<PAGE>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
          THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 1998

                         COMMISSION FILE NO.: 000-22035

                        METRO INFORMATION SERVICES, INC.
             (Exact name of registrant as specified in its charter)

        VIRGINIA                                            54-1112301
(State of incorporation)                                    (I.R.S. employer
                                                         identification number)

POST OFFICE BOX 8888 VIRGINIA BEACH, VIRGINIA               23450
(Address of principal executive office)                     (Zip code)

Registrant's telephone number, including area code:         (757) 486-1900

Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK,
                                                            $0.01 PAR VALUE


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

     The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 1, 1999 was approximately $126 million, based on the
average of the high and low prices of the registrant's Common Stock on The
Nasdaq Stock Market on such date.

     As of March 1, 1999, the registrant had issued and outstanding 14,887,670
shares of Common Stock, $0.01 par value.

     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.

================================================================================

                                    Page 1


<PAGE>

                        METRO INFORMATION SERVICES, INC.
                                 1998 FORM 10-K
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>


                                                                                                         PAGE
<S>      <C>                                                                                             <C>
PART I
         Item 1.     Business                                                                              3
         Item 2.     Properties                                                                           10
         Item 3.     Legal Proceedings                                                                    11
         Item 4.     Submission of Matters to a Vote of Security Holders                                  12
         Executive Officers of the Registrant                                                             12

PART II

         Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters                13
         Item 6.     Selected Financial Data                                                              15
         Item 7.     Management's Discussion and Analysis of Financial Condition and Results of
                      Operations                                                                          16
         Item 7A.    Quantitative and Qualitative Disclosures about Market Risk                           29
         Item 8.     Consolidated Financial Statements and Supplementary Data                             30
         Item 9.     Changes in and Disagreements with Accountants on Accounting and
                      Financial Disclosure                                                                46

PART III

         Item 10.    Directors and Executive Officers of the Registrant; Section 16(a) Beneficial
                       Ownership Reporting Compliance                                                     47
         Item 11.    Executive Compensation                                                               47
         Item 12.    Security Ownership of Certain Beneficial Owners and Management                       51
         Item 13.    Certain Relationships and Related Transactions                                       52

PART IV

         Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K                      52

</TABLE>


                                     Page 2
<PAGE>

PART I

ITEM 1.    BUSINESS

      THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS AS DEFINED IN THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. FOR THIS PURPOSE, ANY STATEMENTS
CONTAINED IN THIS REPORT THAT ARE NOT STATEMENTS OF HISTORICAL FACT ARE
FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, THE WORDS
"BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE IMPORTANT FACTORS DISCUSSED
IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - FACTORS ASSOCIATED WITH FUTURE OPERATIONS" AMONG OTHERS, COULD 
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY FORWARD-
LOOKING STATEMENTS MADE IN THIS REPORT AND THOSE PRESENTED ELSEWHERE BY 
MANAGEMENT FROM TIME TO TIME. PLEASE REFER TO THE CAUTIONARY STATEMENT THAT 
APPEARS AT THE BEGINNING OF "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS" FOR MORE INFORMATION.

DESCRIPTION OF THE BUSINESS

     Metro Information Services, Inc. was incorporated July 1, 1979 in Virginia.
The headquarters of Metro Information Services, Inc. together with its
consolidated subsidiary ("Metro" or the "Company") is located in Virginia Beach,
Virginia.

      Metro provides a wide range of information technology ("IT") consulting
and custom software development services through 44 offices in 41 metropolitan
markets in the United States and Puerto Rico. The Company's more than 2,500
consultants, approximately 56% of whom are salaried, work with clients' internal
IT departments on all aspects of computer systems and applications development.
Services performed by Metro include application systems development and
maintenance, IT architecture and engineering, systems consulting, project
outsourcing and general support services. The Company supports all major
computer technology platforms (mainframe, mid-range, client/server and network
environments) and supports client projects using a broad range of software
applications. For example, the Company implements SAP's client/server software,
custom develops Oracle, Informix, DB2, Visual Basic, C++ and Web-based
applications, implements and supports Windows NT, Novell and UNIX based network
environments and supports numerous other application environments.

DEVELOPMENT OF THE BUSINESS

         Over the last five years Metro has experienced continual growth. On
December 31, 1993, the Company had 15 offices and 675 full-time consultants.
Since December 31, 1993, Metro has grown its revenue at a compound annual growth
rate of 32%. This growth was aided by a strong economy, increased use of and
reliance on IT, significant changes in computer technologies, the migration from
centralized mainframe computer systems to distributed client/server environments
and a trend among corporate America towards outsourcing IT services due to the
shortage of in-house expertise and resources to address the variety and
complexity of IT projects. During the last four years, the Company accelerated
its rate of new office openings from one office per year to as many as four
offices per year. The Company also invested heavily in computerized systems
custom designed for Metro's approach to the IT services industry and
communications systems to enhance the flow of information within the Company.

      Metro was a privately-owned company until January 29, 1997, when the
Company consummated an initial public offering of 3,100,000 shares of its Common
Stock at a price of $16.00 per share. In the offering, the Company issued
2,300,000 shares and a shareholder of the Company sold 800,000 shares. On
February 3, 1997, the several underwriters of the initial public offering
exercised their over-allotment option, purchasing 465,000 shares of Common Stock
from several other shareholders of the Company at a price of $16.00 per share.
The net proceeds to the Company from the offering were $33,144,000. In
connection with the public offering, the Company terminated its S corporation
election resulting in the Company becoming fully subject to federal and state
income taxes effective January 1, 1997. On January 20, 1997, the Company
distributed $9,000,000 to its shareholders, approximating the estimated
aggregate undistributed amount of income on which the Company's shareholders
were required to pay income taxes for tax years 1987 through 1996.



                                     Page 3
<PAGE>

      On July 1, 1997, Metro completed its first acquisitions, adding offices in
Columbia, South Carolina and Kansas City, Missouri. On December 2, 1998, Metro
completed its third acquisition, adding an office in the Palo Alto/Silicon
Valley area of California. At the end of 1998, the Company had grown to 34
offices located in 18 states and Puerto Rico and more than 2,050 full-time
consultants.

      In January 1999, the Company completed its fourth acquisition, adding 
an office in Los Angeles, California and opened an office in Portland, 
Oregon. On February 1, 1999, Metro completed its fifth and sixth 
acquisitions, adding offices in Irvine and San Francisco, California. 
Effective March 1, 1999, the Company completed its seventh acquisition, 
adding offices in Camp Hill (Harrisburg), Altoona and Pittsburgh, 
Pennsylvania, Charlotte, North Carolina, Hagerstown, Maryland and Kansas 
City, Missouri and bringing the total number of offices to 44 in 41 
metropolitan markets. As a result of these acquisitions, the Company 
exhausted the proceeds of its initial public offering and incurred 
approximately $36 million in debt on its credit facilities.

     The Company's shares are listed on The Nasdaq Stock Market under the symbol
"MISI."

INDUSTRY OVERVIEW

      Rapid technological advances have accelerated the growth of the IT
industry in recent years. These advances include more powerful and less
expensive computer technology, the transition from mainframe computer systems to
open and distributed computing environments and the advent of capabilities such
as relational databases, imaging, software development productivity tools and
web enabled software. These advances have expanded the benefits that users can
derive from computer-based information systems and improved the
price-to-performance ratios of such systems. As a result, an increasing number
of companies are employing IT in new ways, often to gain competitive advantages
in the marketplace, and IT services have become an important component of their
long-term growth strategies. The same advances that have enhanced the benefits
of computer systems have rendered the development and implementation of such
systems increasingly complex. In addition, there is a shortage of IT consultants
qualified to support these systems. Accordingly, organizations are turning to IT
services firms such as Metro to develop, support and strengthen their internal
IT departments and systems. In November 1998, Dataquest, an industry research
organization, estimated that in 1998 the size of the IT professional services
market in the United States, consisting of consulting services, development and
integration services, education and training and management services, was $98.1
billion. Dataquest estimates that this market will grow at a compound annual
rate of 16.5%, reaching $180.7 billion by 2002.

BUSINESS STRATEGY

      The key components of the Company's business strategy are:

      ATTRACT, DEVELOP AND RETAIN QUALIFIED CONSULTANTS. The Company seeks to
attract, develop and retain qualified consultants by focusing primarily on IT
services, providing leadership and management support through effective and open
communication, developing consultants through professional and technical
training and education programs, providing challenging project opportunities
with significant client responsibility and offering competitive compensation and
benefits that recognize the individual needs of each consultant. The Company
maintains a proprietary database of current, prospective and former consultants
to help it identify and recruit qualified consultants. In addition, the
Company's presence in 41 metropolitan markets enhances the Company's ability to
match consultants' desired locations and technical abilities with client needs.
Metro recognizes that its success can be sustained only through the efforts and
quality of its consultants. To this end, management provides responsive
technical and professional support, promotes a sense of responsibility and
rewards quality performance through numerous incentive programs and awards.

      BUILD LONG-TERM PARTNERSHIPS WITH CLIENTS. The Company's goal is to have
its clients view Metro as an extension of their IT departments and as a
long-term partner that is able to fulfill their IT services requirements. As a
result, the Company emphasizes a partnership approach to its clients, rather
than a one-time project or assignment approach. To develop these relationships,
the Company spends a significant amount of time and resources tracking and
anticipating the needs of its clients. The Company works to maintain close
communications with its clients during and at the conclusion of each project
with a view to achieving quality results and assessing future opportunities.


                                      Page 4
<PAGE>

      In 1996, 1997 and 1998, the Company provided IT consultants to
approximately 324, 396 and 476 clients, respectively (excluding clients that
generated less than $25,000 in revenue during such year). In each of 1996, 1997
and 1998, at least 85% of the Company's revenue came from clients who were
clients in the prior year.

      The Company's 10 largest clients by revenue in 1998 had each been a client
for over five years, while the Company's two largest clients for 1998 had each
been a client for over 10 years. The Company's 10 largest clients accounted for
approximately 29.1%, 29.8% and 31.3% of the Company's revenue in 1996, 1997 and
1998, respectively. The Company's largest client accounted for approximately
6.5%, 5.8% and 4.4% of the Company's revenue in 1996, 1997 and 1998,
respectively.

 The Company serves clients operating in a wide variety of industries and many
of these clients are engaged in multiple lines of business. In the following
chart these clients have been grouped according to what we believed to be their
principal business area. The approximate percentage of the Company's revenue by
industry group for the years ended December 31, 1996, 1997 and 1998 follows:

<TABLE>

                                       1996        1997        1998
                                       ----        ----        ----
<S>                                   <C>         <C>         <C>
Banking                                8.9%        9.6%       11.0%
Communications                        13.1%       11.9%       10.2%
Financial Services                     6.9%        7.8%        8.6%
Food                                   2.6%        1.7%        1.1%
Healthcare                             9.0%        8.1%        6.2%
Industrial                             1.2%        2.5%        3.0%
Insurance                              1.5%        2.5%        2.5%
Manufacturing & Disribution           10.7%        9.7%        9.4%
Oil & Gas                              1.7%        1.0%        1.2%
Other Services                         3.5%        6.1%        6.5%
Publishing & Broadcasting              1.6%        1.8%        2.1%
Retail                                 3.7%        3.8%        4.4%
State and Local Government             6.9%        7.2%        7.2%
Technology                            15.7%       13.2%       11.8%
Transportation                         3.4%        5.3%        6.1%
Utilities                              5.0%        3.9%        2.9%
Other                                  4.6%        3.9%        5.8%
                                     ------      ------      ------ 

Total Percent of Billings            100.0%      100.0%      100.0%
                                     ======      ======      ======
</TABLE>

      PROVIDE A WIDE RANGE OF VALUE-ADDED IT SERVICES. The Company's consultants
provide a wide range of IT services including planning, managing, building,
implementing and maintaining IT systems. The Company supports all major computer
technology platforms (mainframe, mid-range, client/server and network
environments) and supports projects using a broad range of software
applications. For example, the Company implements SAP's client/server software,
custom develops Oracle, Informix, DB2, Visual Basic, C++ and Web-based
applications, implements and supports Windows NT, Novell and UNIX based network
environments and supports numerous other application environments. The Company
continually seeks to broaden its services in the changing IT market by providing
its consultants with exposure to emerging technologies and by hiring consultants
with diverse IT backgrounds and skills.

      PROVIDE HIGH-QUALITY, COST-EFFECTIVE SERVICES. The Company is dedicated to
providing its clients with the highest possible level of service at what the
Company believes is the "best value." The Company believes its experienced
consultants and proprietary systems allow the Company to deliver high-quality,
on-schedule services to its clients in a cost-effective and efficient manner and
that the quality of its services has been a differentiating factor that has
helped it successfully expand. The Company's dedication to quality services and
client satisfaction has resulted in special 


                                     Page 5
<PAGE>

recognition from clients. The Company's operating procedures and quality
assurance programs are ISO 9002 registered. The Company believes ISO
registration, an international standard for quality assurance and consistency in
operating procedures, enhances its reputation and helps it achieve preferred
vendor status with clients. The Company expects that many potential and existing
clients will require evidence of ISO registration in the future.

      LEVERAGE PROPRIETARY SYSTEMS. The Company's internally designed and
developed proprietary business systems are used to support and enhance its
recruiting, marketing, training, consultant productivity, client scheduling and
client servicing processes. For example, Metro's Staff Sourcing Network provides
the Company with the ability to identify and hire qualified consultants on a
nationwide basis and match their skills and desired work locations with an
appropriate office in a time-critical manner. The Company's scheduling system
allows it to efficiently manage contract renewals and bill rate increases and
anticipate clients' needs for IT consultants and services. These proprietary
systems permit timely sharing of information on a Company-wide basis.

GROWTH STRATEGY

      The Company has competed successfully in the rapidly changing IT
environment and has capitalized on the growing demand for IT services. The
Company's success is evidenced by the fact that the Company's revenue has
increased at a compound annual growth rate of 27% over the last 10 years and 32%
over the last five years. Revenue grew 40% for 1998 compared to 1997. Until July
1, 1997, all of this growth was achieved through internal growth. On July 1,
1997, the Company completed two acquisitions and effective December 1, 1998, the
Company completed a third acquisition. The Company has already completed four
acquisitions in 1999. The Company intends to augment internal growth with
selective acquisitions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Overview."

      The Company's growth strategy consists of three primary components:

      DEVELOP AND EXPAND CLIENT BASE. By providing a wide range of high-quality
services, the Company has historically expanded the scope of its client
relationships through additional assignments and by providing additional
services within client organizations. In addition, because many of the Company's
clients have offices throughout the United States, the Company strives to
leverage these relationships by providing IT services in multiple locations. In
addition to increasing sales with existing clients, the Company seeks to develop
new client relationships in each office.

      OPEN NEW OFFICES. The Company anticipates that it will open three to five
offices annually for the next several years. During 1998, the Company opened
four new offices. In January 1999, the Company opened one new office. The
Company has developed a national expansion strategy and has successfully
replicated its business model in its newly opened offices. New offices opened by
the Company have generally achieved monthly operating income within six to 12
months and cumulative operating income within 18 to 24 months. The Company's
office network establishes a local presence in each market and demonstrates its
commitment to each local market thereby enhancing its ability to attract skilled
consultants for local assignments and assignments in other offices.

      SELECTIVELY ACQUIRE BUSINESSES. The Company's strategy is to supplement
its internal growth through selective acquisitions. The Company seeks out "best
reputation" IT services firms in new geographic markets to reduce start-up costs
and, in markets Metro currently serves, to provide business synergies and
increase market penetration. The Company also considers specialty consulting
practices and new IT services that the Company can cross-sell to its existing
client base. In identifying potential acquisition candidates, the Company seeks
firms with a culture, client base, geographic presence and technical expertise
complementary to its own. The Company strives to improve the acquired firm's
profitability by implementing the Company's business strategies and proprietary
business systems. The Company currently has no agreements, understandings or
commitments with respect to any potential acquisitions.


                                     Page 6
<PAGE>

SERVICES

      IT services are primarily provided by the Company through supplemental IT
services arrangements and, to a lesser extent, through project outsourcing
services arrangements. Substantially all services are billed on a time and
materials basis. For 1998, the Company estimates that supplemental IT services
accounted for more than 90% and project outsourcing services accounted for less
than 10% of the Company's revenue.

      The Company offers IT services in five major service areas: application
systems development and maintenance, IT architecture and engineering, systems
consulting, project outsourcing and general support services. Application
systems development and maintenance services include consultant support of
projects on all major technology platforms including mainframe, mid-range,
client/server, object oriented, network and desktop computing environments. IT
architecture and engineering services include the support of major systems
foundations and operating systems. Systems consulting services include a variety
of strategic business services such as information systems and IT planning.
Project outsourcing services include full project services that generally
require a higher level of responsibility. General support services include a
variety of services such as help desks, call center support, technical training
and documentation and technical writing. As of December 31, 1998, approximately
72% of the Company's consultants were working in the application systems
development and maintenance services area, 6% in IT architecture and engineering
services, 4% in systems consulting services, 4% in project outsourcing services
and 14% in general support services. These percentages change daily as
consultant assignments change. Due to the variation in bill rates in these
service areas, these percentages do not necessarily correspond to the percentage
of revenue from each service area. The Company estimates that, on December 31,
1998, approximately 14% of its consultants were involved in providing Year 2000
("Y2K") related IT services. See, "-Year 2000 Issues."

SALES AND MARKETING

      The Company's marketing objective is to develop long-term partnership
relationships with existing and new clients that will lead to the Company
becoming the preferred provider of IT services. The Company's primary marketing
approach is to introduce prospective clients to Metro's capabilities and to
learn about prospective clients' IT environments through personal appointments
with information systems managers, purchasing or human resources managers and
chief information officers. Other sales and marketing methods include client
referrals, networking, attending trade shows and alliances with other vendors.
The Company divides its sales and marketing effort between new client
acquisition and existing client development. At December 31, 1998, the Company
employed 19 individuals performing new client acquisition functions and 52
individuals performing client development functions. In addition to the
Company's primary marketing approach, the Company also has targeted marketing
initiatives for project outsourcing and managed services/vendor on premise IT
services.

CLIENT SUPPORT STRUCTURE

      Clients are the focus of the Company's client support structure, which
provides each client with "layers of support" from the Company. The first layer
of client support is the IT consultants who work at client sites on assignments
generally lasting six to 12 months. The next layer of support is each office's
Leadership Team which includes: (i) marketing account representatives, (ii)
client services coordinators, (iii) professional staff recruiters, (iv) staff
support and training coordinators and (v) a director who leads the office
Leadership Team, all of whom are supported by administrative assistants. Most
office directors were promoted from within the Company and have an appreciation
for the Company's culture. Having a strong core-leadership team that has "grown
up" with the Company allows Metro to maintain its focus on supporting
consultants and servicing clients.

      The Corporate Support Group furnishes a "layer of support" for the
Company's offices through its President and Chief Executive Officer, John H.
Fain, Chief Operating Officer, Andrew J. Downing, and Chief Financial Officer,
Robert J. Eveleigh, working in conjunction with the Vice Presidents of
Operations ("VPOs"), the Vice President of Administrative Services and the Vice
President of Information Services. The Corporate Support Group performs as many
back office functions as possible at the corporate headquarters to allow the
offices to focus primarily on client service and consultant support.


                                     Page 7
<PAGE>

      EXECUTIVE MANAGEMENT. During 1998, the Executive Management Team consisted
of Mr. Fain, Mr. Downing, Mr. Eveleigh and five VPOs. In January 1999, one of
the VPOs retired from that position and the Company promoted one of its office
directors to VPO, leaving the number of VPOs unchanged at five. Each VPO
typically supports a group of five to 10 offices.

      ADMINISTRATIVE SERVICES. The Administrative Services Department
coordinates the Company's recruiting process, ISO 9002 registration and
compliance, human resources and payroll functions. ISO is an international
standard for quality assurance and consistency in operating procedures. The
Company anticipates that many of its existing and prospective clients will soon
require their IT services vendors' processes to be ISO registered.

