,830   $ 28,350   $ 33,123   $ 39,443   $ 40,029   $ 42,146    $ 37,584    $ 29,590
Cost of services                         12,067     14,747     17,686     20,526     20,749     21,870      24,508      24,587
Selling, general and
administrative expenses                   9,406     11,159     12,457     15,311     14,897     15,653      18,102      16,945
Costs incurred in connection
with new business initiative                  -          -          -          -          -      4,840           -           -
                                       --------   --------   --------   --------   --------   --------    --------    --------
Earnings (loss) from operations           2,357      2,444      2,980      3,606      4,383       (217)     (5,026)    (11,942)
Interest and other income                 1,247      1,375      1,122        828        478        579         380         437
                                       --------   --------   --------   --------   --------   --------    --------    --------
Earnings (loss) before
income taxes (benefit)                    3,604      3,819      4,102      4,434      4,861        362      (4,646)    (11,505)
Provision for income taxes (benefit)      1,504      1,485      1,655      1,687      1,876        157      (1,638)     (4,362)
                                       --------   --------   --------   --------   --------   --------    --------    --------
Net earnings (loss)                    $  2,100   $  2,334   $  2,447   $  2,747   $  2,985   $    205    $ (3,008)   $ (7,143)
                                       ========   ========   ========   ========   ========   ========    ========    ========


Net earnings (loss) per share -
basic                                  $   0.21   $   0.23   $   0.24   $   0.27   $   0.29   $   0.02    $  (0.29)   $  (0.69)
Net earnings (loss) per share -
diluted                                $   0.20   $   0.22   $   0.23   $   0.26   $   0.28   $   0.02    $  (0.29)   $  (0.69)

Shares used in calculating net
earnings (loss) per share - basic        10,212     10,260     10,284     10,304     10,347     10,368      10,328      10,317

Shares used in calculating net
earnings (loss) per share - diluted      10,442     10,609     10,638     10,612     10,609     10,517      10,328      10,317
</TABLE>

    Revenues and operating results fluctuate from quarter to quarter due to
several factors, such as the number and significance of client engagements
commenced and completed during a quarter, delays incurred in connection with a
project, consultant hiring, and utilization. The timing of revenues varies from
quarter to quarter because the Company's sales cycle can be relatively long and
may depend on factors such as the size and scope of assignments, the general
ability of clients to terminate engagements without penalty, and general
economic conditions. In addition, the timing of the establishment of new
practice areas, geographic expansion and the hiring of key individuals can also
have an effect on consultant utilization. Seasonal factors such as vacation
days, total business days in a quarter or the business practices of clients,
such as deferred commitments on new projects until after the end of the calendar
or the client's fiscal year, can cause the Company to experience lower
consultant utilization. Because a significant percentage of the Company's
expenses are relatively fixed, a variation in the number or size of client
assignments or the timing of the initiation or the completion of client
assignments can cause significant variations in operating results from quarter
to quarter. In addition, the Company's annual employees' meeting, which this
year is scheduled for September 2000, can result in lower consultant utilization
in the quarter in which the meeting occurs.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The financial statements are annexed to this Report as pages F-2 through
F-18. An index to such statements appears on page F-l.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

    Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by this item with respect to the directors of the
Company is incorporated by reference from the Company's definitive proxy
statement, expected to be filed with the Commission on or prior to April 21,
2000. Information regarding executive officers is set forth in Part I of this
report.

ITEM 11. EXECUTIVE COMPENSATION

    The information required by this item is incorporated by reference from the
Company's definitive proxy statement, expected to be filed with the Commission
on or prior to April 21, 2000.

                                       16
<PAGE>   17


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this item is incorporated by reference from the
Company's definitive proxy statement, expected to be filed with the Commission
on or prior to April 21, 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this item is incorporated by reference from the
Company's definitive proxy statement, expected to be filed with the Commission
on or prior to April 21, 2000.

                                     PART IV

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

    The financial statements filed as part of this report are listed in the
accompanying Index to Financial Statements. The exhibits filed as part of this
report are listed in the accompanying Index to Exhibits. The Company will
furnish a copy of any exhibit listed to requesting stockholders upon payment of
the Company's reasonable expenses in furnishing those materials. No reports on
Form 8-K were filed by the Company during the last quarter of the period covered
by this report.




                                       17
<PAGE>   18


                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
    EXHIBIT
     NUMBER                                              DESCRIPTION                                                  PAGE
     ------                                              -----------                                                  ----
    <S>             <C>                                                                                               <C>
       2.1          Merger Agreement-- Superior                                                                       (1)

       2.2          Merger Agreement-- Unitive                                                                        (1)

       3.1          Amended and Restated Certificate of Incorporation of the Company, as amended                      (7)

       3.2          Form of By-Laws of the Company                                                                    (2)

       4.1          Specimen Common Stock Certificate                                                                 (2)

      10.1          Form of Indemnification Agreement between the Company and each of its directors and officers      (2)

      10.2          Form of Long-Term Incentive Compensation Plan                                                     (2)

      10.3          Amendment to Long-Term Incentive Plan                                                             (3)

      10.4          Second Amendment to Long-Term Incentive Plan                                                      (8)

      10.5          Lease dated March 21, 1996 between PMTC Limited Partnership and Superior                          (2)

      10.6          Form of Tax Indemnification Agreement                                                             (1)

      10.7          Compensation Agreement dated January 5, 1998 between Richard D. Helppie, Jr. and the Company      (7)

      10.8          Employment Agreement dated January 5, 1998 between Charles O. Bracken and the Company             (7)

      10.9          Employment Agreement dated January 5, 1998 between Robert R. Tashiro and the Company              (7)

      10.10         Employment Agreement dated January 5, 1998 between James T. House and the Company                 (7)

      10.11         Employment Agreement dated January 20, 1997 between Richard Saslow and the Company                (7)

      10.12         Promissory  Note dated April 20, 1995, executed by Charles O. Bracken in favor of Superior        (1)
                    Consultant Company, Inc

      10.13         Pledge Agreement dated April 20, 1995, between Charles O. Bracken and Superior Consultant         (1)
                    Company, Inc

      10.14         Promissory  Note dated April 20, 1995, executed by Robert R. Tashiro in favor of Superior         (1)
                    Consultant Company, Inc

      10.15         Pledge Agreement dated April 20, 1995 between Superior Consultant Company, Inc. and Robert        (1)
                    R. Tashiro

      10.16         Plan and Agreement of Merger dated July 28, 1997, among Superior Consultant Holdings              (4)
                    Corporation, CMSL Acquisition Corp., COMSUL, LTD., and certain shareholders of COMSUL, LTD

      10.17         Merger Agreement dated as of August 14, 1997 among Superior Consultant Holdings Corporation,      (5)
                    Chi Acquisition Co., The Chi Group, Inc. and certain stockholders of the Chi Group, Inc

      10.18         Asset Purchase Agreement, dated August 20, 1998 among Superior Consultant Holdings                (6)
                    Corporation, Enterprise Consulting Group, Inc., Whittaker Corporation and Aviant
                    Information, Inc

      21.1          Subsidiaries of Superior Consultant Holdings Corporation                                          (7)

      27.1          Financial Data Schedules                                                                          (*)
</TABLE>

----------

*  Filed herewith.