      INFORMATION SERVICES. The Information Services Department supports systems
operations, office telecommunications and internal applications systems
development and support. The Company has committed significant resources to the
development of its recruiting systems to improve the database search
capabilities, ease data entry via scanning and imaging, ease remote access to
the database and implement a workgroup concept for using the system.

      FINANCE. The Finance Department is responsible primarily for financial
reporting, general accounting, time entry and reporting, billing, accounts
receivable, facilities acquisition and administration, risk management and
monitoring contract performance.

INTELLECTUAL PROPERTY

      In accordance with industry practice, contracts between the Company and
its clients normally provide that all intellectual property created for a client
belongs exclusively to that client. Intellectual property used by the Company to
operate its business is owned by or licensed to the Company. The Company relies
on trade secret laws to protect its proprietary software. The Company attempts
to protect its trade secrets and other proprietary information through
agreements with employees and consultants. The Company does not hold any patents
and does not have any patent applications pending. There can be no assurance
that the steps taken by the Company to protect its proprietary technology will
be adequate to deter misappropriation of its proprietary rights or third party
development of similar proprietary software.

      Metro Information ServicesSM is a registered service mark of the 
Company. Other than Metro Information ServicesSM, the Company does not own 
any registered service marks.

SEASONALITY

      Metro's operating results are adversely affected when client facilities
close due to holidays or inclement weather. The Company generally experiences a
certain amount of seasonality in the fourth quarter due to the number of
holidays and closings of client facilities during that quarter. Further, the
Company generally experiences lower operating results in the first quarter due
in part to the timing of unemployment and FICA tax accruals and delays in
clients' contract renewal related to clients' budget approval processes.

COMPETITION

      The IT services industry is extremely competitive and highly fragmented.
The Company believes there are thousands of competitors in the United States
alone, many of which are privately owned. Although the market is consolidating,
management believes no one company is dominant. The Company's competitors
include general IT services firms, temporary staffing and personnel placement
companies, general management consulting firms, major accounting firms,
divisions of large hardware and software companies and niche providers of IT
services. Some of the Company's competitors possess substantially greater
resources, greater name recognition and a more established client base than the
Company. In addition, the services offered by the Company have been and continue
to be provided by client personnel. The Company believes that the significant
competitive factors in the sale of its services include quality of consultant
services, availability of consultants, price, breadth of services offered and
reputation.


                                     Page 8
<PAGE>

      As a result of intense competition, IT services engagements frequently are
subject to pricing pressure. Clients also require vendors to provide services in
multiple locations. Competition for contracts for many of Metro's services takes
the form of competitive bidding in response to requests for proposals and
quotes.

      Prime Vendors present an additional competitive challenge. To reduce the
number of their IT service providers, certain businesses are beginning to use a
limited number of vendors and, in some cases, a single vendor (collectively
"Prime Vendors"). Prime Vendors enter into contractual arrangements with clients
to fill their IT services needs either directly or through subcontractors.
Because these Prime Vendors generally are given the first opportunity to fill a
client's consultant needs, the industry trend toward the use of Prime Vendors
may give the Company fewer opportunities to place consultants. In those
circumstances where the Prime Vendor subcontracts with the Company to provide
consultants, the Prime Vendor may place bill rate pressure on the Company.

      The Company has taken steps, when practical, to become a Prime Vendor of
IT services for certain clients. The Company has experienced and anticipates
continued pricing pressure from these clients as a condition to becoming or
remaining a Prime Vendor. The Company evaluates these situations on an
individual basis to determine whether these arrangements contribute to the
overall profitability of the Company.

RECRUITING AND HIRING

      Because recruiting and hiring qualified consultants is critical to the
Company's success, the Company spends significant resources and effort to locate
and retain high-quality consultants. The Company's structured recruiting
approach is based on: the use of a proprietary resume tracking database which
allows qualified candidates to be identified based on specific client
requirements, effective communication between the local offices and corporate
headquarters which allows all offices to share information and match candidates
to the appropriate office and client and a strict qualification process that
utilizes Company-stated standards to qualify candidates both on a technical and
professional basis.

      The Company identifies candidates through a variety of sources, including
local and national advertising, recruiting agencies, referrals from employees
and clients, the Internet, career fairs and professional associations. The
Company believes its national presence and local office network enables it to
recruit consultants with specialized skill sets, which are generally in higher
demand and more difficult to locate. Candidate resume information is entered
into the Company's proprietary database, which allows 35 of the Company's 44
offices equal access to candidate qualifications. The remaining 9 offices,
acquired in 1999, will gain access to this system during 1999. Office staff can
search for candidates based on a variety of search criteria including skill
sets, experience and location preferences. The Company's Administrative Services
Department trains new recruiters (through an in-house training program known
internally as Recruiter University), monitors the recruiting process and
coordinates the sharing of information among all offices so candidates are
quickly and efficiently pursued for hire throughout the Company. At December 31,
1998, the Company had 89 recruiters.

CONSULTANT TRAINING AND EDUCATION

      The Company believes consultant training and education is essential to
meeting client requirements for ever-changing skills and for retaining
consultants. In 1997, the Company began to focus on programs that train less
experienced individuals in new skills to increase the supply of qualified
consultants. The Company offers a variety of training in technical and
professional competencies on a Company-wide level, through its Human Resources
Department and, on an individual office level, through each office's training
coordinator. The Human Resources Department oversees professional and technical
training, the licensing of computer-based training courses, development or
licensing of instructor-led training, utilization of corporate training hardware
and software and tuition reimbursement. Office training coordinators work
closely with their office staff to provide effective training through the
development of training plans, coordination of class logistics and the
sponsorship of informal special interest training sessions. During 1998,
approximately 1.0% of revenue was spent on training and education.


                                     Page 9
<PAGE>

EMPLOYEES

      Virtually all of the Company's consultants are employees of the Company
for federal and state tax purposes. For such individuals, the Company pays
social security taxes (FICA), federal and state unemployment taxes and workers'
compensation insurance premiums. The Company has few consultants that are
independent contractors.

      As of December 31, 1998, the Company had 2,469 employees of which 2,414
were full-time and 55 were part-time (working 30 hours or less in a week). Of
the 2,414 full-time employees, 2,010 were consultants and 404 were general and
administrative staff. Of the 2,010 consultants, the Company classifies 1,258 as
Regular Staff Members ("RSMs") and 752 as Associate Staff Members ("ASMs"). RSMs
are entitled to full benefits and substantially all are salaried and continue to
earn full salary and benefits even if not working for a client. The Company
markets RSMs to new clients in anticipation of completion of current project
assignments. ASMs are entitled to only statutory benefits and the majority are
paid on an hourly basis. In addition to statutory benefits, ASMs are permitted
to participate in a limited number of other benefits, but are required to pay
substantially all of the cost of these benefits. ASMs are employed only for
specific client projects. As a result, even though the Company markets most ASMs
to new clients in anticipation of completion of current project assignments,
they are at greater risk of not being retained by the Company.

      Competition for qualified IT consultants to fill client needs is intense.
The Company believes that its core philosophy and values, developed at the
Company's inception, help it attract and retain high-quality IT professionals.
Consultants sign agreements that limit their ability to compete with the Company
for a 12-month period after leaving the Company. In addition, certain of the
Company's agreements limit the client's ability to hire employees of the Company
working at the client's facility.

      The Company completes an annual comprehensive staff survey detailing
employee satisfaction and areas for improvement. The survey results are
published in special editions of the Company newsletter, MetroEXPRESS, and
shared with employees and clients. The survey helps the Company identify
changing employee needs and desires which the Company believes increases
employee satisfaction and reduces employee turnover. The Company is not a party
to any collective bargaining agreements and considers its relationships with its
employees to be excellent.

YEAR 2000 ISSUES

      Year 2000 ("Y2K") issues are being addressed by the Company and many of
its clients, suppliers, vendors and financial institutions. Y2K issues relate to
the inability of some computer programs to make calculations correctly that
involve dates after December 31, 1999. Y2K issues have the potential to disrupt
normal business operations and decrease the profitability of affected companies.
The Company provides some of its clients with consultants to address Y2K issues.
The Company estimates that, on December 31, 1998, approximately 14% of its
consultants were involved in Y2K activities. See, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Year 2000 Issues."

ITEM 2.    PROPERTIES

      The Company's executive office is located at Reflections II, 200 Golden
Oak Court, Virginia Beach, Virginia 23452. This facility serves as the
headquarters for the Corporate Support Group. The Company's headquarters is
located in a leased facility with approximately 26,600 square feet at a current
annual rent of $440,698, and a term expiring in 2001. As of December 31, 1998,
the Company's 34 offices aggregated approximately 133,800 square feet and are
leased at aggregate current annual rents of approximately $2,298,000 for various
terms, with no lease commitment extending past the year 2003. In addition, in
support of its geographic expansion plan, the Company occasionally leases
residential apartments for terms of two to six months in those cities where new
offices are located. The Company believes that its properties are adequate for
its current needs. Further, the Company believes that suitable additional or
replacement space will be available when required on terms the Company believes
will be acceptable.


                                    Page 10
<PAGE>

The following table sets forth additional information concerning the Company's
facilities:

<TABLE>
<CAPTION>


 DATE OPENED/ACQUIRED                               OFFICE LOCATION
 --------------------                               ---------------
<S>                                                 <C>
 July 1979 .......................................  Tidewater (Virginia Beach), Virginia
 September 1982 ..................................  Research Triangle (Raleigh), North Carolina
 November 1982 ...................................  Richmond, Virginia
 August 1984 .....................................  Tampa Bay (Tampa), Florida
 November 1984 ...................................  Charlotte, North Carolina
 October 1985 ....................................  Triad (Winston-Salem), North Carolina
 March 1987 ......................................  Atlanta, Georgia
 October 1987 ....................................  South Florida (Ft. Lauderdale), Florida
 August 1988 .....................................  Caribbean Islands (Hato Rey), Puerto Rico
 August 1989 .....................................  Orlando (Winter Park), Florida
 November 1989 ...................................  Greenville, South Carolina
 March 1990 ......................................  Roanoke, Virginia
 April 1991 ......................................  Nashville (Brentwood), Tennessee
 September 1992 ..................................  Dallas/Ft. Worth (Dallas), Texas
 July 1993 .......................................  Jacksonville, Florida
 July 1994 .......................................  Houston, Texas
 April 1995 ......................................  Cincinnati (Fort Mitchell, KY), Ohio
 May 1995 ........................................  Chicago (Des Plaines), Illinois
 September 1995 ..................................  Phoenix, Arizona
 November 1995 ...................................  Delaware Valley (Wayne), Pennsylvania
 April 1996 ......................................  Puget Sound (Bellevue), Washington
 June 1996 .......................................  Washington, D.C. (Fairfax, VA)
 October 1996 ....................................  Columbus (Worthington), Ohio
 January 1997 ....................................  Rocky Mountain (Denver), Colorado
 April 1997 ......................................  St. Louis, Missouri
 July 1997* ......................................  Columbia, South Carolina
 July 1997* ......................................  Kansas City, Missouri
 July 1997 .......................................  Austin, Texas
 September 1997 ..................................  Memphis, Tennessee
 January 1998 ....................................  Pittsburgh, Pennsylvania
 April 1998 ......................................  Minneapolis, Minnesota
 May 1998 ........................................  Tallahassee, Florida
 July 1998 .......................................  Baltimore, Maryland
 December 1998* ..................................  Palo Alto/Silicon Valley (Menlo Park), California
 January 1999* ...................................  Los Angeles (El Segundo), California
 January 1999 ....................................  Portland, Oregon
 February 1999* ..................................  Irvine, California
 February 1999* ..................................  San Francisco (San Bruno), California
 March 1999* .....................................  Camp Hill (Harrisburg), Pennsylvania
 March 1999* .....................................  Altoona, Pennsylvania
 March 1999* .....................................  Pittsburgh, Pennsylvania
 March 1999* .....................................  Charlotte, North Carolina
 March 1999* .....................................  Hagerstown, Maryland
 March 1999* .....................................  Kansas City, Missouri
</TABLE>


 *Indicates an office that was acquired.

ITEM 3.    LEGAL PROCEEDINGS

      The Company is not a party to any material legal proceedings, other than
ordinary routine litigation incidental to the business.


                                    Page 11
<PAGE>

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

      No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year ended December 31, 1998.

EXECUTIVE OFFICERS OF THE REGISTRANT

      The following sets forth information as to each Director and Executive
Officer of Metro, including his or her age, present principal occupation, other
business experience during the last five years, directorships in other
publicly-held companies, membership on committees of the Board of Directors and
period of service with Metro.

DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OF THE REGISTRANT

RAY E. BECKER, 62, is founder and President of Consultants to Management, Inc.
of Ellsworth, Maine (management consulting services), and has held those
positions since 1995. From 1985 to 1994, Mr. Becker served in a variety of roles
with Keane, Inc., retiring as Vice President and Western Regional Manager for
Keane in 1994. Mr. Becker has served on Metro's Board of Directors since April
1997. Mr. Becker's term as a director expires at Metro's 2001 Annual Meeting.
Mr. Becker was named Chairman of Metro's Compensation Committee effective
February 1, 1999 and he is also a member of Metro's Audit Committee.

ANDREW J. DOWNING, 43, is a Director and Executive Vice President and Chief
Operating Officer of the Company. Between 1983 and July 1996, Mr. Downing served
in various marketing capacities in the Company's Virginia Beach, Virginia
office, as a Regional Vice President and a Vice President of Operations. In July
1996, Mr. Downing became Executive Vice President and Chief Operating Officer of
the Company. Mr. Downing has served on the Board of Directors since January
1997. Mr. Downing's term as a director expires at Metro's 2001 Annual Meeting.

ROBERT J. EVELEIGH, 39, is a Director and Vice President of Finance, Secretary,
Treasurer and Chief Financial Officer of the Company. Between August 1988 and
January 1997, Mr. Eveleigh was an attorney with Clark & Stant, P.C., the
Company's general counsel. Mr. Eveleigh is also a certified public accountant.
Mr. Eveleigh became Metro's Vice President of Finance, Treasurer and Chief
Financial Officer on January 29, 1997 and its Secretary on April 30, 1998. Mr.
Eveleigh has served on Metro's Board of Directors since January 1997. Mr.
Eveleigh's term as a director expires at Metro's 1999 Annual Meeting.

JOHN H. FAIN, 50, is Chairman of the Board of Directors, President and Chief
Executive Officer of the Company. Mr. Fain was Chairman of Metro's Compensation
Committee until succeeded by Mr. Becker effective February 1, 1999. Mr. Fain
remains a member of the Compensation Committee. Mr. Fain has been a Director
since 1979 and his current term as a director expires at Metro's 2000 Annual
Meeting.

A. EUGENE LOVING, JR., 56, is Chairman of the Board and Chief Executive Officer
of Max Media LLC ("Max"). Mr. Loving has held these positions with Max and its
predecessors since 1991. Mr. Loving has served on the Board of Directors since
April 1997. Mr. Loving's term as a director expires at Metro's 1999 Annual
Meeting. Mr. Loving is a member of Metro's Audit Committee and its Compensation
Committee.

OTHER EXECUTIVE OFFICERS OF THE REGISTRANT

BRADLEY B. BRESEMAN, 48, became Vice President of Administrative Services and
Chief Administrative Officer effective July 1, 1998. Mr. Breseman joined the
Company in April 1995 and served as Director of Administrative Services until
being named to his current position. Before joining Metro, Mr. Breseman spent 22
years with A.B. Dick Company in various capacities, last serving as Vice
President, Service and Distribution.

RONALD D. CHEATHAM, 45, is a Vice President of Operations. Mr. Cheatham joined
the Company in 1993 and has served as Vice President of Operations since
January 1998. He served as Division Director in the Company's Nashville,
Tennessee office from 1995 until being named a Vice President of Operations.
From 1993 to 1995, Mr. Cheatham served as a marketing account representative.


                                    Page 12
<PAGE>

ARTHUR C. HARWOOD, 50, became a Vice President of Operations effective January
1, 1999. Mr. Harwood joined the Company in 1993 and served as Division Director
in the Company's Jacksonville, Florida office from 1993 until being named a Vice
President of Operations.

RICHARD C. JAECKLE, 53, is a Vice President of Operations. Mr. Jaeckle joined
the Company in 1987 and has served as a Vice President of Operations since
January 1994. From July 1989 to December 1993, he was responsible for the
selection and development of new offices.

MICHAEL G. MARTIN, 43, is a Vice President of Operations. Mr. Martin joined the
Company in 1989 and has served as a Vice President of Operations since January
1998. He served as marketing director of Metro's Winston-Salem, North Carolina
office from 1989 until being named a Vice President of Operations.

KATHLEEN A. NEFF, 48, is a Vice President of Operations. Ms. Neff joined Metro
in 1980 and from January 1983 to December 1995, she served as the Technical
Director of the Company's Richmond, Virginia office. She was named to her
current position in January 1996.

R. LAWRENCE WHITLEY, 38, is Vice President of Information Services and Chief
Information Officer. Mr. Whitley joined the Company in September 1988 and served
as Director of Information Services from July 1992 until being named to his
current position. From April 1989 through June 1992, he served as the Manager of
Information Services. From September 1988 through April 1989, he was an
Information Systems Consultant working on the Company's recruiting systems.

PART II

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

      MARKET. The Company completed its initial public offering of stock on
January 29, 1997. The Company's Common Stock, $0.01 par value, trades on The
Nasdaq Stock Market under the symbol "MISI." Before January 29, 1997, there was
no established market for the Company's stock.

The following table sets forth the quarterly range of high and low closing sales
price per share of the Company's Common Stock since January 29, 1997 as reported
by The Nasdaq Stock Market:

<TABLE>
<CAPTION>
         1997:                           HIGH                   LOW
         -----                           ----                   ---
<S>                                     <C>                   <C>    
         First Quarter                  $20.750               $12.500
         Second Quarter                 $20.500               $12.500
         Third Quarter                  $24.000               $16.625
         Fourth Quarter                 $29.250               $20.625

         1998:                           HIGH                   LOW
         -----                           ----                   ---
         First Quarter                  $37.750               $23.250
         Second Quarter                 $40.000               $29.563
         Third Quarter                  $41.750               $24.750
         Fourth Quarter                 $30.000               $18.375
</TABLE>

      HOLDERS. The Company estimates that there were approximately 3,200 record
holders of the Company's Common Stock on March 1, 1999.

      DIVIDENDS. In 1987, the Company became an S corporation for federal and
certain state income tax purposes. As such, the Company's income was allocated
and taxable to the Company's individual shareholders, rather than to the
Company. Between 1987 and December 31, 1996, the Company declared and made
quarterly distributions to its shareholders, generally in amounts in excess of
amounts needed by the shareholders to pay the taxes on the income allocated to
them. On January 20, 1997, the Company distributed to its shareholders $9.0
million, approximating the estimated aggregate undistributed amount of income on
which the shareholders were required to pay income taxes 


                                    Page 13
<PAGE>

for tax years 1987 through 1996. No other amounts were distributed to
shareholders during 1997 or 1998. In connection with the January 29, 1997
initial public offering, the Company terminated its S corporation election on
January 1, 1997.

      The Company currently anticipates that all of its earnings will be
retained for development and expansion of the Company's business and does not
anticipate paying any cash dividends in the foreseeable future. The payment of
dividends is subject to the discretion of the Board of Directors and will depend
on the Company's results of operations, financial position, capital
requirements, general business conditions, restrictions imposed by financing
arrangements (including, without limitation, the Company's credit facilities),
legal and regulatory restrictions on the payment of dividends and other factors
the Board of Directors deems relevant. See, "Management Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources."

      USE OF PROCEEDS FROM REGISTERED SECURITIES. The effective date of the
Company's Securities Act registration statement on Form S-1 was January 29,
1997. The Commission file number is 333-16585. Between the effective date and
December 31, 1998, the expenses incurred in connection with the issuance and
distribution of the securities registered were as follows:

<TABLE>
<CAPTION>
                                              AS PREVIOUSLY REPORTED ON    
                                                 FORM 10-Q FOR PERIOD     ADDITIONAL EXPENSES    EXPENSES INCURRED TO
                                                        ENDING             INCURRED THROUGH           DATE AS OF
DIRECT OR INDIRECT PAYMENTS TO OTHERS:            SEPTEMBER 30, 1998       DECEMBER 31, 1998      DECEMBER 31, 1998
-------------------------------------             ------------------       -----------------     ---------------------
<S>                                                  <C>                     <C>                     <C>
Underwriting discounts and commissions               $ 2,576,000                         --          $ 2,576,000
Other expenses                                         1,080,366                         --            1,080,366
                                                     -----------             --------------          -----------
Total expenses                                       $ 3,656,366                         --          $ 3,656,366
                                                     ===========             ==============          ===========
Net offering proceeds after total expenses
  above                                                                                              $33,143,634
                                                                                                     ===========
</TABLE>

Between the effective date and December 31, 1998, net offering proceeds of
$33,143,634 were used for the following purposes:

<TABLE>
<CAPTION>
                                               AS PREVIOUSLY REPORTED
                                                ON FORM 10-Q FOR THE                              USE OF PROCEEDS
                                                    PERIOD ENDING              CHANGES                THROUGH
DIRECT OR INDIRECT PAYMENTS TO OTHERS:           SEPTEMBER 30, 1998       IN USE OF PROCEEDS     DECEMBER 31, 1998
--------------------------------------           ------------------       ------------------     -----------------
<S>                                                  <C>                     <C>                   <C>         
Acquisition of other businesses                      $ 6,000,919             $ 10,795,772          $ 16,796,691
Repayment of indebtedness                             11,962,829                       --            11,962,829
Temporary investments:
     Municipal Bonds                                  15,179,886              (10,795,772)            4,384,114
                                                     -----------             ------------          ------------
Total Use of Proceeds                                $33,143,634             $         --          $ 33,143,634
                                                     ===========             ============          ============
</TABLE>

The use of proceeds does not represent a material change in the use of proceeds
described in the prospectus. There have been no other changes to the information
provided by the Company on Form SR for the period ended April 30, 1997, on Form
10-Q for the period ended September 30, 1997, on Form 10-K for the period ended
December 31, 1997 or on Form 10-Q for the periods ended March 31, 1998, June 30,
1998 and September 30, 1998.


                                    Page 14
<PAGE>

ITEM 6.    SELECTED FINANCIAL DATA

      The following table contains certain consolidated financial and operating
data and is qualified by the more detailed Consolidated Financial Statements and
Notes thereto included elsewhere in this Report. The Consolidated Balance Sheet
Data as of December 31, 1994, 1995, 1996, 1997 and 1998 and the Consolidated
Statements of Income Data for the years then ended were derived from the
Company's Consolidated Financial Statements and Notes thereto that have been
audited by KPMG LLP, independent certified public accountants. The Operating
Data have been derived from the unaudited internal records of the Company. The
consolidated financial data shown below should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Report.

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                   -----------------------------------------------------------------
                                                     1994          1995(1)       1996          1997           1998
                                                   --------      --------      --------      --------       --------
                                                               (In thousands, except per share data)
<S>                                                <C>           <C>           <C>           <C>            <C>     
CONSOLIDATED STATEMENTS OF INCOME DATA:

Revenue .......................................... $ 68,669      $ 85,904      $113,963      $152,578       $213,892

Cost of revenue ..................................   48,221        61,074        79,752       106,080        148,322
                                                   --------      --------      --------      --------       --------
Gross profit .....................................   20,448        24,830        34,211        46,498         65,570
                                                   --------      --------      --------      --------       --------
Selling, general and administrative expenses .....   14,238        18,970        24,347        30,264         40,349
Depreciation and amortization ....................      357           537           763         1,158          1,851
                                                   --------      --------      --------      --------       --------
Total operating expenses .........................   14,595        19,507        25,110        31,422         42,200
                                                   --------      --------      --------      --------       --------
Operating income .................................    5,853         5,323         9,101        15,076         23,370
Net interest income (expense) ....................     (215)         (323)        (260)           729            781
                                                   --------      --------      --------      --------       --------
Income before income taxes .......................    5,638         5,000         8,841        15,805         24,151
Income taxes(2) ..................................       --            --            --         6,178          9,534
                                                   --------      --------      --------      --------       --------
Net income ....................................... $  5,638      $  5,000      $  8,841      $  9,627       $ 14,617
                                                   ========      ========      ========      ========       ========

Net income per share - basic .....................                             $   0.71      $   0.66       $   0.98
                                                                               ========      ========       ========
Net income per share - diluted ...................                             $   0.71      $   0.66       $   0.97
                                                                               ========      ========       ========
Weighted average shares outstanding:
    Basic ........................................                               12,397        14,611         14,845
    Diluted ......................................                               12,397        14,662         15,001

Income before income taxes ....................... $  5,638      $  5,000      $  8,841
Pro forma provision for income taxes(2) ..........    2,255         2,000         3,536
                                                   --------      --------      --------
Pro forma net income(2) .......................... $  3,383      $  3,000      $  5,305
                                                   ========      =======       ========
Pro forma net income per share - basic and
   diluted(2) ....................................                             $   0.42
                                                                               ========
Pro forma weighted average shares
    outstanding - basic and diluted(3) ...........                               12,669
</TABLE>

-----------

(1)  Includes $770,000 of non-recurring, non-cash compensation expense
     charged to selling, general and administrative expenses accrued in the
     fourth quarter of 1995 for stock issued for services performed by employees
     in 1995.

(2)  For the periods 1994 through 1996, the Company was an S
     corporation for federal and certain state income tax purposes. The pro
     forma provision for income taxes for each period shown reflects a provision
     for income taxes, as if the Company was a C corporation for income tax
     purposes during such periods, at an assumed effective tax rate of 40%. See
     Note 8 of Notes to Consolidated Financial Statements. Effective January 1,
     1997, the Company revoked its S corporation election subjecting it to
     corporate income taxes at federal, state and local levels.

(3)  In accordance with Securities and Exchange Commission Staff Accounting
     Bulletin Topic 1B3, pro forma weighted average shares outstanding for 1996
     are increased to reflect certain distributions in excess of earnings.


                                    Page 15
<PAGE>

<TABLE>
<CAPTION>
                                                                        AS OF DECEMBER 31,
                                                 ------------------------------------------------------------------
                                                   1994           1995          1996         1997            1998
                                                 -------        -------       -------       -------         -------
                                                                    (In thousands, except operating data)
<S>                                              <C>            <C>           <C>           <C>             <C>    
CONSOLIDATED BALANCE SHEET DATA:
Working capital ...............................  $ 3,724        $ 2,368       $ 6,369       $34,560         $36,777
Total assets ..................................   13,466         19,786        21,572        58,533          81,000
Line of credit facilities .....................    3,596          7,256         2,547            --              --
Redeemable common stock .......................    1,070          1,404         2,651            --              --
Total shareholders' equity ....................    4,425          4,613         8,354        45,128          61,245

OPERATING DATA:(1)
Offices .......................................       16             20            23            29              34
Employed consultants ..........................      832          1,067         1,269         1,693           2,010
Subcontracted consultants .....................        6              7            10            23              78
Total consultants .............................      838          1,074         1,279         1,716           2,088
Total employees ...............................      957          1,232         1,483         1,987           2,414
</TABLE>

-----------
(1)   Operating data include only full-time consultants and total employee data
      include only the full-time employees.

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

      CAUTIONARY STATEMENT UNDER THE "SAFE-HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995: INCLUDED IN THIS REPORT AND OTHER
WRITTEN AND ORAL INFORMATION PRESENTED BY MANAGEMENT FROM TIME TO TIME,
INCLUDING, BUT NOT LIMITED TO, ANNUAL REPORTS TO SHAREHOLDERS, QUARTERLY
SHAREHOLDER LETTERS, FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, NEWS
RELEASES AND INVESTOR PRESENTATIONS, ARE FORWARD-LOOKING STATEMENTS ABOUT
BUSINESS STRATEGIES, MARKET POTENTIAL, FUTURE FINANCIAL PERFORMANCE AND OTHER
MATTERS WHICH REFLECT MANAGEMENT'S EXPECTATIONS AS OF THE DATE MADE. WITHOUT
LIMITING THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS,"
"SEEKS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. FUTURE EVENTS AND THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS REFLECTED IN THESE FORWARD-LOOKING STATEMENTS. THERE
ARE A NUMBER OF IMPORTANT FACTORS THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
THESE FACTORS INCLUDE, WITHOUT LIMITATION: THE COMPANY'S ABILITY TO ATTRACT,
DEVELOP AND RETAIN QUALIFIED CONSULTANTS, THE COMPANY'S ABILITY TO OPEN NEW
OFFICES, THE COMPANY'S ABILITY TO EFFECTIVELY IDENTIFY, MANAGE AND INTEGRATE
ACQUISITIONS, CHANGES IN CONSULTANT UTILIZATION AND PRODUCTIVITY RATES, THE
COMPANY'S ABILITY TO ACQUIRE OR DEVELOP ADDITIONAL SERVICE OFFERINGS, CLIENT
DECISIONS TO REDUCE OR INCREASE IT SERVICES OUTSOURCING, EARLY TERMINATION OF
CLIENT CONTRACTS WITHOUT PENALTY, CHANGES IN THE COMPANY'S DEPENDENCE ON
SIGNIFICANT CLIENTS, CHANGES IN GROSS MARGINS DUE TO A VARIETY OF FACTORS
(INCLUDING INCREASED WAGE AND BENEFIT COSTS THAT ARE NOT OFFSET BY BILL RATE
INCREASES), THE TYPES OF SERVICES PERFORMED BY THE COMPANY DURING A PARTICULAR
PERIOD AND COMPETITION. PLEASE REFER TO A DISCUSSION OF THESE AND OTHER FACTORS
IN THIS REPORT, INCLUDING "-RISKS ASSOCIATED WITH FUTURE OPERATIONS" AND THE
COMPANY'S OTHER SECURITIES AND EXCHANGE COMMISSION FILINGS. THE COMPANY
DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

      THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT. THE
COMPANY'S FISCAL YEAR ENDS ON DECEMBER 31.

OVERVIEW

      Metro Information Services, Inc. provides a wide range of information
technology ("IT") consulting and custom software development services through 44
offices in 41 metropolitan markets in the United States and Puerto Rico. The
Company's more than 2,500 consultants, 56% of whom were salaried on March 1,
1999, work with clients' internal IT departments on all aspects of computer
systems and applications development. Services performed by Metro include
application systems development and maintenance, IT architecture and
engineering, systems consulting, project outsourcing and general support
services. The Company supports all major computer technology platforms
(mainframe, mid-range, client/server and network environments) and supports
client projects using a broad range of software applications. For example, the
Company implements SAP's client/server software, custom develops Oracle,
Informix,


                                    Page 16
<PAGE>

DB2, Visual Basic, C++ and Web-based applications, implements and supports
Windows NT, Novell and UNIX based network environments and supports numerous
other application environments.

      Metro's clients operate in a wide variety of industries including
communications, distribution, retail, financial services, government (state and
local only), healthcare, information technology, manufacturing, transportation,
leisure and utilities. The Company emphasizes long-term relationships with its
clients rather than one-time projects or assignments. During the year ended
December 31, 1998, the Company performed IT services for 476 clients (excluding
clients that generated less than $25,000 in revenue during the year).

      Revenue growth is derived primarily from increases in the number of
consultants placed with existing and new clients. The number of full-time
consultants grew from 1,279 at December 31, 1996 to 1,716 at December 31, 1997
and to 2,088 at December 31, 1998, including consultants gained through
acquisitions. In addition, over the same period, the Company increased the
average bill rates charged to clients for consultants to keep pace with the
increased costs of consultants.

      Metro's revenue grew 32.7% in 1996 to $114.0 million, 33.9% in 1997 to
$152.6 million and 40.2% in 1998 to $213.9 million. In 1996, 1997 and 1998, the
Company's 10 largest clients accounted for approximately 29.1%, 29.8% and 31.3%,
respectively, of the Company's revenue and its largest client accounted for
approximately 6.5%, 5.8% and 4.4%, respectively, of revenue.

      Revenue growth has been achieved almost entirely through internal growth,
although 1997 and 1998 revenue growth includes revenue from two acquisitions in
July 1997 and one acquisition in December 1998. Without these acquisitions the
growth rate for 1998 would have been approximately 36.4%. Between January 1,
1996 and December 31, 1998, the Company opened 11 new offices and acquired three
new offices. New offices opened by the Company have generally produced monthly
operating losses or marginal operating income for six to 12 months and have
required 18 to 24 months to reach cumulative operating income. In addition, to
support its growth strategy, the Company continues to invest in its proprietary
business systems and its communications network.

      On July 1, 1997, the Company completed the acquisition of two information
technology services companies. The Company acquired the business operations of
Data Systems Technology, Inc., which had offices in Columbia and Greenville,
South Carolina, for $500,000, of which $134,000 was paid on July 1, 1997
(including payoff of net assumed liabilities), $2,000 was uncollected from
assumed receivables and $364,000 was paid on August 31, 1998 as a result of the
acquired business attaining certain operating income targets. The Company also
acquired the business operations of Kansas City-based J2, Inc., d.b.a. DP Career
Associates (DPCA) for $5.2 million, of which $3.9 million was paid July 1, 1997
and $1.3 million was paid on February 27, 1998 as a result of the acquired
business attaining certain gross profit targets. On December 2, 1998, the
Company completed the acquisition of The Avery Group, an information technology
service company with one office in the Palo Alto/Silicon Valley area of
California. The purchase price was $11 million, with an additional contingency
payment due in early 2000, equal to six times the excess of earnings before
interest, taxes and amortization of goodwill for 1999 over $1,600,000.

      On January 1, 1999, the Company completed the acquisition of D. P.
Specialists, Inc. and D. P. Specialists Learning Center, LLC ("DPS"
collectively), an information technology consulting services and personnel
staffing business with offices in El Segundo, California and Woodbridge, New
Jersey. The purchase price was $10,000,000, with an additional contingency
payment due in early 2000 based on earnings before interest, taxes and
amortization of goodwill for 1999. On February 1, 1999, the Company completed
the acquisitions of The Professionals - Computer Management & Consulting, Inc.
("PCM") and Krystal Solutions, Inc. ("KSC"), both of which are information
technology consulting services and personnel staffing businesses with offices in
Irvine, California and San Bruno, California. The combined purchase price was
$17,976,082, with an additional contingency payment due in 2000 based on
earnings before interest, taxes and amortization of goodwill for the period of
February 1, 1999 through January 31, 2000. Effective March 1, 1999, the Company
completed the acquisition of Solution Technologies, Inc. ("STI"), an information
technology consulting services and personnel staffing business with offices in
Camp Hill (Harrisburg), Altoona and Pittsburgh, Pennsylvania, Charlotte, North
Carolina, Hagerstown, Maryland and Kansas City, Missouri. The purchase price was
$24,046,000, with an additional purchase price amount to be determined based on
STI's consultant count on


                                    Page 17
<PAGE>

March 8, 1999 and an additional contingency payment due in 2000 based on
earnings before interest, taxes and amortization of goodwill for the period of
March 1, 1999 through February 29, 2000.

      The Company's past financial performance should not be relied on as an
indication of future performance. Period-to-period comparisons of the Company's
financial results are not necessarily meaningful indicators of future
performance.

RESULTS OF OPERATIONS

      FOR PURPOSES OF THE FOLLOWING DISCUSSION, A MATURE OFFICE IS ONE THAT WAS
OWNED BY THE COMPANY FOR AT LEAST 12 MONTHS AT THE BEGINNING OF THE EARLIER
PERIOD BEING COMPARED AND A NEW OFFICE IS ONE THAT WAS OPENED OR ACQUIRED
THEREAFTER.

      The following tables set forth, for the periods indicated, the percentage
of revenue and the percentage change from the prior period of certain items
reflected in the Company's consolidated statements of income:

<TABLE>
<CAPTION>

                                                       PERCENTAGE OF REVENUE
                                                   ----------------------------
                                                      YEAR ENDED DECEMBER 31,
                                                   ----------------------------
                                                     1996       1997      1998
                                                    ------     ------    ------
<S>                                                  <C>        <C>       <C>   
Revenue ..........................................   100.0%     100.0%    100.0%
Cost of revenue ..................................    70.0       69.5      69.3
                                                    ------     ------    ------
Gross profit .....................................    30.0       30.5      30.7
                                                    ------     ------    ------
Selling, general and administrative expenses .....    21.3       19.8      18.9
Depreciation and amortization expense ............     0.7        0.8       0.9
                                                    ------     ------    ------
Total operating expenses .........................    22.0       20.6      19.8
                                                    ------     ------    ------
Operating income .................................     8.0        9.9      10.9
Net interest income (expense) ....................    (0.2)       0.5       0.4
                                                    ------     ------    ------
Income before income taxes .......................     7.8       10.4      11.3
Pro forma provision for income taxes(1) ..........     3.1
                                                    ------

Pro forma net income(1) ..........................     4.7%
                                                    ======
Income taxes(1) ..................................               4.1        4.5
                                                               ------    ------
Net income(1) ....................................               6.3%       6.8%
                                                               ======    ======
</TABLE>

<TABLE>
<CAPTION>

                                                                          PERCENTAGE CHANGES
                                                   ---------------------------------------------------------------
                                                                        YEAR ENDED DECEMBER 31,
                                                   ---------------------------------------------------------------
                                                      1997 COMPARED TO 1996                1998 COMPARED TO 1997
                                                   -----------------------------        --------------------------
<S>                                                           <C>                                 <C>  
Revenue ..........................................            33.9%                               40.2%
Cost of revenue ..................................            33.0                                39.8
Gross profit .....................................            35.9                                41.0
Selling, general and administrative expenses .....            24.3                                33.3
Depreciation and amortization expense ............            51.6                                59.8
Total operating expenses .........................            25.1                                34.3
Operating income .................................            65.7                                55.0
Net interest income (expense)(2) .................            N/M                                  7.1
Income before income taxes .......................            78.8                                52.8
Pro forma provision for income taxes(1) ..........            74.7                                54.3
Pro forma net income(1) ..........................            81.5                                51.8

</TABLE>


                                    Page 18
<PAGE>

(1)    For 1996, the company was an S corporation for federal and certain state
       income tax purposes. The pro forma provision for income taxes for this
       year reflects a provision for income taxes as if the company were a C
       corporation for all income tax purposes during such period, at an assumed
       effective tax rate of 40%. See Note 8 of Notes to Consolidated Financial
       Statements. Effective as of January 1, 1997, the company revoked its S
       corporation election subjecting it to corporate income taxes at federal,
       state and local levels. Accordingly percentage of revenue amounts for
       1997 are computed using actual 1997 figures. Percentage changes for 1997
       compared to 1996 are computed using actual 1997 figures and pro forma
       1996 figures.

(2)    N/M - Not Meaningful.

      1998 COMPARED TO 1997

      REVENUE. Revenue increased $61.3 million, or 40.2%, to $213.9 million for
1998 from $152.6 million for 1997. This increase is primarily a result of
increased billings to existing clients, the addition of new clients (including
clients gained through acquisitions) and increased bill rates charged for the
Company's consultants. As of December 31, 1998, compared to December 31, 1997,
the total number of full-time consultants increased to 2,088 from 1,716,
respectively, and clients (excluding clients that generated less than $25,000 in
revenue during such year) increased to 476 from 396, respectively. Revenue from
the Company's 20 mature offices increased $41.6 million, or 29.2%, from the
earlier period and the 14 new offices (including three acquired offices)
accounted for the remaining $19.7 million increase in revenue.

      COST OF REVENUE. Cost of revenue increased $42.2 million, or 39.8%, to
$148.3 million for 1998 from $106.1 million for 1997. Cost of revenue increased
primarily due to compensation and benefits associated with growth in the number
of consultants. As a percentage of revenue, cost of revenue decreased to 69.3%
for 1998 from 69.5% for 1997 primarily because of bill rates to clients
increasing faster than pay rates to consultants during the period.