                                       18
<PAGE>   19


(1)  Incorporated by reference from the Registrant's Amendment No. 1 to Form S-1
     Registration Statement No. 333-10213 as filed on September 20, 1996.

(2)  Incorporated by reference from the Registrant's Form S-1 Registration
     Statement No. 333-10213 as filed on August 15, 1996.

(3)  Incorporated by reference from the Registrant's Information Statement on
     Form 14C as filed on November 7, 1997.

(4)  Incorporated by reference from the Registrant's Form 10-Q as filed on
     August 7, 1997.

(5)  Incorporated by reference from the Registrant's Form 8-K as filed on August
     28, 1997.

(6)  Incorporated by reference from the Registrant's Form 8-K as filed on
     September 2, 1998.

(7)  Incorporated by reference from the Registrant's Form 10-K as filed on March
     31, 1999.

(8)  Incorporated by reference from the Registrant's Information Statement on
     Form 14A as filed April 9, 1999.







                                       19
<PAGE>   20


                                   SIGNATURES

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

                          SUPERIOR CONSULTANT HOLDINGS
                          CORPORATION

March 30, 2000            By:      /s/ RICHARD D. HELPPIE, JR.
                              ---------------------------------------
                                       Richard D. Helppie, Jr.
                                       Chief Executive Officer

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

         SIGNATURES                           TITLE                   DATE
         ----------                           -----                   ----

/s/ REGINALD M. BALLANTYNE III     Director                       March 30, 2000
------------------------------
Reginald M. Ballantyne III

/s/ CHARLES O. BRACKEN             Vice Chairman, Executive Vice  March 30, 2000
----------------------             President and Director
Charles O. Bracken

                                   Director                       March   , 2000
---------------------                                                   --
Kenneth S. George

/s/ RICHARD D. HELPPIE, JR.        Chief Executive Officer        March 30, 2000
---------------------------        (Principal Executive
Richard D. Helppie, Jr.            Officer) and Director

/s/ JAMES T. HOUSE                 Chief Financial Officer        March 30, 2000
------------------                 (Principal Financial and
James T. House                     Accounting Officer)

/s/ BERNARD J. LACHNER             Director                       March 30, 2000
----------------------
Bernard J. Lachner

/s/ DOUGLAS S. PETERS              Director                       March 30, 2000
---------------------
Douglas S. Peters

/s/ RICHARD P. SASLOW              Vice President, General        March 30, 2000
---------------------              Counsel and Director
Richard P. Saslow

                                   Director                       March   , 2000
---------------------                                                   --
John L. Silverman




                                       20

<PAGE>   21
ITEM 8.  FINANCIAL STATEMENTS




            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

                                                                                                                     PAGE
                                                                                                                     ----
<S>                                                                                                                   <C>
Report of Independent Certified Public Accountants..............................................................      F-2

Consolidated Balance Sheets as of December 31, 1998 and 1999....................................................      F-3

Consolidated Statements of Operations for the years ended December 31, 1997, 1998 and 1999......................      F-4

Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1998 and 1999............      F-5

Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999......................      F-6

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




                                       F-1


<PAGE>   22

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





To the Board of Directors
Superior Consultant Holdings Corporation

     We have audited the accompanying consolidated balance sheets of Superior
Consultant Holdings Corporation (a Delaware corporation) and Subsidiaries as of
December 31, 1998 and 1999, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
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 consolidated financial position of
Superior Consultant Holdings Corporation and Subsidiaries as of December 31,
1998 and 1999, and the results of their consolidated operations and their
consolidated cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States.


                                               /s/GRANT THORNTON LLP




Southfield, Michigan
February 24, 2000



                                       F-2

<PAGE>   23
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                                               December 31,
                                                                                                           ---------------------
                                                               ASSETS                                        1998          1999
                                                                                                           --------      -------
                                                                                                               (In thousands)
<S>                                                                                                        <C>           <C>
Current assets
    Cash and cash equivalents........................................................................      $ 45,833      $ 16,691
    Short-term investments...........................................................................           -          13,908
    Accounts receivable, net.........................................................................        40,324        38,728
    Accrued interest receivable and prepaid expenses.................................................         1,867         3,201
    Refundable income taxes..........................................................................            -          5,482
    Deferred income taxes............................................................................         1,067            -
                                                                                                            -------       -------
                 Total current assets................................................................        89,091        78,010

Property and equipment, net..........................................................................        16,472        20,695
Goodwill, net........................................................................................        16,317        18,097
Investments..........................................................................................        11,736        69,683
Other long-term assets...............................................................................           110           112
                                                                                                           --------       -------
                 Total Assets........................................................................      $133,726      $186,597
                                                                                                           ========      ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
    Accounts payable.................................................................................      $  4,035      $  6,093
    Accrued liabilities..............................................................................         4,186         3,624
    Deferred revenue.................................................................................         2,425         6,254
    Deferred income taxes............................................................................            -            228
                                                                                                           --------       -------
                 Total current liabilities...........................................................        10,646        16,199

Long-term debt.......................................................................................            61            -
Deferred income taxes................................................................................           961        19,463
Deferred performance bonuses.........................................................................           564            -
Commitments and contingencies (Note 14)..............................................................            -             -
Stockholders' equity
    Preferred stock; authorized, 1,000,000 shares of $.01 par value; issued and outstanding,
       2,000 shares as of December 31, 1998 and 1999.................................................            -             -
    Common stock; authorized, 30,000,000 shares of $.01 par value; issued and outstanding,
        10,322,039 shares as of December 31, 1998 and 10,426,167 shares as of December 31, 1999......           103           104
    Additional paid-in capital.......................................................................       109,113       114,174
    Stockholders' notes receivable...................................................................          (658)         (636)
    Accumulated other comprehensive income...........................................................            -         33,588
    Treasury stock - at cost; no shares as of December 31, 1998 and 85,000 shares as of
       December 31, 1999.............................................................................            -         (2,270)
    Retained earnings................................................................................        12,936         5,975
                                                                                                           --------       -------
                 Total stockholders' equity..........................................................       121,494       150,935
                                                                                                           --------       -------
                 Total Liabilities and Stockholders' Equity..........................................      $133,726      $186,597
                                                                                                           =========     ========
</TABLE>


    The accompanying notes are an integral part of the financial statements.