      GROSS PROFIT. Gross profit increased $19.1 million, or 41.0%, to $65.6
million for 1998 from $46.5 million for 1997. As a percentage of revenue, gross
profit increased to 30.7% for 1998 from 30.5% for 1997.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $10.1 million, or 33.3%, to $40.4 million for
1998 from $30.3 million for 1997. This increase is due primarily to costs
associated with recently opened offices, growth of administrative staff in
mature offices, hiring additional corporate staff to support the increased
number of offices and development of the Company's proprietary business systems.
As a percentage of revenue, selling, general and administrative expenses
decreased to 18.9% for 1998 from 19.8% for 1997. This decrease is in part the
result of the Company's centralization of administrative functions and leverage
obtained from the Company's proprietary business systems.

      DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$693,000, or 59.8%, to $1,851,000 for 1998 from $1,158,000 for 1997. This
increase is primarily attributable to depreciation on additions to computer
equipment and software and, to a lesser extent, amortization of goodwill related
to the Company's acquisitions. As a percentage of revenue, depreciation and
amortization increased to 0.9% for 1998 from 0.8% for 1997.

      OPERATING INCOME. Operating income increased $8.3 million, or 55.0%, to
$23.4 million for 1998 from $15.1 million for 1997. As a percentage of revenue,
operating income increased to 10.9% for 1998 from 9.9% for 1997. The improvement
in operating income margin is in part the result of the Company's centralization
of administrative functions and leverage obtained from the Company's proprietary
business systems.

      NET INTEREST INCOME (EXPENSE). Net interest income increased by $52,000 to
$781,000 for 1998 from $729,000 for 1997. This change reflects a decrease in the
average level of borrowings during the period and investment of a portion of the
proceeds of the Company's January 1997 initial public offering of Common Stock
in interest bearing instruments.

      INCOME BEFORE INCOME TAXES. Income before income taxes increased $8.3
million, or 52.8%, to $24.1 million for 1998 from $15.8 million for 1997. As a
percentage of revenue, income before income taxes increased to 11.3% for 1998
from 10.4% for 1997.


                                    Page 19
<PAGE>

      INCOME TAXES. The Company's effective tax rate for 1998 and 1997 is 39.5%
and 39.1%, respectively. Income taxes increased $3.3 million or 54.3%, to $9.5
million for 1998 from $6.2 million for 1997. As a percentage of revenue, income
taxes increased to 4.5% for 1998 from 4.1% for 1997. Income taxes for 1997
include a one-time reduction in income tax expense of $125,000, which represents
the cumulative effect of the Company converting from an S corporation to a C
corporation effective January 1, 1997. Excluding the $125,000 one-time reduction
in income taxes, income taxes for 1997 would have been $6.3 million, the
Company's effective tax rate would have been 39.9% and income taxes for 1998
would have represented an increase of $3.2 million or 51.3%.

      NET INCOME. Net income increased $5.0 million, or 51.8%, to $14.6 million
for 1998 from $9.6 million for 1997. As a percentage of revenue, net income
increased to 6.8% for 1998 from 6.3% for 1997.

      EARNINGS PER SHARE. Diluted earnings per share increased $0.31, or 47.0%,
to $0.97 for 1998 from $0.66 for 1997. Excluding the $125,000 one-time credit
described under `INCOME TAXES' above, diluted earnings per share for 1998 would
have increased $0.32, or 49.2%.

       1997 COMPARED TO 1996

      REVENUE. Revenue increased $38.6 million, or 33.9%, to $152.6 million for
1997 from $114.0 million for 1996. This increase is primarily a result of
increased billings to existing clients, the addition of new clients (including
clients gained through acquisitions) and increased bill rates charged for the
Company's consultants. As of December 31, 1997, compared to December 31, 1996,
the total number of full-time consultants increased to 1,716 from 1,279,
respectively, and clients (excluding clients that generated less than $25,000 in
revenue during such year) increased to 396 from 324, respectively. Revenue from
the Company's 16 mature offices increased $25.1 million, or 23.4%, from the
earlier period and the 13 new offices (including two acquired offices) accounted
for the remaining $13.5 million increase in revenue.

      COST OF REVENUE. Cost of revenue increased $26.3 million, or 33.0%, to
$106.1 million for 1997 from $79.8 million for 1996. Cost of revenue increased
primarily due to compensation and benefits associated with growth in the number
of consultants. As a percentage of revenue, cost of revenue decreased to 69.5%
for 1997 from 70.0% for 1996 primarily because of bill rates to clients
increasing faster than pay rates to consultants during the period.

      GROSS PROFIT. Gross profit increased $12.3 million, or 35.9%, to $46.5
million for 1997 from $34.2 million for 1996. As a percentage of revenue, gross
profit increased to 30.5% for 1997 from 30.0% for 1996.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $6.0 million, or 24.3%, to $30.3 million for
1997 from $24.3 million for 1996. This increase is due primarily to costs
associated with recently opened offices, growth of administrative staff in
mature offices, hiring additional corporate staff to support the increased
number of offices and development of the Company's proprietary business systems.
As a percentage of revenue, selling, general and administrative expenses
decreased to 19.8% for 1997 from 21.3% for 1996.

      DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$395,000, or 51.6%, to $1,158,000 for 1997 from $763,000 for 1996. This increase
is primarily attributable to depreciation on additions to computer equipment and
software and, to a lesser extent, amortization of goodwill related to the
Company's recent acquisitions. As a percentage of revenue, depreciation and
amortization increased to 0.8% for 1997 from 0.7% for 1996.

      OPERATING INCOME. Operating income increased $6.0 million, or 65.7%, to
$15.1 million for 1997 from $9.1 million for 1996. As a percentage of revenue,
operating income increased to 9.9% for 1997 from 8.0% for 1996. The improvement
in operating income margin is in part the result of the Company's centralization
of administrative functions and leverage obtained from the Company's proprietary
business systems.

      NET INTEREST INCOME (EXPENSE). Net interest income (expense) increased by
$989,000 to $729,000 of interest income for 1997 from $260,000 of interest
expense for 1996. This change reflects a decrease in the average level of
borrowings during the period and investment of a portion of the proceeds of the
Company's January 1997 initial public offering of Common Stock in interest
bearing instruments.


                                    Page 20
<PAGE>

      INCOME BEFORE INCOME TAXES. Income before income taxes increased $7.0
million, or 78.8%, to $15.8 million for 1997 from $8.8 million for 1996. As a
percentage of revenue, income before income taxes increased to 10.4% for 1997
from 7.8% for 1996.

      INCOME TAXES. In 1996, the Company was an S corporation for federal and
certain state income tax purposes. The income statement for 1996 includes a pro
forma provision for income taxes as if the Company was subject to federal and
state income taxes at an assumed effective rate of 40%. The Company's effective
tax rate for 1997 was 39.1%. Income taxes increased $2.7 million or 74.7%, to
$6.2 million for 1997 from pro forma income taxes of $3.5 million for 1996. As a
percentage of revenue, income taxes increased to 4.1% for 1997 from the pro
forma amount of 3.1% for 1996. Income taxes for 1997 include a one-time
reduction in income tax expense of $125,000, which represents the cumulative
effect of the Company converting from an S corporation to a C corporation
effective January 1, 1997. Excluding the $125,000 one-time reduction in income
taxes, income taxes for 1997 would have increased $2.8 million, or 78.2%, to
$6.3 million and the Company's effective tax rate would have been 39.9%.

      NET INCOME. Net income increased $4.3 million, or 81.5%, to $9.6 million
for 1997 from pro forma net income of $5.3 million for 1996. As a percentage of
revenue, net income increased to 6.3% for 1997 from the pro forma amount of 4.7%
for 1996.

      EARNINGS PER SHARE. Diluted earnings per share increased $0.24, or 57.1%,
to $0.66 for 1997 from pro forma earnings per share of $0.42 for 1996. Excluding
the $125,000 one-time credit described under `INCOME TAXES' above, diluted
earnings per share for 1997 would have increased $0.23, or 54.8%, to $0.65.

LIQUIDITY AND CAPITAL RESOURCES

     In January 1997, the Company completed an initial public offering of
3,100,000 shares of its Common Stock at a price of $16.00 per share. In the
offering, the Company sold 2,300,000 shares and a shareholder of the Company
sold 800,000 shares. Shortly thereafter, the representatives of the several
underwriters exercised their over-allotment option resulting in the sale of
465,000 shares by other shareholders of the Company. The net proceeds to the
Company were approximately $33,144,000. The Company did not receive any of the
proceeds from the sale of shares by the selling shareholders. The Company used
$4,352,920 of the proceeds from the initial public offering during the third
quarter of 1997, $1,284,024 during the first quarter of 1998, $363,975 during
the third quarter of 1998 and $10,795,772 during the fourth quarter of 1998 for
the acquisitions of DP Career Associates, Data Systems Technology, Inc. and The
Avery Group, described in Note 4 of Notes to Consolidated Financial 
Statements. Between January 1, 1999 and March 2, 1999, the Company
spent $52,022,082 on its acquisitions of D.P. Specialists, Inc. and D.P.
Specialists Learning Center, LLC ("DPS" collectively), The Professionals -
Computer Management & Consulting, Inc., Krystal Solutions, Inc. and Solution
Technologies, Inc. These acquisitions caused the Company to exhaust the balance
of the proceeds from the sale and incur approximately $36 million in debt on its
credit facilities.

      The Company made its first sale of stock under the Metro Information
Services, Inc. Employee Stock Purchase Plan (the "ESPP") on September 30, 1997.
The Company sold 10,000 shares for an aggregate purchase price of $167,350 on
September 30, 1997, 9,984 shares for $184,587 on December 31, 1997, 12,000
shares for $289,428 on March 31, 1998, 9,486 shares for $278,167 on June 30,
1998, 13,300 shares for $360,336 on September 30, 1998 and 18,320 shares for
$395,125 on December 31, 1998. The ESPP is described in Note 10 of Notes to
Consolidated Financial Statements.

      During the year ended December 31, 1998, certain employees exercised
stock options which vested on December 31, 1997 pursuant to the 1997 Employee
Incentive Stock Option Plan. Total proceeds from the issuance of stock for
option exercises during the year ended December 31, 1998 were $177,120.

      The Company funds its operations primarily from cash generated by
operations. Net cash provided by operations was $13,038,573 for 1998 and
consisted primarily of net income of $14,617,044 and, excluding the effects of
acquisitions, increases in accounts receivable of $9,664,564, accounts payable
of $2,922,251 and accrued compensation and benefits of $2,027,850. The increases
in accounts receivable, accounts payable, and accrued compensation and


                                    Page 21
<PAGE>

benefits are primarily due to the revenue growth experienced during 1998. The
Company's working capital was $36,777,000 at December 31, 1998 compared to
$34,560,000 at December 31, 1997.

     The Company has $90,000,000 of credit facilities provided in equal amounts
by three banks, approximately $54,000,000 of which is available as of March 1,
1999. The facilities have a five-year maturity, which may be extended each year
for an additional year. If the facilities are not extended, principal repayment
is required at the end of four years. Until that time interest only is payable
monthly. Two of the facilities allow the Company to select among prime rate and
London Interbank Offered Rate (LIBOR) based interest rates while the third has
only LIBOR based interest rates. All of the facilities have interest rates which
increase as the balance outstanding under the facilities increases. The Company
has selected a 30-day LIBOR based rate and, if any borrowings were outstanding
under the facilities at December 31, 1998, the rate on such borrowings would
have borne interest rates ranging from 5.4% to 6.0%. The facilities also contain
fees, ranging from 0.125% to 0.3125% annually, which are charged on the unused
portion of the facilities. The facilities are collateralized by accounts
receivable of the Company. At December 31, 1998, no amounts were outstanding
under the facilities.

      The credit facilities contain several covenants, including one requiring
the maintenance of a certain tangible net worth ratio, which limit the amount of
dividends that can be paid. The covenants also impose limits on incurring
additional debt and require a certain debt service coverage ratio to be
maintained. Amounts advanced under the facilities can be used for acquisitions
and general working capital purposes.

      The Company believes that the available funds under its credit facilities
and cash flows from operations will be adequate to meet its needs for working
capital and capital expenditures for at least the next two years. Any
significant acquisitions, however, may require additional debt and equity
financing.

SEASONALITY

      Metro's operating results are adversely affected when client facilities
close due to holidays or inclement weather. The Company generally experiences a
certain amount of seasonality in the fourth quarter due to the number of
holidays and closings of client facilities during that quarter. Further, the
Company generally experiences lower operating results in the first quarter due
in part to the timing of unemployment and FICA tax accruals and delays in
clients' contract renewals related to clients' budget approval processes.

INFLATION

      Due to the high demand for IT services and a shortage of qualified IT
consultants, wage inflation in the IT services industry surpassed normal wage
inflation during 1998. If this trend continues, it could have a material adverse
effect on the Company's business, operating results and financial condition if
the Company is unable to pass increased payroll costs on to its clients. The
Company attempts to obtain bill rate increases from clients to offset these
increases whenever possible. The Company expects to obtain bill rate increases
in 1999 to offset pay rate increases in 1999, although there can be no assurance
that this will occur. Average pay rates for 1998 increased 12.0% over average
pay rates for 1997. Average pay rates for 1997 increased 5.3% over average pay
rates for 1996. The Company expects average pay rate increases in 1999 will fall
between these percentages.

YEAR 2000 ISSUES

         Many computer systems use dates to correctly process information. Until
recently, computer systems used a two-digit date to indicate a year. For
example, the year 1958 is indicated in these systems by the digits "58." As the
year 2000 approaches, these systems will need to process information involving
the year 2000 and later years. Systems that use only a two-digit year may
confuse the year 2000 for the year 1900, causing the systems to produce
incorrect results. This problem is commonly known as the year 2000, Y2K or
Millenium Bug ("Year 2000") problem.

         As an investor, you should be aware that the full extent of the Year
2000 problem is unknown. The Securities and Exchange Commission ("SEC") recently
issued an Interpretation in which it indicated that, "... the 


                                    Page 22
<PAGE>

extent of the potential impact of the Year 2000 problem is not yet known, and if
not timely corrected, it could affect the global economy." The SEC's
Interpretation requires publicly traded companies such as us to disclose
additional information about their Year 2000 problems. This disclosure is the
result of our effort to inform the investing public of the risks we believe are
likely to affect us. All readers of this document are encouraged to read the SEC
Interpretation.

         Estimates of the cost to fix Year 2000 problems worldwide run to the
hundreds of billions of dollars. Additional costs in the form of business
interruptions, additional repair costs and litigation costs may be incurred if
the fixes do not work. It appears there is no way to predict with certainty what
will happen after December 31, 1999. It is certain, however, that the year 2000
will arrive soon. As a result, all companies should be undertaking a study to
determine how they may be affected by the Year 2000 problem and take steps to
address the effects where appropriate. Failure to do so could cause injury not
only to the company that is not ready for the year 2000, but every other person
dealing with that company. As a result, it is difficult for any company,
including Metro, to evaluate effectively the impact that third party failures
may have on its business. In this disclosure, we have assumed we will not be
Year 2000 compliant under the Interpretation until all third parties with whom
we have a material relationship provide us with written assurance that they
expect to be Year 2000 compliant in time. We have treated written responses to
our requests for this information, information provided on third parties' web
sites and information filed with the SEC by our U.S. public company clients as
written assurance under this disclosure.

         METRO'S STATE OF READINESS

         Metro's approach to the Year 2000 problem involves: 1) assessing,
correcting and testing our internal systems; 2) obtaining assurance from third
parties who exchange information electronically with us that the information
they provide will be Year 2000 compliant; 3) obtaining assurance or information
on the state of Year 2000 readiness of our material clients and suppliers; and
4) developing contingency plans, when practical, to address expected Year 2000
failures. A discussion of each of these areas follows.

         INTERNAL RISKS

          We completed an initial assessment of our systems in 1997. Additional
information received by us led to a second assessment during the third quarter
of 1998.

         These assessments covered embedded computer chips, computer software,
computer hardware, telephones, communications equipment, facsimile machines,
scanners, copiers and voice mail which we own and were able to identify as
critical to our ability to provide services to our clients. These assessments
identified a limited amount of software that displayed dates in an ambiguous
2-digit format, but processed dates correctly in 4-digit format. We corrected
this ambiguity in the third quarter of 1998. The assessment also identified a
variety of BIOS programs (programs that allow personal computers to run) that
require additional upgrades to make them Year 2000 compliant according to the
manufacturer of the personal computers. We finished upgrading these BIOS
programs by December 31, 1998. We expect to finish upgrading certain
non-compliant computer operating systems by April 15, 1999 with patches provided
by the computer manufacturers. We will perform additional testing of our systems
through June 30, 1999.

         After the assessments described above were made we acquired five
companies: The Avery Group, D.P. Specialists, Inc. and D.P. Specialists Learning
Center LLC ("DPS" collectively), The Professionals - Computer Management &
Consulting, Inc., Krystal Solutions, Inc. and Solution Technologies, Inc. We
have completed an assessment of the Avery Group and the upgrade of noncompliant
BIOS and operating systems. We expect to perform testing of the Avery Group's
Systems through June 30, 1999. We are conducting an assessment of the systems
used by the other acquired companies and expect to complete necessary upgrades
by June 30, 1999. We expect to perform additional testing of their systems
through September 30, 1999.

         We are seeking information from other companies with whom we have a
material relationship. We have or will send letters to these companies
requesting confirmation that they will be able to continue their relationship
with us at the same level and without interruption before and after the Year
2000. As of March 1, 1999, we had not 


                                    Page 23
<PAGE>

received responses from 33 of these companies. We are continuing our efforts to
obtain information from these companies. When respondents have indicated they
will not be compliant we have made plans to switch to alternate suppliers.

         We are implementing other systems which we have received written
assurances are Year 2000 compliant. See "-Liquidity and Capital Resources." We
are not treating the costs of these new systems as Year 2000 costs because we
did not accelerate their implementation due to Year 2000 problems.

         EXTERNAL RISKS. We are installing new software that we expect to begin
using in 1999. See "-Liquidity and Capital Resources." This new system will
increase the amount of information we exchange with our banks and 401(k) plan
administrator. In some cases, the Year 2000 problem does not affect the
information being received. In other cases, we have received assurances from
these institutions that they will be Year 2000 compliant in a timely fashion. In
one case, we have made arrangements to receive the information in a usable
2-digit year format. We are relying on these assurances as part of our Year 2000
planning. If these assurances are wrong, they could have a material adverse
effect on our business, financial condition and results of operations.

         We have reviewed filings made by our U.S. public company clients who
provided more than 0.2% of revenue during the 12 months ended December 31, 1998.
This review covered filings through February 15, 1999, and was performed to
determine the extent of the risk that our clients may not be Year 2000
compliant. These companies represented 57.6% of our revenue for the 12 months
ending December 31, 1998. This review furnished the following information on our
clients' expected completion date for their year 2000 efforts:

<TABLE>
<CAPTION>
                            Will not                                                                      
                 Not      be Year 2000    Year 2000        by      by       by        by
              Disclosed    Compliant    Compliant Now   3/31/99  6/30/99  9/30/99  12/31/99
<S>             <C>            <C>           <C>          <C>     <C>      <C>       <C> 
% Of Metro
    Revenue     0.6%           0%            0%           7.1%    22.3%    19.5%     8.1%
</TABLE>

         We have treated the information furnished in these reports as written
assurance provided by these clients on the status of their Year 2000 problem. In
some cases these clients have indicated they will be substantially complete or
will have completed Year 2000 efforts for their mission critical systems by the
date indicated. We have treated this disclosure as an indication that these
companies will be able to continue their business relationships with us without
disruption or failure. We have or will request additional information from those
clients who indicated they will not be compliant or provided no disclosure. At
present, we plan to monitor disclosures made by these publicly traded clients in
Forms 10-Q and 10-K.