                                       F-3
<PAGE>   24
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                           Year Ended December 31,
                                                                                           --------------------------------
                                                                                      1997           1998            1999
                                                                                     -------        -------         -------
                                                                                     (In thousands, except per share data)

<S>                                                                                  <C>           <C>             <C>
Revenues........................................................................     $76,895       $124,746        $149,349

Operating costs and expenses
    Cost of services............................................................      39,260         65,026          91,714
    Selling, general and administrative expenses................................      31,236         48,333          65,597
    Costs incurred in connection with new business initiative...................         -              -             4,840
                                                                                     -------        -------         -------
         Total operating costs and expenses.....................................      70,496        113,359         162,151
                                                                                     -------        -------         -------
         Earnings (loss) from operations........................................       6,399         11,387         (12,802)

Other income, principally interest..............................................      (2,728)        (4,572)         (1,874)
Costs incurred in connection with mergers.......................................         917            -               -
                                                                                     -------        -------         -------
         Earnings (loss) before income taxes (benefit)..........................       8,210         15,959         (10,928)

Provision (benefit) for income taxes............................................       3,625          6,331          (3,967)
                                                                                     -------        -------         -------
         Net earnings (loss)....................................................    $  4,585      $   9,628       $  (6,961)
                                                                                    ========      =========       =========


Net earnings (loss) per share
    Basic.......................................................................    $   0.54     $    0.94        $   (0.67)
                                                                                    ========      =========       =========
    Diluted.....................................................................    $   0.53     $    0.91        $   (0.67)
                                                                                    ========      =========       =========
Weighted average number of common shares outstanding
    Basic.......................................................................       8,519         10,266          10,340
                                                                                    ========      =========       =========
    Diluted.....................................................................       8,670         10,580          10,340
                                                                                    ========      =========       =========
</TABLE>


    The accompanying notes are an integral part of the financial statements.

                                       F-4

<PAGE>   25
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>




                                                            Preferred Stock      Common Stock     Additional    Stockholders'
                                                            ---------------     --------------      Paid-In         Notes
                                                            Shares   Amount     Shares  Amount      Capital      Receivable
                                                            ------   ------     ------  ------    ----------    -------------
                                                                                                        (In thousands)
<S>                                                         <C>     <C>        <C>       <C>      <C>            <C>
Balance at January 1, 1997................................     -    $  -         8,154   $  82    $ 42,966        $(698)
Net earnings..............................................     -       -            -       -           -            -
Issuance of common stock..................................     -       -         2,000      20      60,263           -
Shares issued in connection with acquisition..............     -       -            75      -        1,600           -
Exercise of stock options.................................     -       -            13      -          110           -
Stock repurchased and retired.............................     -       -           (34)     -          (70)          -
Compensation expense recognized for fair
  value of stock options granted..........................     -       -            -       -           28           -
Termination of deferred compensation plan.................     -       -            -       -          735           -
Payment on stockholders' notes receivable.................     -       -            -       -           -            19
                                                              ----  -----       ------   -----    --------        -----
Balance at December 31, 1997..............................     -       -        10,208     102     105,632         (679)
Net earnings..............................................     -       -            -       -           -            -
Shares issued in connection with acquisitions.............      2      -            72       1       2,582           -
Exercise of stock options.................................     -       -            42      -          640           -
Tax benefit relating to stock options exercised...........     -       -            -       -          251           -
Costs of follow on offering...............................     -       -            -       -          (22)          -
Compensation expense recognized for fair
  value of stock options granted..........................     -       -            -       -           30           -
Payment on stockholders' notes receivable.................     -       -            -       -           -            21
                                                              ----  -----       ------   -----    --------        -----
Balance at December 31, 1998..............................      2      -        10,322     103     109,113         (658)
Net loss..................................................     -       -            -       -           -            -
Shares issued in connection with acquisitions.............     -       -            46      -          640           -
Exercise of stock options.................................     -       -            58       1       1,253           -
Tax benefit relating to stock options exercised...........     -       -            -       -          160           -
Expense recognized for fair value of stock options
    and warrants granted..................................     -       -            -       -        3,008           -
Purchase of 85,000 shares of treasury stock...............     -       -            -       -           -
Net unrealized gain on investment securities..............     -       -            -       -           -
Payment on stockholders' notes receivable.................     -       -            -       -           -            22
                                                              ----  -----       ------   ----     --------        -----
Balance at December 31, 1999..............................      2   $  -        10,426   $104     $114,174        $(636)
                                                              ====  =====       ======   ====     ========        =====


<CAPTION>

                                                           Net
                                                        Unrealized
                                                         Gain on      Treasury      Retained
                                                       Investment       Stock       Earnings
                                                       Securities      Amount       (Deficit)     Total
                                                       ----------     --------     ----------    -------

<S>                                                    <C>            <C>           <C>          <C>
Balance at January 1, 1997.......................      $    -           $    -      $  (980)     $ 41,370
Net earnings.....................................           -                -        4,585         4,585
Issuance of common stock.........................           -                -           -         60,283
Shares issued in connection with acquisition.....           -                -           -          1,600
Exercise of stock options........................           -                -           -            110
Stock repurchased and retired....................           -                -         (297)         (367)
Compensation expense recognized for fair
  value of stock options granted.................           -                -           -             28
Termination of deferred compensation plan........           -                -           -            735
Payment on stockholders' notes receivable........           -                -           -             19
                                                       -------          -------     -------      --------
Balance at December 31, 1997.....................           -                -        3,308      $108,363
Net earnings.....................................           -                -        9,628         9,628
Shares issued in connection with acquisitions....           -                -           -          2,583
Exercise of stock options........................           -                -           -            640
Tax benefit relating to stock options exercised..           -                -           -            251
Costs of follow on offering......................           -                -           -            (22)
Compensation expense recognized for fair
  value of stock options granted.................           -                -           -             30
Payment on stockholders' notes receivable........           -                -           -             21
                                                       -------          -------     -------      --------
Balance at December 31, 1998.....................           -                -       12,936       121,494
Net loss.........................................           -                -       (6,961)       (6,961)
Shares issued in connection with acquisitions....           -                -           -            640
Exercise of stock options........................           -                -           -          1,254
Tax benefit relating to stock options exercised..           -                -           -            160
Expense recognized for fair value of stock options
    and warrants granted.........................           -                -           -          3,008
Purchase of 85,000 shares of treasury stock......           -            (2,270)         -         (2,270)
Net unrealized gain on investment securities.....       33,588               -                     33,588
Payment on stockholders' notes receivable........                            -           -             22
                                                       -------           -------    -------      --------
Balance at December 31, 1999.....................      $33,588           $(2,270)   $ 5,975      $150,935
                                                       =======           =======    =======      ========
</TABLE>


    The accompanying notes are an integral part of the financial statements.

                                       F-5

<PAGE>   26
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                   Year Ended December 31,
                                                                                            --------------------------------------
                                                                                             1997           1998           1999
                                                                                            -------       --------       ---------
                                                                                                       (In thousands)
<S>                                                                                         <C>           <C>            <C>
Cash flows from operating activities:
    Net earnings (loss)...............................................................      $ 4,585       $  9,628       $ (6,961)
    Adjustments to reconcile net earnings (loss) to net
       cash provided by (used in) operating activities:
          Depreciation and amortization of property and equipment.....................        1,176          2,382          5,817
          Goodwill amortization.......................................................          264            826          1,338
          Options and warrants issued to nonemployees.................................           28             30          3,008
          Bad debt expense............................................................          594            582            927
          Loss on disposal of property and equipment..................................          -              -              180
          Interest income on marketable debt security.................................          -              -             (323)
          Warrants from business partner..............................................          -              -              (29)
          Deferred income taxes (benefits)............................................          288           (104)        (3,065)
          Changes in operating assets and liabilities, net of effects from acquisitions:
              Accounts receivable.....................................................       (5,307)       (17,400)         1,539
              Accrued interest receivable and prepaid expenses........................         (852)           130         (1,259)
              Other long-term assets..................................................          177            -               (2)
              Refundable income taxes.................................................          -              -           (5,322)
              Accounts payable........................................................          146         (2,002)         1,984
              Accrued liabilities, deferred bonuses and compensation..................          132           (830)        (1,200)
              Deferred revenue........................................................         (106)           277          3,829
              Income taxes payable....................................................         (444)           (10)           -
                                                                                            -------       --------       --------
                 Net cash provided by (used in) operating activities..................          681         (6,491)           461

Cash flows from investing activities:
    Purchase of businesses............................................................       (3,375)       (12,824)        (3,235)
    Purchase of investment securities.................................................          -          (11,736)       (15,103)
    Purchase of property and equipment................................................       (4,634)       (10,880)       (10,210)
                                                                                            -------       --------       --------
                 Net cash used in investing activities................................       (8,009)       (35,440)       (28,548)

 Cash flows from financing activities:
    Repayment of lines of credit, net.................................................       (1,298)           -              -
    Repayments of long-term debt......................................................         (961)          (128)           (61)
    Proceeds from issuance of common stock............................................       60,283            -              -
    Principal payments on stockholders' notes receivable..............................           19             21             22
    Exercise of stock options.........................................................          110            640          1,254
    Stock repurchased.................................................................         (367)           -           (2,270)
    Costs of follow on offering.......................................................          -              (22)           -
                                                                                            -------       --------       --------
                 Net cash provided by (used in) financing activities..................       57,786            511         (1,055)
                                                                                            -------       --------       --------
Net increase (decrease) in cash and cash equivalents..................................       50,458        (41,420)       (29,142)
Cash and cash equivalents, beginning of period........................................       36,795         87,253         45,833
                                                                                            -------       --------       --------
Cash and cash equivalents, end of period..............................................      $87,253       $ 45,833       $ 16,691
                                                                                            =======       ========       ========

Supplemental disclosure of cash flow information - cash paid for income taxes.........      $ 3,375       $  6,454       $  4,110

Non-Cash Transactions:
    Shares issued in connection with acquisitions.....................................      $ 1,600       $  2,583       $    640
    Liabilities assumed in connection with acquisitions...............................          -            2,976            -
    Termination of deferred compensation plan.........................................          735            -              -
    Net unrealized gain on investments, net of deferred income taxes..................          -              -           33,588
    Tax benefit from exercise of stock options........................................          -              251            160
</TABLE>


    The accompanying notes are an integral part of the financial statements.

                                       F-6

<PAGE>   27
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
Superior Consultant Holdings Corporation and its wholly-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated.

     Business Activities and Reportable Segments

     The Company has three business and reportable segments: healthcare
consulting, enterprise-wide communications, and e-commerce/systems integration.
The healthcare consulting segment provides information technology, strategic and
operations management consulting services, and outsourcing services to a broad
cross-section of U.S. healthcare industry participants and information systems
vendors. The enterprise-wide communications segment assists U.S. companies in
various industries with network and telecommunication design and acquisition,
enterprise messaging, intranet and web strategies, workgroup consulting, as well
as software and application development solutions. The e-commerce/systems
integration segment assists U.S. hospitals, payors, physician networks,
internet-based healthcare companies and ancillary healthcare providers in
developing and implementing strategic business objectives as they relate to
e-commerce/systems integration and the efficient use of the internet in
healthcare.

     Cash and Cash Equivalents

     For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.

     Property and Equipment

     Property and equipment are stated at cost. Expenditures for renewals and
improvements that extend the useful life of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred.

     Investment Securities

     The Company follows Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Under
Statement No. 115, debt and marketable equity securities must be classified in
one of three categories: trading, available-for-sale, or held to maturity. At
December 31, 1999, the Company's investments in debt and drkoop.com and
Healtheon/WebMD Corp. equity securities qualify under the provisions of
Statement No. 115 as available-for-sale. Such securities are recorded at fair
value, and unrealized holding gains and losses, net of the related tax effect,
are not reflected in earnings but are reported as a separate component of
stockholders' equity until realized. A decline in the market value of an
available-for-sale security below cost that is deemed other than temporary would
be charged to earnings and result in the establishment of a new cost basis for
the security.

     Realized gains and losses will be determined on the specific identification
method and reflected in earnings. Interest on debt is accrued through the
balance sheet date.

     Income Taxes

     The Company accounts for income taxes using the asset and liability
approach. Deferred income taxes are provided for the differences between the tax
bases of assets or liabilities and their reported amounts in the financial
statements. The tax benefit from the exercise of certain stock options reduces
the Company's accrued income tax liability and increases additional paid-in
capital.




                                       F-7

<PAGE>   28
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Use of Estimates

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

     Fair Value of Financial Instruments

     The carrying value of the cash equivalents, investments in U.S. Government
securities, drkoop.com and Healtheon/WebMD approximates their estimated fair
values based upon quoted market prices. The fair value of stockholders' notes
receivable approximate their carrying values based on current rates for
instruments with similar characteristics. Company management believes the fair
value of its investment in Neoforma.com exceeds its carrying value, based on
quoted market prices subsequent to Neoforma's initial public offering in January
2000.

     Revenue Recognition

     The Company recognizes revenues as services are performed for projects
billed on a time and materials basis. For outsourcing engagements, the Company
recognizes revenue in the amount billable under the contract. On fixed-fee
projects, the Company recognizes revenue in a manner similar to the percentage
of completion basis. The Company periodically reviews long-term contracts to
identify any loss contracts, in which case any loss would be recognized
immediately. Deferred revenue represents collections made in advance of services
being performed.

     Stock-Based Compensation

     For options granted to employees, the Company follows the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and accordingly, recognizes no compensation expense for these option
grants. For options and warrants to non-employees, the Company follows the
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("SFAS 123"), and accordingly, recognizes expense
using a fair market value method for these option and warrant grants.