         We are also requesting assurance from our other clients who provided
more than 0.2% of revenue during the 12 months ended December 31, 1998. These
clients represented 24.8% of revenue during the 12 months ended December 31,
1998. We have reviewed written assurances from these clients representing 12.1%
of revenue during the 12 months ended December 31, 1998. This review furnished
the following information on our clients' expected completion date for their
year 2000 efforts:

<TABLE>
<CAPTION>
                          Will not                                                 
                Not     be Year 2000    Year 2000      by       By       by        by          
             Disclosed   Compliant    Compliant Now  3/31/99  6/30/99  9/30/99  12/31/99
<S>             <C>          <C>          <C>         <C>      <C>       <C>      
% Of Metro
    Revenue     0%           0%           0.5%        0.3%     5.3%      0.8%     5.2%
</TABLE>

         We have not yet received assurance from the rest of these companies. We
expect to have more information on these companies when we file our Quarterly
Report on Form 10-Q in April or May 1999. If these clients do not become Year
2000 compliant in a timely fashion, our business, financial condition and
results of operations could be materially adversely affected.


                                    Page 24
<PAGE>

         BUSINESS RISKS. We are seeking written assurance from our clients. See
EXTERNAL RISKS above.

         LITIGATION RISKS. We have limited our involvement in Year 2000 projects
and worked primarily on a time and materials basis. We have also sought
limitations on our liability for Year 2000 related problems arising from our
services when appropriate. We are not able to estimate the cost of any
litigation that may arise in the future.

         COSTS TO ADDRESS THE COMPANY'S YEAR 2000 PROBLEM

         Our internal information technology staff will perform repairs to our
internal systems. We believe our internal systems will be Year 2000 complaint by
July 1, 1999. We may perform additional assessments, remediation and testing if
information about Year 2000 risks to our internal systems changes.

         Our internal information technology staff is also requesting
information from our material clients and suppliers to address external risks.
We do not expect to incur material incremental costs to gather this information.
We will defer other projects these individuals could have worked on by about 6
months. We do not consider these deferred projects mission critical or expect
their delay to have a material adverse effect on our business, results of
operations or financial condition.

         The cost of our Year 2000 activities is expected to be approximately
$275,000, approximately $25,000 of which had been incurred at December 31, 1998.

         RISKS OF THE COMPANY'S YEAR 2000 ISSUES

          The Year 2000 problem involves several risks for us. One risk is that
our computerized systems and embedded systems (such as minicontrollers and chips
in elevators, machinery and equipment) ("internal risks") and those of our
clients, suppliers, vendors, financial institutions and others ("external
risks") will be disrupted or fail. We also consider the possible loss of revenue
when consultants on Year 2000 assignments complete their assignments a Year 2000
related risk. We may also become involved in litigation over the Year 2000
services we have rendered to our clients. These risks have the capacity to cause
a material adverse effect on our business, results of operations and financial
condition although we are uncertain what risks we will actually suffer. These
risks are discussed below.

         INTERNAL RISKS. We rely heavily on computer systems to run our
business. Internal risks consist of potential disruptions and failures of our
proprietary and purchased computer software, computer hardware, office
equipment, office systems and turnover in our information technology staff.
Software systems include recruiting, candidate tracking, payroll, human
resources, benefits and financial accounting systems. Disruptions and failures
of these systems could hurt our ability to bill our clients, collect money from
clients, pay our employees in a timely manner and continue in business.

         EXTERNAL RISKS.

         External risks are risks that third parties will suffer Year 2000
problems that adversely affect us. These risks include the inability of certain
third parties to exchange electronic data with us and the risk of disruptions
and failures of persons with whom we do business. These third parties include
our clients, suppliers, vendors, financial institutions and others with whom we
do business.

         If we are not able to exchange information electronically with third
parties, our ability to receive and pay money as needed may be slowed and
information on 401(k) account and cash balances may be delayed. If our clients,
suppliers, vendors and financial institutions are not Year 2000 compliant, their
noncompliance may cause a material disruption to their businesses. These
disruptions could negatively impact us in many ways, including: a client may be
unable to pay us; a financial institution may be unable to process checks drawn
on our bank accounts, accept deposits or process wire transfers; a client,
supplier, vendor or financial institution may fail; vendor deliveries of
computer equipment and other supplies may be delayed or cease; voice and data
connections we use to share information may be interrupted and brokers who make
a market in our stock may not be able to trade our stock. This 


                                    Page 25
<PAGE>

list is not comprehensive. Other interruptions to the normal conduct of business
by us, the nature and extent of which we cannot fully foresee, may also occur.
We are unable to determine the nature or length or effect such interruptions, if
any, may have on us.

         BUSINESS RISKS. As an IT services company, we have benefited from the
Year 2000 problem by providing consultants with the skills necessary to help
address these issues for our clients. We face the risk of reduced business
opportunities, revenue and profits as clients resolve their Year 2000 problem if
Year 2000 assignments are not replaced with other assignments. We believe that
when consultants complete Year 2000 assignments, many of these consultants will
be re-assigned to perform activities delayed by clients while addressing the
Year 2000 problem. In other cases, we will need to find other assignments for
these consultants. We estimate that, at December 31, 1998, approximately 14% of
our consultants were involved in Year 2000 assignments.

         LITIGATION RISKS. Approximately 72% of our services involve writing
custom software for clients and maintaining software for clients. Clients may
sue us over work we have performed that causes or fails to fix a Year 2000
problem. This risk exists regardless of the steps we may take to provide error
free Year 2000 services and make our internal systems Year 2000 ready. Any
litigation may have a material adverse effect on our business, financial
condition and results of operations and may distract management's attention from
running the business. This distraction could have further adverse effects on the
business.

         The SEC has directed us to describe our "most reasonably likely worst
case scenario" posed by the Year 2000 issues we face. Based on our current
understanding of the Year 2000 issues facing the Company, we believe our most
reasonably likely worst case scenario is that we will suffer little or no
disruptions or failures in our internal systems, but minor disruptions and
failures among our material clients, suppliers, vendors and financial
institutions. Nonetheless, as we learn more from our material clients,
suppliers, vendors and financial institutions, it is possible that this belief
could change.

         CONTINGENCY PLANS

         We are developing Year 2000 contingency plans where practical. These
plans address alternatives to electronic processing of candidate resumes, hires
of new employees, terminations of existing employees, payroll, supplier
payments, cash receipts from clients, invoices to clients and initiatives
without e-mail. These plans also address furnishing required reports to clients,
furnishing required governmental reports, gaining access to leased office space,
shipping intracompany correspondence and communicating Company reports. These
plans include stockpiling supplies and equipment, identifying alternative
sources of goods and services and performing certain tasks manually. For
example, we may store paper copies of electronically stored data (such as
candidate resumes) at locations likely to need them if we believe that the data
will not be accessible due to a Year 2000 failure. In some situations, however,
it is not practical to have an effective contingency plan. For example, a
failure by our primary banking institution may interrupt our cash receipts and
our ability to pay our employees in a timely manner. Our contingency plan may
call for paying employees in cash, but may not be practical due the amount of
cash involved, the number of Company locations and the number of employees who
must be paid. Our payroll is currently several million dollars per pay period
paid through 44 locations in 41 metropolitan markets to over 3,000 employees.

         As an investor, you should be aware that the number of Year 2000
failures suffered by us may exceed our ability to address them all at one time.
In addition, significant Year 2000 failures by third parties, including clients,
may jeopardize our financial strength. In severe circumstances, our ability to
continue as a going concern may be threatened or we may fail. We believe,
however, that we are taking reasonable and prudent steps to address the Year
2000 problem based on the information currently available to us. We will
continue to monitor this issue and plan to modify our approach to the problem if
we believe the circumstances warrant such a change.

NEW SYSTEMS IMPLEMENTATION

         The Company has licensed new human resources, payroll and financial
accounting software. These systems provide enhanced capabilities and integration
of information and are believed to be Y2K compliant. A combination of Metro
employees and outside consultants will be used to implement these systems. The
Company's current 


                                    Page 26
<PAGE>

estimate of the cost to replace these systems is $2.8 million. The Company
expects to capitalize and amortize these costs over these systems' useful lives.

RECENT ACCOUNTING PRONOUNCEMENTS

      On March 4, 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP"), ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. This SOP provides guidance on
capitalization of certain costs related to computer software developed or
obtained for internal use. The SOP is effective for financial statements for
fiscal years beginning after December 15, 1998. Earlier application was
encouraged in fiscal years for which annual financial statements had not been
issued. The Company adopted the SOP effective January 1, 1998. The SOP causes
amounts that otherwise would have been charged to selling, general and
administrative expenses in the period incurred to be capitalized and amortized
over the useful life of the computer software, typically three to seven years.
Through December 31, 1998, $1,051,000 in costs have been capitalized by the
Company pursuant to this SOP. For the year ended December 31, 1998, the effect
of this change in accounting was to increase net income by $636,000 and increase
basic and diluted income per share by $0.04. Because the SOP requires that
computer software be ready for its intended use before amortization begins, no
amortization expense has been recognized for these amounts through December 31,
1998.

RISK ASSOCIATED WITH FUTURE OPERATIONS

      DEPENDENCE ON QUALIFIED PERSONNEL. The Company's success depends on its
ability to attract and retain consultants with the technical skills and
experience required to meet its clients' specific needs. The Company must
continually identify and recruit technical personnel in each of its markets to
fill new positions and to replace consultants who have left the Company. The IT
industry has high consultant turnover rates and the demand for consultants has,
to date, substantially exceeded supply. This has resulted in intense competition
for consultants and the Company expects such competition for consultants to
increase in the future. There can be no assurance that the Company will attract
and retain the personnel it requires to conduct its operations successfully or
attract additional personnel for expanded operations. Failure to attract and
retain such personnel or an increase in the Company's consultant turnover rate
could have a material adverse effect on the Company's business, operating
results and financial condition.

      RISK ASSOCIATED WITH OPENING NEW OFFICES. The Company recently accelerated
its office expansion program by opening three new offices in 1996, four new
offices in 1997 and four new offices in 1998 in geographic markets where the
Company had no previous presence. In addition, the Company expects to open three
to five offices annually for the next several years. Historically, for
approximately six to 12 months after opening, new offices have generally
produced monthly operating losses or marginal operating income and have placed
significant demands on the Company's operational, administrative and financial
resources. In addition, the Company's future performance and profitability will
depend, in part, on its ability to successfully attract and retain qualified
personnel to manage the growth and operations of the new offices. The opening of
additional offices, individually or in the aggregate, may have a material
adverse effect on the Company's business, operating results and financial
condition.

      RISK ASSOCIATED WITH GROWTH THROUGH ACQUISITIONS. The Company intends to
grow, in part, through the acquisition of other IT businesses. The Company's
acquisition strategy depends on its ability to identify, finance and complete
acquisitions. There is significant competition for acquisition opportunities
which may increase the cost of acquisition candidates. Some competitors for
these candidates have greater resources than the Company. The Company will face
a variety of additional risks if it completes acquisitions, including the
inability to integrate the acquired businesses into the Company's operations,
the inability to achieve expected financial results from the acquired
businesses, the diversion of management's attention, the inability to retain key
personnel of the acquired businesses, losses due to liabilities and
contingencies of the acquired businesses and the adverse impact on net income
caused by amortization of acquired intangible assets. The Company's failure or
inability to successfully implement and manage its acquisition strategy may have
a material adverse effect on the Company's business, operating results and
financial condition. In addition, the value of Company stock held by
shareholders at the time of any acquisition may be diluted if the Company issues
stock to complete any acquisition.


                                    Page 27
<PAGE>

      RISK ASSOCIATED WITH NEW SERVICES. The Company intends to grow, in part,
through the development or acquisition of IT services beyond the scope of
services presently provided by the Company. The Company's ability to
successfully develop new services depends on a number of factors, including its
ability to identify and effectively integrate new services into the Company's
existing operating structure. The identification and offering of new services in
which the Company has no or little experience or expertise could result in
diversion of management's attention and place disproportionate demands on the
Company's operational, administrative and financial resources. There can be no
assurance that the performance of any new service offerings, whether acquired or
developed by the Company, will meet management's expectations or provide the
same profit margins as the Company's existing operations.

      COMPETITION. The IT services industry is extremely competitive and highly
fragmented. Although the market is consolidating, management believes no one
company is dominant. The Company's competitors include general IT services
firms, temporary staffing and personnel placement companies, general management
consulting firms, major accounting firms, divisions of large hardware and
software companies and niche providers of IT services. Some of the Company's
competitors possess substantially greater resources, greater name recognition
and a more established client base than the Company. In addition, the services
offered by the Company have been and continue to be provided by clients'
in-house personnel. There can be no assurance that the Company will be able to
compete successfully against existing or new competitors as the industry
continues to evolve.

      TREND TOWARD PRIME VENDORS. To reduce the number of their IT service
providers, certain businesses are beginning to use a limited number of vendors
and, in some cases, a single vendor (collectively, "Prime Vendors"). These Prime
Vendors fill client needs directly or through subcontractors. Metro anticipates
that this trend toward Prime Vendors may become increasingly common in the
marketplace and may result in pricing pressure and the loss of business
opportunities. There can be no assurance that this trend will not lead to
reduced gross profit margins and fewer opportunities to place consultants and
will not have a material adverse effect on the Company's business, operating
results and financial condition.

      The Company has taken steps, when practical, to become a Prime Vendor of
IT services. In certain cases, the Company experiences pricing pressure from
clients as a condition to becoming or remaining a Prime Vendor. In other cases,
the Company experiences demands to provide consultants in multiple locations to
become or remain a Prime Vendor. Although the Company believes it can
effectively meet its clients' requirements, there can be no assurance that the
Company will be able to compete effectively with other Prime Vendors or remain a
Prime Vendor.

      ABSENCE OF LONG-TERM CONTRACTS; DEPENDENCE ON KEY CLIENTS. Substantially
all of the Company's contracts to perform services may be canceled or modified
by the Company's clients at will without penalty. Approximately 54% of the
Company's consultants are salaried employees and unless terminated, receive full
compensation and benefits even if not engaged in billable work. As a result,
cancellation or reduction of a contract may result in a loss of revenue without
a corresponding reduction in cost of revenue. Although the Company has a broad
client base, the loss of one or more large clients could have a material adverse
effect on the Company's business, operating results and financial condition. In
1996, 1997 and 1998, the Company's 10 largest clients accounted for
approximately 29.1%, 29.8% and 31.3%, respectively, of the Company's revenue and
its largest client accounted for approximately 6.5%, 5.8% and 4.4%,
respectively, of revenue.

      CONTRACT PERFORMANCE AND PROJECT OUTSOURCING RISKS. Project outsourcing is
distinguishable from the Company's core business in that project outsourcing
requires the Company to assume a greater level of responsibility for developing
or maintaining systems on behalf of its clients. Many of the Company's project
outsourcing engagements are critical to the operations of its clients'
businesses. The Company's failure or inability to complete such engagements to
its clients' satisfaction could have a material adverse effect on its clients'
operations and, consequently, may give rise to claims against the Company for
actual or consequential damages or otherwise damage its reputation, any of which
could have a material adverse effect on the Company's business, operating
results and financial condition.

      RAPID TECHNOLOGICAL CHANGE. Rapid technological advances, frequent product
introductions and enhancements, and changes in client requirements characterize
the market for IT services. The Company's future success depends, in 


                                    Page 28
<PAGE>

part, on its ability to provide consultants possessing the skills to service
past, current and next generation products and technologies. These factors will
require the Company to provide adequately trained personnel to address the
increasing and evolving needs of its clients. Any failure by the Company to
anticipate or respond rapidly to technological advances, new products and
enhancements or changes in client requirements could have a material adverse
effect on the Company's business, operating results and financial condition.

      EMPLOYMENT LIABILITY RISKS. Metro employs and places its consultants and
other employees at its clients' businesses. Risks associated with this activity
include possible claims of discrimination and harassment, liabilities for errors
and omissions by the Company's employees, misuse of client proprietary
information or intellectual property, injury to Company and client employees,
misappropriation of client funds, theft of client property, other criminal
activity, torts and other similar claims. In certain circumstances, the Company
may be held responsible for the actions of persons not under the Company's
direct control. Although the Company has not had significant problems with
respect to such employment liability, there can be no assurance that the Company
will not experience such problems in the future.

      RELIANCE ON TECHNOLOGY AND COMPUTER SYSTEMS. The Company relies on its
computer and communications systems, the hub of which is located at its
corporate headquarters in Virginia Beach, Virginia. Although the Company has a
disaster recovery plan, temporary or permanent loss of these systems from fire,
power loss, natural disaster, operating malfunction or any other cause could
have a material adverse effect on the Company's business, operating results and
financial condition. The Company's property and business interruption insurance
may not be adequate to compensate the Company for all losses that may occur. In
addition, the Company is in the process of implementing new human resources,
payroll and financial accounting software systems. An unsuccessful
implementation of these new systems or significant delays in their
implementation could have a material adverse effect on the Company's business
operations.

      DEPENDENCE ON SENIOR MANAGEMENT. The continued growth and success of the
Company is largely dependent on the efforts, direction and guidance of its
existing senior management and on its ability to attract and retain qualified
managers. The Company has entered into employment agreements with its executive
officers, each of which contains provisions limiting these employees' rights to
compete with the Company and hire its employees. The loss of any of the
Company's senior management or key personnel and, in particular, John H. Fain,
President and Chief Executive Officer, or Andrew J. Downing, Executive Vice
President and Chief Operating Officer, or the inability to attract and retain
key management personnel in the future, could have a material adverse effect on
the Company's business, operating results and financial condition. The Company
carries no key man life insurance on Mr. Fain or Mr. Downing.

      HEALTH PLAN SELF INSURANCE RISKS. The Company self-insures a portion of
its group health and dental plan. On December 31, 1998, 1,645 of the Company's
2,414 employees were covered by the group health plan. The Company self-insures
up to $125,000 of claims per covered employee per year with a Company maximum
annual aggregate liability of 125% of expected claims as computed at the end of
each year based on the number of covered persons during the year. Self insurance
charges may fluctuate materially from quarter to quarter and may cause a
material adverse effect on the Company's quarterly and annual business,
operating results and financial condition.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has not entered into the market risk sensitive transactions required
to be disclosed under this Item.


                                    Page 29


<PAGE>

ITEM 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Metro Information Services, Inc.:

We have audited the accompanying consolidated balance sheets of Metro
Information Services, Inc. and subsidiary (the "Company") as of December 31,
1997 and 1998, and the related consolidated statements of income, changes in
redeemable common stock and shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based upon our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Metro Information
Services, Inc. and subsidiary as of December 31, 1997 and 1998 and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.

                                                   /s/ KPMG LLP

Norfolk, Virginia

January 29, 1999, except as to Note 15,
   which is as of March 2, 1999


                                    Page 30

<PAGE>

                 METRO INFORMATION SERVICES, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                                 YEAR ENDED DECEMBER 31,
                                                                  ---------------------------------------------------
                                                                      1996                1997                1998
                                                                  ------------        ------------       ------------
<S>                                                               <C>                 <C>                <C>         
Revenue ........................................................  $113,962,932        $152,578,107       $213,891,637
Cost of revenue ................................................    79,751,603         106,079,583        148,321,681
                                                                  ------------        ------------       ------------
Gross profit ...................................................    34,211,329          46,498,524         65,569,956
                                                                  ------------        ------------       ------------
Selling, general and administrative expenses (Note 5) ..........    24,346,933          30,264,143         40,349,100
Depreciation and amortization ..................................       763,760           1,158,228          1,850,529
                                                                  ------------        ------------       ------------
    Total operating expenses ...................................    25,110,693          31,422,371         42,199,629
                                                                  ------------        ------------       ------------
Operating income ...............................................     9,100,636          15,076,153         23,370,327
                                                                  ------------        ------------       ------------
Interest income ................................................        49,622             788,752            837,557
Interest expense ...............................................      (309,076)            (60,100)           (56,991)
                                                                  ------------        ------------       ------------
    Net interest income (expense) ..............................      (259,454)            728,652            780,566
                                                                  ------------        ------------       ------------
Income before income taxes .....................................     8,841,182          15,804,805         24,150,893
Income taxes (Note 8) ..........................................            --           6,177,558          9,533,849
                                                                  ------------        ------------       ------------
Net income .....................................................  $  8,841,182        $  9,627,247       $ 14,617,044
                                                                  ============        ============       ============

    Net income per share - basic (Note 9) ......................  $       0.71        $       0.66       $       0.98
                                                                  ============        ============       ============
    Net income per share - diluted (Note 9) ....................  $       0.71        $       0.66       $       0.97
                                                                  ============        ============       ============

Weighted average number of shares of common stock
   and potential dilutive securities outstanding (Note 9):
      Basic ....................................................    12,397,376          14,610,888         14,845,465
      Diluted ..................................................    12,397,376          14,662,257         15,001,176

Pro forma income data:
    Income before income taxes .................................   $ 8,841,182
    Pro forma provision for income taxes (unaudited)
         (Note 8) ..............................................     3,536,473
                                                                   -----------

    Pro forma net income (unaudited) ...........................   $ 5,304,709
                                                                   ===========

    Pro forma net income per share - basic and diluted
         (unaudited) (Note 9) ..................................   $      0.42
                                                                   ===========
    Proforma weighted average number of shares of common
         stock and potential dilutive securities outstanding
         - basic and diluted (unaudited) .......................    12,668,990
</TABLE>



          See accompanying notes to consolidated financial statements.