     Comprehensive Income

     Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, Reporting of Comprehensive Income
("SFAS 130"), which establishes standards for reporting and display of
comprehensive income and its components in a full set of financial statements.
SFAS 130 also requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.

     Total comprehensive income is summarized as follows:

<TABLE>
<CAPTION>

                                                              Year Ended December 31,
                                                            ---------------------------
                                                             1997       1998      1999
                                                            ------     ------   -------
     <S>                                                    <C>        <C>       <C>
     Net earnings (loss)................................... $4,585     $9,628   $(6,961)
     Other comprehensive income, net of income tax.........    -          -      33,588
                                                            ------     ------   -------
     Total comprehensive income............................ $4,585     $9,628   $26,627
                                                            ======     ======   =======
</TABLE>

                                       F-8

<PAGE>   29
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


1.   SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

     New Accounting Pronouncement

     The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133, Derivative Instruments and Hedging Activities
("SFAS 133"), which is effective for fiscal years beginning after June 15, 2000.
As the Company does not currently participate in any activity involving
derivatives, the Company anticipates that adoption of SFAS 133 will not have a
material effect on its consolidated financial statements.

     Reclassifications

     Certain reclassifications were made to the 1998 balance sheet to conform to
1999's presentation.

2.   ACQUISITIONS AND INVESTMENTS

     The following table summarizes business combinations completed in the years
ending December 31, 1997, 1998 and 1999:

<TABLE>
<CAPTION>

                                                                             Purchase         Common           Method of
          Entity Name                   Segment             Date              Price        Shares Issued      Accounting
-------------------------------       -----------        ----------       -------------    -------------      ----------
<S>                                   <C>                <C>                 <C>            <C>               <C>
     1997:
                                       Healthcare
The Kaufman Group                      Consulting         March 1997      $ 5.5 million          74,590       Purchase

COMSUL, Ltd.                           Enterprise          July 1997      $ 7.7 million         240,630       Pooling

                                       Healthcare
Chi Systems, Inc.                      Consulting        August 1997      $11.2 million         331,509       Pooling

     1998:

Network Services Division of
Multimedia Medical Systems, Inc.       Enterprise       January 1998      $ 4.9 million             -          Purchase

                                       Healthcare
Novum, Inc.                            Consulting         March 1998      $  .6 million           4,363        Purchase

                                       Healthcare
Lincoln Computer Corporation           Consulting         April 1998      $ 3.1 million          51,270        Purchase

Aviant Information, Inc.               Enterprise        August 1998      $ 5.2 million             -          Purchase

                                       Healthcare
Clark Information Services, Inc.       Consulting      November 1998      $ 2.5 million          55,886        Purchase

                                                                                             6,328 common
                                                                                               and 2,000
                                       Healthcare                                             convertible
ACA Holding, Inc.                      Consulting      December 1998      $ 2.6 million        preferred       Purchase

                                       Healthcare
Health Forecasting Group               Consulting      December 1998      $  .3 million            -           Purchase

     1999:

Integration Services Group
of Healthdyne Information              Healthcare
Enterprises                            Consulting       January 1999      $ 2.2 million            -           Purchase
</TABLE>

                                       F-9
<PAGE>   30
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


2.   ACQUISITIONS AND INVESTMENTS (CONTINUED)

     In connection with the acquisitions accounted for by the purchase method,
the Company has recorded goodwill totaling $4,975,000, $12,432,000 and
$3,118,000 during the years ended December 31, 1997, 1998 and 1999,
respectively. All goodwill is amortized on a straight-line basis over 15 years.
Certain acquisitions have contingent payment provisions. As of December 31,
1999, the maximum remaining contingent payments total approximately $7.9 million
($2.1 million payable in cash and $5.8 million in common stock).

     In December 1998, in connection with an acquisition, the Company issued
2,000 shares of preferred stock, contingently convertible into a maximum of $3.0
million in additional common shares through December 2000. The preferred stock
has a liquidation preference of $1 per share, and voting rights determined by a
formula with a floor of 21 votes per share.


     The following unaudited pro forma summary presents the results of
operations as though the Company and its acquired businesses accounted for using
the purchase method had combined as of January 1, 1997 and 1998, respectively.

                                                        Year Ended December 31,
                                                        -----------------------
                                                          1997         1998
                                                         ------       ------
                                                                    (Unaudited)
        Revenues....................................... $117,322     $137,385
        Net earnings...................................    1,364        7,485
        Net earnings per share
           Basic.......................................     0.16         0.73
           Diluted.....................................     0.16         0.71

     The above amounts are based upon certain assumptions and estimates which
the Company believes are reasonable. The pro forma results do not necessarily
reflect the results of operations as they would have been if the companies had
constituted a single entity during such years and is not necessarily indicative
of results which may be obtained in the future.

     In April 1998, the Company invested $6 million in drkoop.com, an internet
start-up company, and recorded its investment at cost. In June 1999 drkoop.com
completed its initial public offering, providing a readily determinable fair
value of the Company's investment in drkoop.com's stock. The Company's
investment was restricted by a lock-up agreement, which expired in December
1999. Further, the Company's investment was issued without registration and its
resale is governed by Rule 144 of the Securities and Exchange Commission. Based
on drkoop.com's trading volume since its IPO, the Company believes that its
entire investment is reasonably expected to qualify for sale prior to December
31, 2000. Therefore, the Company's investment in drkoop.com is subject to
Statement No. 115, and is reflected at fair value at December 31, 1999. The
Company's belief that its entire investment in drkoop.com is reasonably expected
to qualify for sale within one year, notwithstanding the Rule 144 limitations,
is a significant accounting estimate that if changed, could be material to the
consolidated financial statements.

     In May 1999, the Company invested $10 million in WebMD, Inc., a private
company, and recorded its investment at cost. WebMD was acquired by Healtheon
Corp., a public company, in November 1999, providing a readily determinable fair
value of the Company's investment in Healtheon/WebMD's stock. Therefore, the
Company's investment in Healtheon/WebMD is subject to Statement No. 115, and is
reflected at fair value at December 31, 1999.

     In October 1999, the Company invested $5 million in Neoforma.com, a private
company, and recorded its investment at cost at December 31, 1999. In January
2000, Neoforma.com completed its IPO, providing a readily determinable fair
value of the Company's investment in Neoforma.com's stock.



                                      F-10


<PAGE>   31
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)



3.   AVAILABLE-FOR-SALE SECURITIES

     Securities classified as available-for-sale under Statement No. 115 at
December 31, 1999 are summarized as follows:

<TABLE>
<CAPTION>

                                                                                     Gross       Gross
                                                                                  Unrealized   Unrealized
                                                                                    Holding     Holding     Market
                                                                        Cost         Gains       Losses     Value
                                                                      --------    ----------   ----------   ------
     <S>                                                              <C>         <C>          <C>          <C>
     U.S. Government Securities maturing after 10 years
        (cost includes accrued interest)........................      $  6,009    $    -      $ (1,323)    $ 4,686
     Common Stock...............................................        16,089      57,773         -        73,862
                                                                       -------     -------    --------     --------
                                                                      $ 22,098    $ 57,773    $ (1,323)    $ 78,548
                                                                      ========    ========    ========     ========
</TABLE>

     Differences between cost and market of $56,450,000 (less deferred taxes of
$22,862,000) were credited to a separate component of stockholder's equity
called "Net Unrealized Investment Gains" as of December 31, 1999.