                                    Page 31
<PAGE>

                 METRO INFORMATION SERVICES, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,
                                                                                 ------------------------------------
                                                                                    1997                     1998
                                                                                 -----------              -----------
<S>                                                                              <C>                      <C>        
ASSETS:
Current assets:
    Cash and cash equivalents (Note 2) ........................................  $22,028,594              $18,495,580
    Accounts receivable less allowance for doubtful 
        accounts of $152,201 and $372,671 at        
        December 31, 1997 and 1998 ............................................   24,136,582               35,994,170
    Prepaid expenses ..........................................................      402,115                  457,578
    Deferred income taxes (Note 8) ............................................      662,687                  851,653
                                                                                 -----------              -----------
         Total current assets .................................................   47,229,978               55,798,981
Property and equipment, net (Note 6) ..........................................    5,672,548                9,655,638
Goodwill, net (Note 4) ........................................................    5,327,622               15,410,128
Other assets ..................................................................      303,067                  134,951
                                                                                 -----------              -----------
Total assets ..................................................................  $58,533,215              $80,999,698
                                                                                 ===========              ===========


LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
     Accounts payable (Note 2) ................................................  $ 4,118,209              $ 8,119,928
     Accrued compensation and benefits ........................................    8,551,501               10,902,482
                                                                                 -----------              -----------
          Total current liabilities ...........................................   12,669,710               19,022,410
Deferred income taxes (Note 8) ................................................      735,632                  732,195
                                                                                 -----------              -----------
          Total liabilities ...................................................   13,405,342               19,754,605
                                                                                 -----------              -----------
Shareholders' equity:
     Preferred stock, $0.01 par
       value; authorized 1,000,000 shares; none
       issued and outstanding (Note 13) .......................................           --                       --
     Common stock, $0.01 par value, authorized 
       50,000,000 shares; issued and outstanding 14,819,984 
       shares at December 31, 1997 and 14,884,160 shares at
       December 31, 1998 (Note 13) ............................................      148,200                  148,842
     Paid in capital ..........................................................   36,085,946               37,585,480
     Retained earnings ........................................................    8,893,727               23,510,771
                                                                                 -----------              -----------
       Total shareholders' equity .............................................   45,127,873               61,245,093
                                                                                 -----------              -----------
Commitments, contingencies and subsequent events
       (Notes 12 and 15)

Total liabilities and shareholders' equity ....................................  $58,533,215              $80,999,698
                                                                                 ===========              ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                    Page 32

<PAGE>

<TABLE>
<CAPTION>

                                     METRO INFORMATION SERVICES, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY

                                                                                        SHAREHOLDERS' EQUITY
                                               REDEEMABLE           --------------------------------------------------------------
                                              COMMON STOCK             COMMON STOCK     
                                          ----------------------    --------------------    PAID IN      RETAINED
                                           SHARES      AMOUNT        SHARES     AMOUNT      CAPITAL      EARNINGS         TOTAL
                                          ---------  -----------    ---------  ---------   ---------    -----------    -----------
<S>                                       <C>        <C>            <C>        <C>         <C>          <C>            <C>        
BALANCE AS OF DECEMBER 31, 1995 ........  3,419,613  $ 1,404,298    8,768,239  $  87,682   $      --   $ 4,525,298     $ 4,612,980
Issuance of redeemable common stock ....    312,148    1,246,595           --         --          --            --              --
Distributions paid .....................         --           --           --         --          --    (5,100,000)     (5,100,000)
Net income for 1996 ....................         --           --           --         --          --     8,841,182       8,841,182
                                          ---------  -----------    ---------  ---------   ---------   -----------     -----------
BALANCE AS OF DECEMBER 31, 1996 ........  3,731,761    2,650,893    8,768,239     87,682          --     8,266,480       8,354,162
Release of redemption feature on
 redeemable common stock ............... (3,731,761)  (2,650,893)   3,731,761     37,318   2,613,575            --       2,650,893
Distributions paid .....................         --           --           --         --          --    (9,000,000)     (9,000,000)
Net proceeds from issuance of shares
  of common stock ......................         --           --    2,300,000     23,000  33,120,634            --      33,143,634
Net proceeds from issuance of shares
  of common stock to Employee Stock 
  Purchase Plan ........................         --           --       19,984        200     351,737            --         351,937
Net income for 1997 ....................         --           --           --         --          --     9,627,247       9,627,247
                                          ---------  -----------    ---------  ---------   ---------    -----------    -----------
BALANCE AS OF DECEMBER 31, 1997 ........         --           --   14,819,984    148,200  36,085,946     8,893,727      45,127,873
Net proceeds from issuance of shares                                                                                              
     of common stock to Employee Stock                                                                                            
     Purchase Plan .....................         --           --       53,106        531   1,322,525            --       1,323,056
Net proceeds from issuance of shares
     of common stock to Employee
     Incentive Stock Option Plan .......         --           --       11,070        111     177,009            --         177,120
Net income for 1998 ....................         --           --           --         --          --    14,617,044      14,617,044
                                          ---------  -----------   ----------  --------- -----------   -----------     -----------
BALANCE AS OF DECEMBER 31, 1998 ........         --  $        --   14,884,160  $ 148,842 $37,585,480   $23,510,771     $61,245,093
                                          =========  ===========   ==========  ========= ===========   ===========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.



                                    Page 33

<PAGE>

                 METRO INFORMATION SERVICES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                ----------------------------------------------
                                                                    1996             1997             1998
                                                                ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income.................................................  $  8,841,182     $  9,627,247     $ 14,617,044
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation and amortization - cost of revenue.......            --           28,777           45,875
        Depreciation and amortization - selling, general and
           administrative expenses............................       763,760        1,158,228        1,850,529
     Net loss on sale of property and equipment...............        39,509           45,750           41,089
     Deferred taxes...........................................            --           72,945         (192,403)
     Changes in operating assets and liabilities
     increasing (decreasing) cash, net of the effects of
     acquisitions:
         Restricted cash (Note 2).............................            --               --        1,264,524
         Accounts receivable..................................      (884,450)      (7,203,422)      (9,664,564)
         Prepaid expenses.....................................       107,962         (289,834)         (53,555)
         Other assets.........................................      (496,045)        (202,398)         179,933
         Accounts payable.....................................       189,381        1,591,112        2,922,251
         Accrued compensation and benefits....................     2,087,054        1,650,251        2,027,850
                                                                ------------     ------------     ------------
              Net cash provided by operating activities.......    10,648,353        6,478,656       13,038,573
                                                                ------------     ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of property and equipment ...................    (2,267,638)      (2,701,722)      (3,494,790)
     Acquisition of computer software ........................            --               --       (2,141,332)
     Acquisition of businesses, net of cash acquired .........            --       (4,352,920)     (12,443,771)
     Proceeds from sale of property and equipment ............         9,779           27,176            8,130
                                                                ------------     ------------     ------------
              Net cash used in investing activities ..........    (2,257,859)      (7,027,466)     (18,071,763)
                                                                ------------     ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net repayments under line of credit .....................    (4,708,234)      (2,547,388)              --
     Decrease in other assets related to issuance of
       2,300,000 shares ......................................            --          471,849               --
     Proceeds from issuance of redeemable common stock .......       476,595               --               --
     Proceeds from issuance of 2,300,000 shares ..............            --       33,143,634               --
     Proceeds from issuance of shares to Employee
       Stock Purchase Plan ...................................            --          351,937        1,323,056
     Proceeds from issuance of shares on exercise of
          incentive stock options ............................            --               --          177,120
     Distributions to shareholders............................    (5,100,000)      (9,000,000)              --
     Advances on notes receivable - related parties ..........      (175,000)        (550,000)              --
     Repayment of notes receivable - related parties .........     1,156,682          550,000               --
                                                                ------------     ------------     ------------
         Net cash provided by (used in) financing activities      (8,349,957)      22,420,032        1,500,176
                                                                ------------     ------------     ------------
         Net increase (decrease) in cash .....................        40,537       21,871,222       (3,553,014)
Cash and cash equivalents at beginning of year ...............       116,835          157,372       22,028,594
                                                                ------------     ------------     ------------
Cash and cash equivalents at end of year .....................  $    157,372     $ 22,028,594     $ 18,495,580
                                                                ============     ============     ============
Supplemental disclosure of cash flow information:
     Cash paid for interest ..................................  $    309,076     $     60,100     $     56,991
                                                                ============     ============     ============
     Cash paid for income taxes ..............................  $         --     $  6,466,602     $  9,004,978
                                                                ============     ============     ============
</TABLE>


During 1997 and 1998, non-cash financing activities associated with acquisitions
totaled $1,300,000 and $1,001,344, respectively.

          See accompanying notes to consolidated financial statements.

                                    Page 34

<PAGE>

                 METRO INFORMATION SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF BUSINESS

         Metro Information Services, Inc. together with its consolidated
subsidiary Metro Information Services of Northern California, Inc. ("Metro" or
the "Company") is an information technology ("IT") consulting services company
providing IT consultants on a contract basis to organizations with complex IT
operations. On December 31, 1998, the Company had 34 offices in the United
States and Puerto Rico.

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidary. All intercompany balances and
transactions have been eliminated.

         REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK

         The Company derives substantially all of its revenue from consulting
services and substantially all services provided by the Company are billed on a
time and materials basis. Revenue is recognized as services are performed.
Concentration of credit risk with respect to accounts receivable is limited due
to the number and diversity of the Company's client base.

         CASH AND CASH EQUIVALENTS

         Cash and cash equivalents include all highly liquid debt instruments
with original maturities of three months or less. Cash equivalents at December
31, 1998 consisted of overnight money market investments.

         FINANCIAL INSTRUMENTS

         The carrying amounts of the Company's financial instruments, primarily
accounts receivable, accounts payable and accrued compensation and benefits,
approximate fair value due to the short maturity of these instruments.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Depreciation on property and
equipment is calculated on the straight-line method over their estimated useful
lives. Depreciation on leasehold improvements is calculated on the straight-line
method over the lesser of the length of the lease term or their estimated useful
lives.

         GOODWILL

         Goodwill represents the excess of cost over fair value of net assets
purchased in acquisitions and is amortized on a straight-line basis over the
expected benefit period, generally 30 years. Management periodically assesses
whether there has been a permanent impairment in the value of goodwill. The
amount of such impairment is determined by comparing anticipated future cash
flows to the carrying value of the related goodwill.

         INCOME TAXES AND PRO FORMA INCOME TAXES

         Before January 1, 1997, the Company, with the consent of its
shareholders, was taxed under the provisions of Subchapter S of the Internal
Revenue Code of 1986, which provides that, in lieu of corporate income taxes,
the shareholders of the S corporation are taxed on their proportionate share of
the Company's taxable income. Therefore, pro forma income taxes shown for the
period ending in 1996 represent the estimated amount of income taxes the 


                                    Page 35
<PAGE>

Company would have reported had the Company been a C corporation for that period
taxable at an assumed effective tax rate of 40%.

         Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and, if applicable, operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

         UNAUDITED PRO FORMA NET INCOME AND PRO FORMA NET INCOME PER SHARE

         The pro forma net income presented in the consolidated statements of
income reflects the pro forma effects for income taxes at an effective rate of
40%, as if the Company had been a taxable entity for all periods presented.

         The pro forma net income per common share is computed based on the
weighted average number of common shares and potential dilutive securities
outstanding after giving effect to the stock split discussed in Note 14. In
accordance with Securities and Exchange Commission Staff Accounting Bulletin
Topic 1B3, weighted average shares for the year ended December 31, 1996 are
increased to reflect certain distributions in excess of earnings.

         IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

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

         USE OF ESTIMATES

         Management of the Company has made a number of estimates and
assumptions relating to the reporting of revenue and expense, assets and
liabilities and the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.

         RECLASSIFICATIONS

         Certain prior year amounts have been reclassified to conform to current
year presentation.

(2) RESTRICTED CASH

         Metro has agreed to act as payment agent for a client on an information
technology project. As of December 31, 1998, the Company held $1,264,524 of
restricted cash for this client. This amount is included in cash and cash
equivalents and accounts payable presented in the consolidated balance sheets.
Client approved invoices will be paid out of the restricted cash held and Metro
will remit any remaining restricted cash to the client at the end of the
project. Metro is not obligated to pay invoices that exceed the amount of the
restricted cash held.


                                    Page 36
<PAGE>

(3) INTERNAL USE SOFTWARE COSTS

         On March 4, 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1 ("SOP"), ACCOUNTING FOR THE COSTS
OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. This SOP provides
guidance on capitalization of certain costs related to computer software
developed or obtained for internal use. The SOP is effective for financial
statements for fiscal years beginning after December 15, 1998. Earlier
application was encouraged in fiscal years for which annual financial statements
had not been issued. The Company adopted the SOP effective January 1, 1998. The
SOP causes amounts that otherwise would have been charged to selling, general
and administrative expenses in the period incurred to be capitalized and
amortized over the useful life of the computer software, typically three to
seven years. Through December 31, 1998, $1,051,000 in costs have been
capitalized by the Company pursuant to this SOP. For the year ended December 31,
1998, the effect of this change in accounting was to increase net income by
$636,000 and increase basic and diluted income per share by $0.04. Because the
SOP requires that computer software be ready for its intended use before
amortization begins, no amortization expense has been recognized for these
amounts through December 31, 1998.

(4) ACQUISITIONS

         On July 1, 1997, the Company completed the acquisition of two IT
services companies using a portion of the proceeds from the Company's initial
public offering completed in January 1997. The Company acquired the business
operations of Data Systems Technology, Inc., which had offices in Columbia and
Greenville, South Carolina, for $500,000, of which $134,000 was paid on July 1,
1997 (including payoff of net assumed liabilities), $2,000 was uncollected from
assumed receivables and $364,000 was paid on August 31, 1998 as a result of the
acquired business attaining certain operating income targets. The Company also
acquired the business operations of Kansas City-based J2, Inc., d.b.a. DP Career
Associates, for $5.2 million, of which $3.9 million was paid on July 1, 1997 and
$1.3 million was paid on February 27, 1998 as a result of the acquired business
attaining certain gross profit targets. On December 2, 1998, the Company
completed the acquisition of The Avery Group, an information technology services
company with one office in the Palo Alto/Silicon Valley area of California. The
purchase price was $11 million, with an additional contingency payment due in
early 2000, equal to six times the excess of earnings before interest, taxes and
amortization of goodwill for 1999 over $1,600,000. The purchase price has been
preliminarily allocated based on estimated fair values at the date of
acquisition. Each acquisition is accounted for as a purchase. In connection with
these acquisitions, the Company has recorded approximately $15,692,000 of
goodwill which is being amortized on a straight-line basis over 30 years.
Amortization expense for 1998 was $213,851 and accumulated amortization as of
December 31, 1998 was $282,116. See Note 15 for a discussion of subsequent
events.

(5) RELATED PARTY TRANSACTIONS

         During 1996 there were several related party notes receivable
outstanding. As of January 1, 1996, these related party notes receivable
consisted of $800,000 due on a $1,000,000 line of credit note from the majority
shareholder requiring annual interest payments at 8%, which was secured by Deed
of Trust on real property (the "Line of Credit Note"); $168,322 due on an
unsecured note from a partnership in which the majority shareholder and two
other shareholders were general partners, requiring monthly payments of
principal and interest at 8%; and $13,360 of other notes receivable from
employees. As of December 31, 1996, all of the notes receivable, except for the
Line of Credit Note, had been repaid in full and the notes canceled. Shortly
before the Company's January 29, 1997 initial public offering, the majority
shareholder repaid his outstanding Line of Credit Note in full. The Company then
canceled the Line of Credit Note and released the Deed of Trust on real property
securing the note. The highest balance outstanding on the Line of Credit Note
during 1997 was $550,000.

         Until December 31, 1996, the Company leased its corporate headquarters
from a partnership in which the majority shareholder of the Company and his
spouse were the general partners. The lease agreement provided for an annual
rental of $144,000 payable in monthly installments of $12,000. The Company
leased a new corporate headquarters facility from an unrelated third party
beginning December 15, 1996. The lease for the old facility was terminated on
December 31, 1996.


                                    Page 37
<PAGE>
         In September 1996, the Company purchased two condominiums from
partnerships in which the majority shareholder and certain other shareholders of
the Company are general partners. The total purchase price of $380,000 was
determined by independent appraisals. Before the purchase, these condominiums
were leased by the Company from the partnerships for annual rentals of $69,000
and were generally made available to the Company's employees as a benefit.

(6) PROPERTY AND EQUIPMENT

      Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                  USEFUL         ----------------------------
                                                                   LIFE              1997             1998
                                                                  -------        ----------       -----------
<S>                                                              <C>              <C>              <C>
      Land ..................................................          n.a.       $   94,376       $  129,221
      Buildings .............................................    31.5 years          607,297          938,957
      Computer equipment and software .......................     3-7 years        6,056,484        9,627,741
      Furniture and equipment ...............................     5-7 years        2,011,907        2,938,976
      Leasehold improvements ................................       Various          291,602          484,375
                                                                                  ----------       ----------
                                                                                   9,061,666       14,119,270
           Less accumulated depreciation and amortization....                      3,389,118        4,463,632
                                                                                  ----------       ----------
                                                                                  $5,672,548       $9,655,638
                                                                                  ==========       ==========
</TABLE>

(7) LINE OF CREDIT FACILITIES

         The Company maintains credit facilities of $39,900,000. The facilities
are provided in equal amounts by three banks and have a five-year maturity which
may be extended each year for an additional year. If the facilities are not
extended, principal on one of the facilities must be repaid in four equal annual
installments while the other two facilities require principal repayment at the
end of four years. Until that time, interest only is payable monthly. Two of the
facilities allow the Company to select among prime rate and London Interbank
Offered Rate (LIBOR) based interest rates while the third has only LIBOR based
interest rates. All of the facilities have interest rates that increase as the
balance outstanding under the facilities increases. At December 31, 1998 and
1997, no amounts were outstanding under the facilities. The Company has selected
a 30-day LIBOR based rate and, if any borrowings were outstanding under the
facilities at December 31, 1998, the rate on such borrowings would have ranged
from 5.4% to 6.0%. The facilities also contain fees, ranging from 0.125% to
0.3125% annually, which are charged on the unused portion of the facilities. The
facilities are collateralized by accounts receivable of the Company.

         The credit facilities contain several covenants, including one
requiring the maintenance of a certain tangible net worth ratio, which limits
the amount of dividends that can be paid. The covenants also impose limits on
incurring additional debt and require a certain debt service coverage ratio to
be maintained. Amounts advanced under the facilities can be used for
acquisitions and general working capital purposes. As discussed in Note 15, the
Company changed its line of credit facilities on January 15, 1999.