     Securities available for sale at December 31, 1998 consisted of U.S.
Government Securities maturing after ten years with a cost and market value of
$5,686,000.

4.   ALLOWANCE FOR DOUBTFUL ACCOUNTS

     A summary of activity in connection with the allowance for doubtful
accounts follows:

<TABLE>
<CAPTION>

                                                                                       Year Ended December 31,
                                                                                     --------------------------
                                                                                     1997       1998      1999
                                                                                     -----     ------    -------
     <S>                                                                             <C>       <C>       <C>
     Allowance for doubtful accounts at beginning of year.......................     $ 478     $   692   $ 1,010
     Write-offs.................................................................      (380)       (264)     (187)
     Charged to bad debt expense................................................       594         582       927
                                                                                     -----     -------   -------
     Allowance for doubtful accounts at end of year.............................     $ 692     $ 1,010   $ 1,750
                                                                                     =====     =======   =======
</TABLE>

5.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:
<TABLE>
<CAPTION>

                                                                                                       Range of
                                                                                   December 31,
                                                                                 -----------------
                                                                                  1998       1999        Lives
                                                                                 -------    -------    --------
                  <S>                                                           <C>        <C>        <C>
                  Office furniture and equipment.............................   $  4,121   $  6,035   5-7 Years
                  Computer equipment.........................................     12,909     16,815   3-5 Years
                  Computer software..........................................      2,131      3,230   3-5 Years
                  Buildings..................................................      3,152      3,799    40 Years
                  Leasehold improvements.....................................        601      2,420   2-7 Years
                                                                                  ------     ------
                                                                                  22,914     32,299
                        Less:  accumulated depreciation and amortization.....     (6,442)   (12,002)

                  Land.......................................................        -          398
                                                                                  ------     ------
                  Property and equipment, net................................   $ 16,472   $ 20,695
                                                                                ========   ========
</TABLE>

                                      F-11

<PAGE>   32
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


6.   GOODWILL

     Goodwill represents the excess of the purchase price over the net assets
acquired in connection with the Company's acquisitions, and consists of the
following:
                                                              December 31,
                                                          --------------------
                                                            1998        1999
                                                          --------    --------
     Goodwill..........................................   $ 17,407    $ 20,525
        Less:  accumulated amortization................     (1,090)     (2,428)
                                                          --------    --------
     Goodwill, net.....................................   $ 16,317    $ 18,097
                                                          ========    ========

     The Company monitors events and changes in circumstances that could
indicate the carrying amount of goodwill may not be recovered. When events or
changes in circumstances are present that indicate the carrying amount of an
intangible asset may not be recoverable, the Company assesses the recoverability
by determining whether the carrying value of such asset will be recoverable
through the future cash flows expected from the use of the asset and its
eventual disposition.

7.   DEBT

     At December 31, 1998 and 1999, the Company has a line of credit with a bank
which allows borrowings of up to $3.0 million, due on demand, with no scheduled
maturity date. Borrowings bear interest at the bank's prime rate and are
collateralized by all assets of the Company. At December 31, 1998 and 1999,
there were no amounts outstanding on this line.

8.   ACCRUED LIABILITIES

     Accrued liabilities consist of the following:
                                                              December 31,
                                                            -----------------
                                                             1998       1999
                                                            ------     ------
     Payroll and withholding taxes......................    $1,403     $2,036
     Commissions........................................        11          -
     Profit sharing.....................................       422          -
     Bonuses............................................     2,350      1,588
                                                            ------     ------
                Total accrued liabilities...............    $4,186     $3,624
                                                            ======     ======




                                      F-12


<PAGE>   33
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)



9.   STOCK OPTIONS AND WARRANTS

     In 1996, the Company adopted its Long-Term Incentive Plan (the Plan).
Pursuant to the Plan and its amendment, a maximum of 4,000,000 shares of common
stock were reserved for the granting of incentive, nonstatutory or formula
options, restricted stock grants and other equity based compensation. The
options, other than the director formula options, may have terms not exceeding
ten years when granted. The exercise price of each option equals the market
price of the Company's stock on the date of grant.

     Had compensation cost for the Plan been determined based on the fair value
of all the options at the grant dates consistent with SFAS 123, the Company
would have reported the pro forma amounts as follows:

<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
                                                                   ----------------------------
                                                                    1997       1998      1999
                                                                   ------     ------   --------
             <S>                                                   <C>        <C>      <C>
             Pro forma net earnings (loss)....................     $4,085     $7,993   $(11,929)
             Pro forma net earnings (loss) per share
                Basic.........................................       0.48       0.78      (1.15)
                Diluted.......................................       0.47       0.76      (1.15)
</TABLE>

     For purposes of pro forma disclosures, the estimated fair value of the
stock options are amortized to expense over the options' vesting period. The
fair value of these stock options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                                                                   ---------------------------
                                                                    1997       1998       1999
                                                                   ------     ------     ------
             <S>                                                   <C>        <C>        <C>
             Risk free interest rate..........................       6.38%      4.63%     6.14%
             Dividend yield...................................          0%         0%        0%
             Volatility factor................................        .53        .52       .75
             Expected option term life in years...............        5.0        5.0       5.0
</TABLE>

     A summary of the status of the Company's options and warrants as of
December 31, 1997, 1998 and 1999, and changes during the years then ended, is
presented below:

<TABLE>
<CAPTION>

                                                                           1997                1998                1999
                                                                     -----------------   -----------------   -----------------
                                                                              Weighted            Weighted            Weighted
                                                                               Average             Average             Average
                                                                     Shares   Exercise   Shares   Exercise   Shares   Exercise
                                                                      (000)     Price     (000)     Price     (000)     Price
                                                                     ------   --------   ------   --------   ------   --------
     <S>                                                             <C>      <C>        <C>      <C>        <C>      <C>
     Outstanding at beginning of year........................          248    $16.00       548    $21.43     1,106     $27.57
     Granted.................................................          341    $24.07       638    $26.91     1,454     $34.82
     Exercised...............................................          (13)   $ 9.83       (42)   $15.19       (58)    $21.59
     Forfeited...............................................          (28)   $ 9.60       (38)   $32.75      (191)    $31.55
                                                                      ----               -----               -----
     Outstanding at year-end.................................          548    $21.43     1,106    $27.57     2,311     $32.13
     Exercisable at year-end.................................          113    $19.01       188    $16.37         2     $10.31
     Weighted-average fair value of grants during the year...          341    $18.92       638    $16.26     1,454     $20.50
</TABLE>



                                      F-13

<PAGE>   34
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)



9.   STOCK OPTIONS AND WARRANTS (CONTINUED)

     The following information applies to options and warrants outstanding at
December 31, 1999:

<TABLE>
<CAPTION>

                                                          Number      Weighted-Average      Weighted-Average
         Range of Exercise Prices                       Outstanding    Exercise Price        Remaining Life
         --------------------                           -----------   ----------------      ----------------
         <S>                                            <C>           <C>                    <C>
         $10.31 - $24.75...........................         413            $19.73              2.50 years
         $28.00 - $35.75...........................         982            $31.24              3.62 years
         $36.00 - $45.13...........................         916            $36.81              3.93 years
                                                           -----
                                                           2,311
                                                           =====
</TABLE>

10.  COSTS INCURRED IN CONNECTION WITH NEW BUSINESS INITIATIVE

     In May 1999, the Company entered into an alliance agreement with a business
partner and incurred certain one-time costs. These costs consist of:

              Issuance of warrants............................       $2,856
              Additional depreciation expense due
                 to change in estimated useful lives..........        1,507
              Bonuses.........................................          477
                                                                     ------
                                                                     $4,840
                                                                     ======

     The fair value of the warrants was calculated at the date of grant using a
Black-Scholes pricing model with the following assumptions: risk-free interest
rate of 5%, dividend yield of 0%, volatility factor of 42%, and expected term of
5 years.

     The Company agreed to install specified types of software in its own
operations and personal computers. As a result, the estimated useful lives of
certain software and hardware in use at the time the alliance agreement was
signed were shortened. The effect of the change was to increase the net loss for
the year ended December 31, 1999 by $933,000 or $0.09 per basic and diluted
share.

     In addition, during the year ended December 31, 1999, the Company incurred
other operating costs in connection with execution of the alliance agreement
commitments. A portion of these costs was funded by the business partner, and
was recorded as a reduction to expense. The reduction in cost of services and
selling, general and administrative expense for the year ended December 31, 1999
was $700,000 and $2,549,000, respectively.



                                      F-14


<PAGE>   35
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)



11.  INCOME TAXES The income tax provision (benefit) consists of the following:

<TABLE>
<CAPTION>

                                                                                          Year Ended December 31,
                                                                                        ---------------------------
                                                                                          1997      1998     1999
                                                                                        -------    ------   -------
             <S>                                                                        <C>        <C>      <C>
             Current federal income taxes.......................................        $ 3,071    $5,339   $  (517)
             Deferred federal income taxes......................................            288      (104)   (2,557)
             Current state income taxes.........................................            289       845      (545)
             Deferred state income taxes........................................             -         -       (508)
             Tax benefit from exercise of stock options credited
                directly to additional paid-in capital..........................             -        251       160
             Investment tax credits.............................................            (23)       -         -
                                                                                        $ 3,625    $6,331   $(3,967)
                                                                                        =======    ======   =======
</TABLE>

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

<TABLE>
<CAPTION>

                                                                            1998       1999
                                                                          -------     -------
         <S>                                                              <C>         <C>
         Deferred tax assets:
             Deferred compensation....................................... $   362     $   183
             Allowance for bad debts.....................................     343         709
             Deferred revenue............................................     709       2,533
             Options or warrants issued to non-employees.................      -         1,230
             Investment in debt security.................................      -           536
             Other.......................................................      -            62
                                                                            ------     -------
                Total deferred tax assets................................    1,414       5,253

         Deferred tax liabilities:
             Change from cash to accrual basis of tax accounting.........      385         229
             Depreciation................................................      923       1,303
             Investment in drkoop.com....................................      -        22,449
             Investment in Healtheon/WebMD...............................      -           949
             Other.......................................................      -            14
                                                                            ------     -------
                Total deferred tax liabilities...........................    1,308      24,944
                                                                            ------     -------
                Total net deferred tax asset (liability).................  $   106    $(19,691)
                                                                           =======    ========
</TABLE>

     A reconciliation of the provision for income taxes follows:

<TABLE>
<CAPTION>

                                                                              Year Ended December 31,
                                                                            ----------------------------
                                                                             1997       1998       1999
                                                                            ------     ------    -------
         <S>                                                                <C>        <C>
         Expected expense (benefit) at the statutory rate..............     $2,791     $5,426    $(3,716)
         Permanent differences; expenses recognized for book, not tax          218        308        402
         Merger costs..................................................        312        -          -
         State income taxes (benefit), net of federal income taxes.....        191        558       (688)
         Investment tax credits and other..............................        113         39         35
                                                                             -----      -----      -----
             Total income taxes (benefit)..............................     $3,625     $6,331    $(3,967)
                                                                            ======     ======    =======
</TABLE>

                                      F-15

<PAGE>   36
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)



12.   PROFIT-SHARING AND DEFERRED COMPENSATION PLAN

     The Company has a profit-sharing plan which qualifies under Section 401(a)
of the Internal Revenue Code. Eligible employees may contribute up to the
maximum allowable under tax regulations. Company contributions are fully
discretionary. Profit sharing expense was $420,000 and $422,000 for the years
ended December 31, 1997 and 1998, respectively. There were no contributions made
during the year ended December 31, 1999.

     Prior to its merger with the Company, Chi had a non-qualified deferred
compensation plan covering selected executives, all of whom were stockholders.
Expense recognized under the plan was approximately $30,000 for the year ended
December 31, 1997. In connection with Chi's merger with the Company in August
1997, the plan was terminated, and the then existing liability was reflected as
an increase to additional paid-in capital.

13.  NET EARNINGS (LOSS) PER SHARE

     Earnings per common share ("EPS") data were computed as follows:

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                            ----------------------------
                                                                             1997      1998       1999
                                                                            ------    -------    -------
         <S>                                                                <C>       <C>        <C>
         Basic EPS:
             Net earnings (loss).......................................     $4,585    $ 9,628    $(6,961)
             Weighted-average common shares outstanding................      8,519     10,266     10,340
             Basic earnings (loss) per share...........................     $ 0.54    $  0.94    $ (0.67)
                                                                            ======    =======    =======
         Diluted EPS:
             Net earnings (loss).......................................     $4,585    $  9,628   $(6,961)
             Weighted-average common shares outstanding................      8,519     10,266     10,340
             Dilutive effect of stock options..........................        151        314        -
                                                                            ------    -------    -------
             Weighted-average shares assuming dilution.................      8,670     10,580     10,340
             Diluted earnings (loss) per share.........................     $ 0.53    $  0.91    $ (0.67)
                                                                            ======    =======    =======
</TABLE>

     Options and warrants to purchase approximately 77,000, 114,000 and
2,311,000 shares of common stock with a weighted average exercise price of
$25.64, $39.97 and $32.13 were outstanding at December 31, 1997, 1998 and 1999,
respectively, but were excluded from the computation of common share equivalents
because to do so would have been antidilutive for the periods presented.