(8) INCOME TAXES

         The unaudited pro forma provision for income taxes presented on the
consolidated statement of income for 1996 represents the estimated taxes that
would have been recorded had the Company been a C corporation for income tax
purposes for that period. The pro forma provision for income taxes is as
follows:

<TABLE>
<CAPTION>
                                                       YEAR ENDED
Pro forma (unaudited):                             DECEMBER 31, 1996
                                                 ----------------------
<S>                                               <C>
      Federal ................................         $3,006,002
      State ..................................            530,471
                                                       ----------
         Total pro forma .....................         $3,536,473
                                                       ==========
</TABLE>
                                    Page 38

<PAGE>

       During 1997 and 1998, the Company was a C corporation for income tax
purposes. The provision for income taxes for 1997 and 1998 includes federal and
state income taxes currently payable and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities. The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                 ----------------------------
                                                    1997              1998
                                                 ----------        ----------
<S>                                              <C>               <C>
Current:
      Federal...............................     $5,047,918        $8,113,236
      State.................................      1,056,695         1,613,016
Deferred:
      Federal...............................         60,586          (160,233)
      State.................................         12,359           (32,170)
                                                 ----------        ----------
         Total income tax expense...........     $6,177,558        $9,533,849
                                                 ==========        ==========

</TABLE>

      The 1996 pro forma tax expense and 1997 and 1998 actual tax expense differ
from the amount which would be provided by applying the statutory federal rate
to income before income taxes primarily as a result of state income taxes. A
reconciliation of the statutory federal income tax rate and the effective rate
is as follows:

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                     ---------------------------
                                                     1996     1997         1998
                                                      ---      ---       ------
<S>                                                  <C>      <C>        <C>
Statutory tax rate ...............................     34%      34%          35%
Effect of:
     State and local income taxes, net of
       Federal tax benefit .......................      5        5          4.5
     Other .......................................      1        1           --
     Termination of S election ...................     --       (1)          --
                                                      ---      ---       ------
     Effective tax rate ..........................     40%      39%        39.5%
                                                      ===      ===       ======
</TABLE>

      The components of the deferred tax asset and liability at December 31,
1997 and 1998 are as follows:

<TABLE>
<CAPTION>

Current deferred tax asset:                        1997               1998
                                                 ---------          ---------
<S>                                              <C>                <C>
    Self-insurance reserves.................     $ 309,265          $ 373,594
    Accrued expenses........................       294,620            355,111
    Allowance for doubtful accounts.........        58,802            122,948
                                                 ---------          ---------
                                                 $ 662,687          $ 851,653
                                                 =========          =========

Long-term deferred tax liability:

    Depreciation and amortization...........     $(426,515)         $(615,387)
    Accrued expenses for financial
        reporting purposes..................      (309,117)          (116,808)
                                                 ---------          ---------
                                                 $(735,632)         $(732,195)
                                                 =========          ========= 
</TABLE>

         In assessing whether deferred tax assets may be realized, management
considers whether it is more likely than not that some or all of the deferred
taxes will not be realized. Based on the availability of carrybacks of future
deductible amounts to 1997 and 1998 taxable income and management's projections
for future taxable income over the periods in which the deferred tax assets are
deductible, management believes the existing net deductible temporary
differences will reverse during periods in which carrybacks are available and/or
in which the Company generates net taxable income. There can be no assurance,
however, that the Company will generate any income or any specific level of
continuing income in future years.


                                    Page 39
<PAGE>

(9) EARNINGS PER SHARE

         In February 1998, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 98 ("SAB 98") which applies to companies that issued
shares of stock within 12 months of an initial public offering ("IPO") or
converted from an S corporation to a C corporation for Federal income tax
purposes. In addition to reporting pro forma net income per share, SAB 98
requires that companies report actual historical net income per share. Prior to
SAB 98, stock and stock options issued within 12 months of an IPO below the IPO
price were treated as outstanding for all periods presented using the treasury
stock method. SAB 98 eliminates this treatment for issuances that are not
considered to be nominal issuances. The Company has determined that issuances of
stock and stock options within 12 months of the IPO were not nominal
issuances. SAB 98 has been applied in the accompanying financial statements for
all periods presented.

         The following reconciles the numerators and denominators of the basic
and diluted earnings per share computations of net income. During 1996 there
were no dilutive securities outstanding. Therefore, the calculation of basic and
diluted earnings per share was identical in this year. The reconciliations for
1997 and 1998 are shown below:

<TABLE>
<CAPTION>
                                                                             SHARES                       
                                                      NET INCOME           OUTSTANDING             EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997                  (NUMERATOR)         (DENOMINATOR)            PER SHARE
------------------------------------                  -----------       ------------------         ---------
<S>                                                    <C>                   <C>                   <C>     
Basic Earnings Per Share ...........................   $9,627,247            14,610,888            $   0.66
                                                                                                   ========
Effect of Dilutive Securities - Incentive
  Stock Options deemed outstanding .................           --                51,369

                                                       ----------            ----------
Diluted Earnings Per Share .........................   $9,627,247            14,662,257            $   0.66
                                                       ==========            ==========            ========

<CAPTION>
                                                                             SHARES                       
                                                      NET INCOME           OUTSTANDING             EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998                  (NUMERATOR)         (DENOMINATOR)            PER SHARE
------------------------------------                  -----------       ------------------         ---------

<S>                                                    <C>                   <C>                   <C>     
Basic Earnings Per Share ...........................  $14,617,044             14,845,465            $   0.98
                                                                                                    ========
Effect of Dilutive Securities - Incentive
  Stock Options deemed outstanding .................           --                155,711
                                                      -----------             ----------
Diluted Earnings Per Share .........................  $14,617,044             15,001,176            $   0.97
                                                      ===========             ==========            ========
</TABLE>


See Note 10 for a description of the Incentive Stock Option Plan.

(10) STOCK OPTION PLANS

         SFAS NO. 123 DISCLOSURE

         As permitted by SFAS No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION,
the Company applies APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, to account for its three stock-based compensation plans. In
accordance with APB Opinion No. 25, the Company recorded no compensation expense
related to these plans in 1997 and 1998. There is no compensation expense
related to the Metro Information Services, Inc. Employee Stock Purchase Plan
(the "ESPP") because it qualifies as a non-compensatory plan under APB Opinion
No. 25. There was no compensation expense recorded for either of the stock
option plans discussed below because the exercise price of each option equaled
the fair value of the underlying common stock as of the grant date. If
compensation expense for the Company's three stock-based compensation plans had
been determined based on the fair value of the underlying common stock at the
grant dates as calculated in accordance with SFAS No. 123, the Company's net
income and net income per share for the years ended December 31, 1997 and 1998
would have been reduced to the pro forma amounts indicated below. No options or
shares were issued under the plans before 1997.


                                    Page 40
<PAGE>

<TABLE>
<CAPTION>
                                                       DECEMBER 31, 1997                       DECEMBER 31, 1998
                                                  ----------------------------           ----------------------------
                                                     AS           SFAS NO. 123              AS           SFAS NO. 123
                                                  REPORTED         PRO FORMA             REPORTED         PRO FORMA
                                                  --------         ---------             --------         ---------
<S>                                             <C>                <C>                <C>                <C>        
      Net income ............................   $9,627,247         $9,233,358         $14,617,044        $13,903,986
                                                ==========         ==========         ===========        ===========
      Net income per share -
           Basic ............................     $   0.66           $   0.63            $   0.98           $   0.94
                                                  ========           ========            ========           ========
           Diluted ..........................     $   0.66           $   0.63            $   0.97           $   0.93
                                                  ========           ========            ========           ========
</TABLE>

         The full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income and net income
per share amounts presented above because compensation cost is recognized over
the options' vesting periods.

         OUTSIDE DIRECTORS STOCK PLAN

         On December 24, 1996, the Company adopted a non-qualified stock option
plan (the "Outside Directors Stock Plan") for the outside directors of the
Company. Each outside director is granted an option for 3,000 shares of Common
Stock on such director's initial election. At each Annual Meeting thereafter,
such director is granted an additional option for 1,000 shares of Common Stock.
The options granted to outside directors are immediately exercisable in full at
a price equal to the fair market value of Common Stock on the date of grant. The
options expire 10 years after the date of grant or one year after the outside
director is no longer a director of the Company, whichever is earlier. The
Company has reserved 50,000 shares for issuance under this plan. During 1997 and
1998, the Outside Directors Stock Plan issued 8,000 options and 2,000 options,
respectively, to outside directors and no options were exercised.

         INCENTIVE STOCK OPTION PLAN

         On December 24, 1996, the Company adopted the 1997 Employee Incentive
Stock Option Plan which provides for the grant of incentive stock options to
purchase up to an aggregate of 770,000 shares of Common Stock. In connection
with the initial public offering, certain employees of the Company were granted
options to purchase 374,300 shares of Common Stock at the initial public
offering price of $16.00 per share. On various dates during 1998, certain
employees of the Company were granted options to purchase 246,000 options at the
fair market value on the date of grant. All of the options issued in 1997 and
1998 vest ratably over five years and expire not later than nine years and 11
months after the date of grant.

The fair value of options at the date of grant was estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions:

                                                      1997             1998
                                                      ----             ----
      Expected life .............................   5 years          5 years
      Risk free interest rate ...................    6.3%             5.0%
      Expected volatility .......................     51%              56%
      Annual dividend yield .....................      0%               0%

      A summary of the status of the Company's 1997 Employee Incentive Stock
Option Plan and Outside Directors Stock Plan as of December 31, 1997 and 1998,
and changes during the years then ended, is presented below:


                                    Page 41
<PAGE>

<TABLE>
<CAPTION>
                                                    1997                                1998
                                       ----------------------------------    ----------------------------------
                                                            WEIGHTED                             WEIGHTED
                                         NUMBER OF          AVERAGE            NUMBER OF         AVERAGE
                                           SHARES        EXERCISE PRICE         SHARES        EXERCISE PRICE
                                       ---------------  -----------------    -------------  -------------------
<S>                                          <C>                  <C>            <C>                    <C>
Options at beginning of  year ........             --                 --          314,200               $15.97
Granted ..............................        382,300             $15.98          248,000               $27.47
Exercised ............................             --                 --          (11,070)              $16.00
Forfeited ............................        (68,100)            $16.00          (27,160)              $19.89
                                             --------                            --------
Options at end of year ...............        314,200             $15.97          523,970               $21.21
                                             ========                            ========

Options exercisable at year-end ......         69,320             $15.88          138,310               $18.07
                                             ========                            ========

Weighted average estimated fair value
     of options granted during the
     year ............................          $8.30                              $14.65
                                                =====                              ======
</TABLE>

      Following is a summary of the range of exercise prices and the weighted
average contractual life of outstanding stock options at December 31, 1998:

<TABLE>
<CAPTION>
                                                    OPTIONS OUTSTANDING                     OPTIONS EXERCISABLE
                                      --------------------------------------------        ------------------------
                                                WEIGHTED AVERAGE        WEIGHTED                       WEIGHTED
                                              REMAINING CONTRACTUAL     AVERAGE                         AVERAGE
   RANGE OF EXERCISE PRICES          SHARES          LIFE            EXERCISE PRICE        SHARES   EXERCISE PRICE
   ------------------------         --------         ----            --------------        ------   --------------
<S>                                    <C>          <C>                   <C>                <C>         <C>   
$13.50 ..........................     6,000        8.3 years             $13.50             6,000       $13.50
$16.00 ..........................   276,970        8.0 years             $16.00           106,510       $16.00
$19.25 ..........................     2,000        8.4 years             $19.25             2,000       $19.25
$23.75 to $25.81 ................    26,500        9.8 years             $25.70                --           --
$27.25 to $27.75 ................   210,500        9.5 years             $27.60            21,800       $27.70
$35.75 ..........................     2,000        9.4 years             $35.75             2,000       $35.75
                                    -------                                               -------
$13.50 to $35.75 ................   523,970        8.7 years             $21.21           138,310       $18.07
                                    =======                                               =======
</TABLE>

         EMPLOYEE STOCK PURCHASE PLAN

         The Company adopted the ESPP on December 24, 1996. Under the ESPP, an
aggregate of 250,000 shares of Common Stock may be purchased from the Company by
the employees through payroll withholding pursuant to a series of offerings. All
full-time employees who have met certain service requirements (as defined in the
ESPP), except for employees who own Common Stock of the Company or options on
such stock which represent more than 5% of Common Stock of the Company, are
eligible to participate. The purchase price of Common Stock is 85% of the lesser
of the fair market value of Common Stock on the first trading day of the
calendar quarter and the last trading day of the quarter. During 1997 and 1998,
the Company sold 19,984 and 53,106 shares, respectively, of Common Stock to the
ESPP for a total of $351,937 and $1,323,056, respectively.

         The fair value of the employees' purchase rights of ESPP shares was
estimated using the Black-Scholes option pricing model with the following
weighted average assumptions:

                                              1997             1998
                                              ----             ----
     Expected life .......................  3 months         3 months
     Risk free interest rate .............  5.1%             4.9%
     Expected volatility .................  27%              31%
     Annual dividend yield ...............   0%               0%

         The weighted average fair value of those purchase rights granted in
1998 was $6.38.

                                    Page 42

<PAGE>

(11) PROFIT SHARING PLAN

         The Company sponsors a 401(k) employee benefit plan covering all
eligible employees with a minimum of three months of service. Eligible employees
are permitted to make voluntary deductible contributions to the plan and the
Company makes matching contributions of one-half of the eligible employee's
contribution, up to a maximum of 6% of the employee's compensation.

         The Company made matching contributions of $1,181,665, $1,342,860 and
$1,775,329 to the plan for the years ended December 31, 1996, 1997 and 1998,
respectively.

(12) COMMITMENTS AND CONTINGENCIES

         The Company is obligated under various non-cancelable operating leases
for office space. Rent expense for the years ended December 31, 1996, 1997 and
1998 was $1,094,436, $1,424,822 and $1,930,184, respectively, and is included in
selling, general and administrative expenses in the accompanying consolidated
statements of income. Renewal options are available at most locations. Future
minimum lease payments, including contingent rentals, as of December 31, 1998
are as follows:

<TABLE>
<S>                                                      <C>
       1999............................................  $ 2,298,049
       2000............................................    2,087,597
       2001............................................    1,736,614
       2002............................................      755,125
       2003............................................      368,285
       Thereafter......................................           --
                                                         -----------
                                                         $ 7,245,670
                                                         -----------
                                                         -----------
</TABLE>

         The Company self-insures against employees' health insurance claims up
to a stop loss limit of $125,000 per employee per year and a variable, aggregate
stop loss limit. Amounts charged to income related to insurance claims were
$3,143,431, $3,965,692 and $5,535,831 for the years ended December 31, 1996,
1997 and 1998, respectively. Included in accrued compensation and benefits on
the accompanying consolidated balance sheets is a reserve for claims incurred
but not yet reported of $800,494 and $952,348 at December 31, 1997 and 1998,
respectively.

(13) SHAREHOLDERS' EQUITY

         On October 22, 1996, the Company's shareholders amended and restated
the articles of incorporation. Under the amended and restated articles of
incorporation, the Company authorized 1,000,000 shares of Preferred Stock, par
value $0.01 and 50,000,000 shares of Common with a par value of $0.01 per share,
of which 49,000,000 shares are designated as Common Stock and 1,000,000 shares
are designated as Nonvoting Common Stock. The recapitalization and the
3,507.2952 for one stock split described in Note 14, are reflected in these
consolidated financial statements and the accompanying notes.

         PREFERRED STOCK

         The Company's Board of Directors has the authority to issue shares of
Preferred Stock and determine the stock terms without obtaining shareholders
approval. There are currently no issued or outstanding shares of Preferred Stock
and the Company has no present plans to issue any shares of Preferred Stock.

         COMMON STOCK

         The Common Stock shareholders have the sole right to vote. Those shares
of Common Stock that were subject to certain contractual redemption obligations
in 1996 have been classified as redeemable common stock (the "Redeemable Common
Stock"). In all other respects, the Common Stock and Redeemable Common Stock had
identical rights.


                                    Page 43
<PAGE>

         Redeemable Common Stock was offered to key members of management under
individual stock purchase agreements annually on April 1 and the individuals had
30 days to purchase the stock. The number of shares offered was determined by
the Company's president based on the prior fiscal year's operating income and
each individual's performance in that year. The purchase price was determined by
a formula based on operating income.

(14) INITIAL PUBLIC OFFERING

         On January 29, 1997, the Company consummated an initial public offering
of 3,100,000 shares of its Common Stock at a price of $16.00 per share, of which
2,300,000 shares were issued and sold by the Company and 800,000 shares were
sold by a shareholder of the Company. Shortly thereafter the representatives of
the several underwriters exercised their over-allotment option resulting in the
sale of 465,000 shares by other shareholders of the Company. The net proceeds to
the Company from the offering were approximately $33,144,000. The Company did
not receive any proceeds from the sale of shares by the selling shareholders.

         The following corporate actions were taken in connection with the
initial public offering:

         DISTRIBUTIONS

         On January 20, 1997, the Company distributed $9,000,000 to its
shareholders, approximating the estimated aggregate undistributed amount of
income on which the Company's shareholders were required to pay income taxes for
tax years 1987 through 1996.

         STOCK SPLIT

         On January 24, 1997, the Company effected a 3,507.2952 for one stock
split by means of a stock dividend. All share and per share data in these
financial statements reflect this stock split.

         CONVERSION OF NONVOTING COMMON STOCK

         The nonvoting Redeemable Common Stock was released from any agreement
requiring its redemption and was converted into voting Common Stock. As a
result, the 3,731,761 shares of Redeemable Common Stock have been reclassified
as Common Stock in the December 31, 1997 and 1998 financial statements.

         TERMINATION OF S CORPORATION ELECTION

         Effective January 1, 1997, the Company terminated its S corporation
election resulting in the Company becoming a C corporation for all income tax
purposes.

         CANCELATION OF RELATED PARTY NOTE

         Shortly before the initial public offering, the Company's majority
shareholder repaid his outstanding line of credit note in full. The Company then
canceled the line of credit note and released the Deed of Trust on real property
securing the note.

         EMPLOYMENT AGREEMENTS

         In connection with the Company's January 29, 1997 initial public
offering, the Company entered into employment agreements with six executive
officers. The agreements became effective in January 1997, and provide for an
initial term of one year with total annual base salaries of $1,200,000 for 1997
and automatically renew for successive one-year terms unless terminated by
either party. The six executive officers are also entitled to a performance
bonus. The agreements contain a two-year non-competition provision following
termination of employment.


                                    Page 44
<PAGE>

(15) SUBSEQUENT EVENTS (UNAUDITED)

         On January 1, 1999, the Company acquired D. P. Specialists, Inc. and 
D. P. Specialists Learning Center, LLC ("DPS" collectively), an information 
technology consulting services and personnel staffing business located in El 
Segundo, California and Woodbridge, New Jersey for a purchase price of 
$10,000,000. DPS had unaudited gross revenues of $13,242,626 for the year 
ended December 31, 1998. On February 1, 1999, the Company acquired The 
Professionals -Computer Management & Consulting, Inc. ("PCM") and Krystal 
Solutions, Inc. ("KSC"), both of which are information technology consulting 
services and personnel staffing businesses located in Irvine, California and 
San Bruno, California for a purchase price of $17,976,082. PCM and KSC had 
unaudited gross revenues of $10,668,000 and $11,445,000 respectively, for the 
year ended December 31, 1998. Effective March 1, 1999, the Company acquired 
Solution Technologies, Inc. ("STI"), an information technology consulting 
services and personnel staffing business located in Camp Hill (Harrisburg), 
Altoona and Pittsburgh, Pennsylvania, Charlotte, North Carolina, Hagerstown, 
Maryland and Kansas City, Missouri, for a purchase price of $24,046,000. 
There may be an additional purchase price amount which is to be determined 
based on STI's consultant count on March 8, 1999. STI had unaudited gross 
revenues of $23,176,000 for the year ended December 31, 1998. For all of 
these acquisitions, if the companies acquired achieve certain predetermined 
financial results during the next fiscal year, the Company will make an 
additional payment which will be recorded as additional goodwill. The 
acquisitions will be accounted for using the purchase method of accounting. 
Accordingly, a portion of the purchase price will be allocated to net 
tangible and intangible assets acquired based on their estimated fair values. 
The balance of the purchase price will be recorded as goodwill. The 
acquisitions were financed partially with proceeds remaining from the 
Company's initial public offering of common stock on January 29, 1997. The 
remainder of the purchase price was financed with the Company's cash on hand 
and borrowings from the Company's line of credit.