                                      F-16


<PAGE>   37
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


14.  COMMITMENTS AND CONTINGENCIES

     The Company leases office facilities, certain equipment and vehicles under
lease agreements classified as operating leases. Future minimum lease payments
under such noncancelable operating leases as of December 31, 1999 are summarized
as follows:

<TABLE>
<CAPTION>

                                                                     Related          All       Sublease
                                                                      Party          Other       Income            Total
                                                                    ----------     ----------  -----------      -----------
         <S>                                                        <C>            <C>           <C>            <C>
         Years ending December 31:
             2000.............................................      $      539     $    2,882    $   (542)      $     2,879
             2001.............................................             539          2,389        (246)            2,682
             2002.............................................             539          2,081         (29)            2,591
             2003.............................................             539          1,866           -             2,405
             2004.............................................             539          1,101           -             1,640
             Thereafter.......................................             806          1,362           -             2,168
                                                                    ----------    -----------    ---------      -----------
             Total future minimum lease payments..............      $    3,501    $    11,681    $   (817)      $    14,365
                                                                    ==========    ===========    =========      ===========
</TABLE>

     Net rent expense amounted to approximately $1,614,000, $2,751,000 and
$3,566,000 for the years ended December 31, 1997, 1998 and 1999, respectively,
and has been included in selling, general and administrative expenses in the
accompanying statements of operations. The rent expense was offset by sublease
income of approximately $69,000 and $196,000 for the years ended December 31,
1998 and 1999, respectively.

     Commencing July 1, 2001, Superior is required to pay a business partner a
royalty of approximately 3.4% of a certain portion of its systems integration
revenue. The royalty, up to a cumulative maximum amount of $11,300,000, will be
payable in the years the related revenue is recognized. In addition, as of
December 31, 1999 the Company has agreed to contribute a minimum of $500,000
over the next two years to a joint marketing fund.

     The Company is party to litigation matters and claims which are normal in
the course of its operations, and while the results of litigation and claims
cannot be predicted with certainty, management believes the final outcome of
such matters will not have a materially adverse effect on the Company's
consolidated financial position.

15.  RELATED PARTY TRANSACTIONS

     The Company leases an office facility from an entity partially owned by two
stockholders. Net rent expense for this lease was approximately $400,000,
$463,000 and $469,000 for the years ended December 31, 1997, 1998 and 1999,
respectively. The rent expense was offset by sublease income of approximately
$69,000 for the years ended December 31, 1998 and 1999.

     During 1995, Superior issued 658,833 shares of its common stock to two
stockholders in exchange for two promissory notes totaling $750,000, and the
cancellation of outstanding stock options. The notes bear interest at 7.7% per
annum and require annual payments totaling $75,000. Interest income on these
notes totaled approximately $56,000, $54,000 and $53,000 for the years ended
December 31, 1997, 1998 and 1999, respectively.

     The Company charters aircraft from an entity owned by an
officer/stockholder. Payments to the entity were approximately $224,000,
$662,000 and $605,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.

     During the years ended December 31, 1998 and 1999, the Company recognized
revenue of approximately $1,500,000 and $1,100,000, respectively, from entities
in which it has an equity interest.

16.  SEGMENT FINANCIAL INFORMATION

     See Note 1 for a description of the Company's segments. The Company's
reportable segments are business units that offer and provide different services
through different means. The Company's recruiting, training, information
technology, merger and acquisition, accounting, finance and senior management
functions are combined into the unallocated SG&A expenses. Unallocated assets
consist principally of cash, accrued interest receivable, prepaid expenses and
investment securities.


                                      F-17

<PAGE>   38
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)



16.  SEGMENT FINANCIAL INFORMATION (CONTINUED)

     The Company evaluates segment performance and allocates resources based on
gross profit. Intrasegment services are provided at cost. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies in Note 1.

<TABLE>
<CAPTION>

                                                                                      Year Ended December 31,
                                                                                -----------------------------------
                                                                                   1997        1998         1999
                                                                                ----------   ---------    ---------
         <S>                                                                       <C>        <C>          <C>
         Revenues:
             Healthcare consulting.....................................         $   63,509   $ 105,644    $ 133,339
             Enterprise-wide communications............................             13,396      19,102       15,316
             e-commerce/systems integration............................                -           -            694
                                                                                ----------   ---------    ---------
                   Subtotal............................................             76,905     124,746      149,349
             Intrasegment elimination - healthcare consulting..........                (10)        -            -
                                                                                ----------   ---------    ---------
                   Consolidated revenues...............................         $   76,895   $ 124,746    $ 149,349
                                                                                ==========   =========    =========
         Gross Profit and Income Statement Reconciliation:
             Healthcare consulting.....................................         $   33,143   $  50,838    $  54,699
             Enterprise-wide communications............................              4,492       8,882        2,961
             e-commerce/systems integration............................                -           -            (25)
                                                                                ----------   ---------    ---------
                   Consolidated gross profit...........................             37,635      59,720       57,635

             Unallocated:
                SG&A expenses..........................................             31,236      48,333       65,597
                Costs incurred in connection with new
                   business initiative.................................                -           -          4,840
                Other income, principally interest.....................             (2,728)     (4,572)      (1,874)
                Merger expenses........................................                917         -            -
                                                                                ----------   ---------    ---------
                   Subtotal............................................             29,425      43,761       68,563
                                                                                ----------   ---------    ---------
                   Consolidated earnings (loss) before income taxes....         $    8,210   $  15,959    $ (10,928)
                                                                                ==========   =========    =========
         Depreciation and amortization:
             Healthcare consulting.....................................         $      484   $   1,493    $   4,636
             Enterprise-wide communications............................                956       1,715        2,519
             e-commerce/systems integration............................                -           -            -
                                                                                ----------   ---------    ---------
                   Consolidated depreciation and amortization..........         $    1,440   $   3,208    $   7,155
                                                                                ==========   =========    =========
         Identifiable assets:
             Healthcare consulting.....................................         $   21,975   $  63,899    $  71,105
             Enterprise-wide communications............................              8,232      15,374        6,002
             e-commerce/systems integration............................                -           -            351
             Unallocated...............................................             89,194      54,453      109,139
                                                                                ----------   ---------    ---------
                   Consolidated total assets...........................           $119,401   $ 133,726    $ 186,597
                                                                                ==========   =========    =========
         Expenditures for long-term assets:
             Healthcare consulting.....................................         $    5,605   $  14,075    $   7,524
             Enterprise-wide communications............................              3,316      16,261        5,921
             e-commerce/systems integration............................                -           -            -
                                                                                ----------   ---------    ---------
                                                                                $    8,921   $  30,336    $  13,445
                                                                                ==========   =========    =========
</TABLE>
                                      F-18