         On January 15, 1999, the Company increased its line of credit
facilities from $39,900,000 to $90,000,000. In addition, one the covenants was
modified to increase the limit on incurring additional debt. The facilities are
provided in equal amounts by three banks and have a five-year maturity which may
be extended each year for an additional year. If the facilities are not
extended, principal on one of the facilities was previously required to be
repaid in four equal annual installments. All of the facilities now require that
if their terms are not extended, principal must be repaid at the end of four
years.


                                    Page 45
<PAGE>

(16) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

    The following table sets forth certain quarterly operating information for
each of the 12 quarters ending with the quarter ended December 31, 1998. This
information was derived from the unaudited consolidated financial statements of
the Company which, in the opinion of management, were prepared on the same basis
as the consolidated financial statements contained elsewhere in this report and
include all adjustments, consisting of normal recurring adjustments, which
management considers necessary for the fair presentation of the information for
the periods presented. The financial data shown below should be read in
conjunction with the consolidated financial statements and notes thereto
included in this report. Results for any fiscal quarter are not necessarily
indicative of results for the full year or for any future quarter.

<TABLE>
<CAPTION>
                                                                             
STATEMENTS OF INCOME DATA                                   FIRST        SECOND      THIRD      FOURTH
                                                           QUARTER       QUARTER    QUARTER     QUARTER
                                                           -------       -------    -------     -------
                                                            (Dollars in thousands except per share data)
<S>                                                        <C>           <C>         <C>         <C>    
1996:
    Revenue .............................................  $26,328       $27,812     $29,142     $30,681
    Gross profit ........................................    7,726         8,452       8,817       9,216
    Operating income ....................................    2,107         2,248       2,431       2,314
    Net income ..........................................    2,021         2,184       2,371       2,265
    Net income per share - basic and diluted ............  $  0.17       $  0.18     $  0.19     $  0.18
    Pro forma net income ................................    1,213         1,310       1,423       1,359
    Pro forma net income per share - basic and diluted ..  $  0.09       $  0.10     $  0.11     $  0.11
    Gross profit percentage .............................     29.3%         30.4%       30.3%       30.0%
    Operating income percentage .........................      8.0%          8.1%        8.3%        7.5%

1997:
    Revenue .............................................  $33,045       $35,883     $40,569     $43,080
    Gross profit ........................................    9,727        10,841      12,580      13,351
    Operating income ....................................    2,741         3,409       4,314       4,612
    Net income ..........................................    1,832         2,180       2,703       2,912
    Net income per share - basic and diluted ............  $  0.13(1)    $  0.15     $  0.18     $  0.20
    Gross profit percentage .............................     29.4%         30.2%       31.0%       31.0%
    Operating income percentage .........................      8.3%          9.5%       10.6%       10.7%

1998:
    Revenue .............................................  $47,110       $52,391     $56,593     $57,799
    Gross profit ........................................   14,346        16,375      17,296      17,553
    Operating income ....................................    4,663         5,715       6,538       6,454
    Net income ..........................................    2,899         3,559       4,051       4,109
    Net income per share - basic ........................  $  0.20       $  0.24     $  0.27     $  0.28
    Net income per share - diluted ......................  $  0.19       $  0.24     $  0.27     $  0.27
    Gross profit percentage .............................     30.5%         31.3%       30.6%       30.4%
    Operating income percentage .........................      9.9%         10.9%       11.6%       11.2%
</TABLE>

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

(1)  Net income per share for the three months ended March 31, 1997 includes a
     one-time reduction in income tax expense of $125,000 which represents the
     cumulative effect of the Company converting from a S corporation to a C
     corporation effective January 1, 1997. Excluding the $125,000 one-time
     reduction in income taxes, earnings per share for the three months ended
     March 31, 1997 would have been $0.12.

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

None.

                                    Page 46

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; SECTION 16(A)
         BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      The Company is required to identify any director or officer who failed to
timely file with the Securities and Exchange Commission a required report
relating to ownership and change in ownership of the Company's equity
securities. One officer, Ron Cheatham, inadvertently did not report on Form 4
the sale of 300 shares, which he purchased in the Employee Stock Purchase Plan,
in August 1998. This sale was reported on a subsequently filed Form 5.

      The other information required by this Item is included in Part I as
permitted by Rule 401 of Regulation S-K and the General Instructions.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

      The following table sets forth certain information concerning compensation
paid to or earned by the Company's President and Chief Executive Officer and
each of the Company's four other most highly compensated executive officers who
earned more than $100,000 (the "Named Executive Officers") for services rendered
during the years ended December 31, 1998, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                                      LONG-TERM
                                                    ANNUAL COMPENSATION             COMPENSATION
                                               ------------------------------     -----------------
                                                                                  SHARES OF COMMON
                                                         SALARY       BONUS       STOCK UNDERLYING          ALL OTHER
NAME AND PRINCIPAL POSITION                    YEAR        ($)         ($)           OPTIONS(#)         COMPENSATION ($)
---------------------------                    ----      ------       -------     -----------------     ----------------
<S>                                            <C>       <C>          <C>              <C>                 <C>
John H. Fain,                                  1998      330,000      130,000              --              15,636 (1)
   Chairman of the Board, President and        1997      300,000      195,000              --              16,339 (2)
   Chief Executive Officer                     1996      600,000           --              --               7,889 (2)
                                                    
Andrew J. Downing,                             1998      264,000      102,500           5,000               6,559 (1)
   Executive Vice President and Chief          1997      240,000      159,914           5,000               5,330 (2)
   Operating Officer                           1996      210,000      180,810           5,000                 749 (2)

Frank B. Bracken, Jr.,                         1998      200,000       96,250              --               5,800 (1)
  Vice President of Operations                 1997      180,000      145,729           5,000               7,206 (2)
                                               1996      170,000      143,891           5,000                  --

Richard C. Jaeckle,                            1998      200,000      122,500           5,000               6,000 (1)
   Vice President of Operations                1997      180,000      138,750           5,000               6,086 (2)
                                               1996      180,000       99,787           5,000                  --

Kathleen A. Neff,                              1998      200,000       77,500           5,000               6,388 (1)
   Vice President of Operations                1997      180,000      128,567           5,000              10,673 (2)
                                               1996      165,000      100,203           5,000                 475 (2)
</TABLE>

----------
(1)   Retirement Savings Plan and Trust contributions were $4,800 for each of
      the Named Executive Officers. Amounts paid for excess accrued vacation and
      sick leave amounted to $8,631 for Mr. Fain, $20 for Mr. Downing, $0 for
      Mr. Bracken, $0 for Mr. Jaeckle and $0 for Ms. Neff. The remaining amounts
      represent non-cash compensation for use of Company condominiums and other
      miscellaneous amounts.

(2)   Includes certain health insurance premiums paid by the Company for 1996,
      amounts the Company contributed to the Metro Information Services, Inc.
      Retirement Savings Plan and Trust, amounts paid for excess accrued
      vacation and sick leave, non-cash compensation for use of Company
      condominiums and other miscellaneous amounts for 1996 and 1997.


                                    Page 47
<PAGE>

1998 OPTION GRANTS TABLE

      The following table sets forth the number of options to purchase shares of
Common Stock granted to the Named Executive Officers during 1998.

<TABLE>
<CAPTION>

                               NUMBER OF SHARES     PERCENT OF TOTAL                                   
                                  UNDERLYING       OPTIONS GRANTED TO    EXERCISE OR                   PRESENT VALUE 
                                    OPTIONS            EMPLOYEES         BASE PRICE     EXPIRATION       ON DATE OF  
            NAME                    GRANTED              IN 1998        ($/SHARE) (1)       DATE       GRANT ($) (2) 
            ----                    -------              -------        -------------       ----       ------------- 
<S>                                  <C>                   <C>              <C>           <C>              <C>   
John H. Fain.................           --                  --                 --               --             --
Andrew J. Downing ...........        5,000                 2.0              27.75         12/01/07         75,300
Andrew J. Downing ...........        5,000                 2.0              27.50         11/28/08         72,700
Frank B. Bracken, Jr. .......        5,000                 2.0              27.75         12/01/07         75,300
Richard C. Jaeckle ..........        5,000                 2.0              27.75         12/01/07         75,300
Richard C. Jaeckle ..........        5,000                 2.0              27.50         11/28/08         72,700
Kathleen A. Neff ............        5,000                 2.0              27.75         12/01/07         75,300
Kathleen A. Neff ............        5,000                 2.0              27.50         11/28/08         72,700
</TABLE>

----------
(1)  All options were granted at an exercise price equal to the fair market
     value of the underlying securities on the grant date. Options were granted
     on 1/1/98 at $27.75 and on 12/28/98 at $27.50. The options vest ratably
     over five years and will expire, at the latest, nine years and 11 months
     after the date of grant.

(2)  This value is based on the Black-Scholes option pricing model which
     includes assumptions for variables such as interest rates, stock price
     volatility and future dividend yield. The Company's use of this model is
     not an endorsement of its accuracy. Whether the model assumptions used will
     prove to be accurate cannot be known at the date of grant or as of the date
     of this Report. The Black-Scholes model produces a value based on freely
     tradable securities. Because the stock options awarded in 1998 are
     non-transferable, the "present value" shown cannot be realized by the
     holder. Recognizing these limitations of the model, the following
     assumptions were used to estimate the present value on the date of grant:
     1/1/98 grants - dividend yield of 0%, risk-free rate of return of 5.7%,
     estimated volatility of 56% and estimated average expected option term of 5
     years (these options vest ratably over five years beginning December 31,
     1998); 12/28/98 grants - dividend yield of 0%, risk-free rate of return of
     4.6%, estimated volatility of 56% and estimated average expected option
     term of 5 years (these options vest ratably over five years beginning
     December 31, 1999).

1998 YEAR-END OPTION VALUE TABLE

      During 1998, no stock options were exercised by any of the Named Executive
Officers. The following table sets forth the number and value of all unexercised
options at year end for these individuals:

<TABLE>
<CAPTION>
                                                               NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                                              UNDERLYING UNEXERCISED       IN-THE-MONEY OPTIONS AT
                                                             OPTIONS AT YEAR END (#)             YEAR END ($)
NAME                                                        EXERCISABLE/UNEXERCISABLE     EXERCISABLE/UNEXERCISABLE
----                                                        -------------------------     -------------------------
<S>                                                                      <C>                         <C>
John H. Fain ............................................                         0/0                           0/0
Andrew J. Downing .......................................                3,000/12,000                31,680/157,870
Frank B. Bracken, Jr. ...................................                 3,000/7,000                 31,680/85,170
Richard C. Jaeckle ......................................                3,000/12,000                31,680/157,870
Kathleen A. Neff ........................................                3,000/12,000                31,680/157,870
</TABLE>

DIRECTOR COMPENSATION

         Directors who are executive officers of the Company receive no
compensation for their service as members of either the Board of Directors or
committees thereof. During 1998, the Outside Directors, Mr. Becker and Mr.
Loving, each received an annual fee of $6,000, plus $1,000 for each Board of
Directors and committee meeting attended and reimbursement for their expenses.
In addition, under the Company's non-qualified stock option plan for Outside
Directors (the "Outside Directors Stock Plan"), each Outside Director received
an option for 1,000 shares of the


                                    Page 48
<PAGE>

Common Stock for their participation in Metro's 1998 Annual Meeting, held June
9, 1998. At each Annual Meeting of shareholders thereafter, such director shall
be granted an additional option for 1,000 shares of the Common Stock. The
options granted to Outside Directors may be exercised immediately at a price
equal to the fair market value of the Common Stock on the date of grant. The
options expire 10 years after the date of grant or one year after the Outside
Director is no longer a director of the Company, whichever is earlier. Options
for an aggregate of 50,000 shares of the Common Stock may be granted under the
Outside Directors Stock Plan. The Company granted options for 2,000 shares under
this plan during 1998.

EMPLOYMENT AGREEMENTS

         In connection with the Company's January 29, 1997 initial public
offering, the Company entered into employment agreements with each of its Named
Executive Officers effective January 1, 1997. The employment agreements provide
for an initial term of one year. Thereafter, each agreement will automatically
renew for successive one-year terms unless terminated by either party. Each
employment agreement provides that an officer's compensation will include a base
salary, a performance bonus and other bonus programs and benefit plans. The
performance bonus is based on the Company's achievement of specified levels of
revenue and operating income as determined by the Compensation Committee. The
agreements contain provisions protecting against use of the Company's
confidential information and protecting the Company against competition from
each officer for a two-year period after termination of employment in any market
in which the Company operates. For 1999, the base salaries of the Named
Executive Officers are as follows: Mr. Fain, $360,000; Mr. Downing, $300,000;
Mr. Bracken, $200,000; Mr. Jaeckle, $220,000; and Ms. Neff, $230,000.

         Each employment agreement also includes a salary continuation
arrangement in the event of a serious illness or accident that leads to
long-term disability or in the event of termination of the agreement by the
Company without cause. The amount payable under these arrangements from Metro's
funds and group disability policy could exceed $100,000 under each employment
agreement.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         John H. Fain, Chairman of the Board, President and Chief Executive
Officer of Metro, served as Chairman of the Compensation Committee during 1998.
No other interlocks or insider participation required to be disclosed under this
caption occurred during 1998.

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

         The Compensation Committee of the Board of Directors has responsibility
for establishing and monitoring compensation programs of the Company's executive
officers, which include the Company's President and Chief Executive Officer,
Executive Vice President and Chief Operating Officer, Vice President and Chief
Financial Officer and each Vice President of Operations. The Compensation
Committee is composed of John H. Fain, the Company's Chairman of the Board,
President and Chief Executive Officer, and two outside Directors. Mr. Fain does
not participate in the Compensation Committee's consideration of his
compensation.

         The Compensation Committee was formed on April 18, 1997 after the
Company's January 1997 initial public offering. The 1997 Compensation Plans
("1997 Compensation Plans") for the Company's executive officers were
established before the initial public offering. Accordingly, the Compensation
Committee was not involved in the determination of the 1997 Compensation Plans.
Mr. Fain, who was then the Company's sole Director, made those compensation
decisions. The Compensation Committee met once in 1997 and twice in 1998 to
consider the 1998 and 1999 compensation plans for the Company's executive
officers.

         The Company's 1997 and 1998 Compensation Plans were designed and
administered so that a significant portion of each executive officer's
compensation was linked to the Company's financial performance and so that the
interests of the Company's executive officers were aligned with the interests of
its shareholders. The Company's compensation plans include base salary,
incentive awards based on financial performance of the Company for each quarter
and the year and incentive stock option awards. The base salary of the executive
officers is based on a number of factors, including base salary for executives
in similar companies, the experience and training of the executive


                                    Page 49
<PAGE>

officer and the length of service of the executive officer with the Company. A
significant percentage of the executive officers' compensation for 1997 and 1998
was based on the Company achieving certain revenue, operating income and other
performance goals, including consultant growth, productivity and consultant
retention. These goals were met or exceeded by the Company.

         Before the Company's initial public offering, the Company established
the Metro Information Services, Inc. 1997 Employee Incentive Stock Option Plan
(the "Incentive Stock Plan") to provide incentive to the Company's key
employees, including the executive officers of the Company, to increase the
value of the Company's stock. In 1997 and 1998, each of the executive officers
(other than Mr. Fain, who is ineligible to participate in the Incentive Stock
Plan) received grants of options under the Incentive Stock Plan. The options
granted executive officers under the Incentive Stock Plan vest over a five-year
period.

         This report is submitted by the members of the Compensation Committee:

              Ray E. Becker
              John H. Fain
              A. Eugene Loving, Jr.

PERFORMANCE GRAPH

         The following graph provides a comparison of the cumulative total
stockholder return on the Common Stock with the cumulative total return on The
Nasdaq Stock Market and a group of 10 peer companies during the period from the
Company's initial public offering on January 29, 1997 through December 31, 1998.
The comparison assumes that $100 was invested at the beginning of the period in
the stock or index and assumes the reinvestment of any dividends. The Company
selected a peer group of other IT services companies with similar service
offerings. The peer companies are: Analysts International Corp., Ciber, Inc.,
Computer Horizons Corp., Computer Management Sciences, Inc., Computer Task
Group, Inc., Cotelligent Group, Inc., Data Processing Resources Corp., Keane,
Inc., Renaissance Worldwide, Inc. and SCB Computer Technology, Inc. The peer
group index reflects the weighted average market capitalization of the group.

[PERFORMANCE GRAPH]

This graph depicts the performance of $100 invested on January 29, 1997, in the
Company's Common Stock, Nasdaq Stock Market (U.S.) and peer group IT services
companies, including reinvestment of any dividends for the fiscal year ended
December 31, 1997 and 1998.

Corresponding index value and Common Stock price values are given below:

<TABLE>
<CAPTION>
                                          JANUARY 29, 1997      DECEMBER 31, 1997      DECEMBER 31, 1998
                                          -----------------     -----------------      -----------------
<S>                                            <C>                   <C>                    <C>    
Metro Information Services, Inc.               $100.00               $173.44                $187.50
The Nasdaq Stock Market (U.S.)                 $100.00               $116.86                $163.99
Peer Group                                     $100.00               $183.33                $171.04
</TABLE>


                                    Page 50

<PAGE>

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of March 1, 1999, certain
information regarding the beneficial ownership of Metro Common Stock, by (i)
each of the Company's directors, (ii) each of the executive officers named in
the Summary Compensation Table, (iii) all directors and officers of the Company
as a group and (iv) each person known by the Company to own beneficially more
than 5% of Common Stock. Unless otherwise indicated in the footnotes to the
table below, each person or entity named below has an address in care of the
Company's principal office. All share amounts have been rounded to the nearest
whole share.

<TABLE>
<CAPTION>

DIRECTORS, OFFICERS                                                                   TOTAL
AND 5% SHAREHOLDERS                                                                OWNERSHIP (1)     PERCENTAGE
-------------------                                                                -------------     ----------
<S>                                                                                   <C>             <C>  
John H. Fain(2) .................................................................      8,360,665       56.2%
Andrew J. Downing(3) ............................................................        508,363        3.4
Robert J. Eveleigh(4) ...........................................................          4,594         *
Ray E. Becker(5) ................................................................          5,000         *
Frank B. Bracken, Jr.(6) ........................................................        203,664        1.4
Richard C. Jaeckle(7) ...........................................................         82,214         *
A. Eugene Loving, Jr.(8) ........................................................          5,100         *
Kathleen A. Neff(9) .............................................................        209,102        1.4
The Fain Family Irrevocable Trust 1993(10) ......................................      1,206,510        8.1
All directors and executive officers as a group (12 persons)(2) .................      9,253,392       62.0
</TABLE>

----------
* Indicates less than 1%.

(1)  Beneficial ownership is determined in accordance with rules of the
     Securities and Exchange Commission (the "Commission") and includes general
     voting power or investment power with respect to securities. Shares of the
     Common Stock subject to options and warrants currently exercisable or
     exercisable within 60 days of the date of this Report are deemed
     outstanding for computing the percentage of the person holding such
     options, but are not deemed outstanding for computing the percentage of any
     other person. Except as otherwise specified below, the persons named in the
     table above have sole voting and investment power with respect to all
     shares of the Common Stock shown as beneficially owned by them.

(2)  Includes 1,206,510 shares of the Common Stock owned by a trust established
     by Mr. Fain of which his wife, Joyce L. Fain, and his sister, Cynthia L.
     Akins, are the co-trustees and of which Mr. Fain disclaims beneficial
     ownership, 227,974 shares of the Common Stock held by a trust of which Mr.
     Fain's son is the beneficiary and Mr. Fain is the trustee and of which Mr.
     Fain disclaims beneficial ownership and 206,930 shares of the Common Stock
     held by Ms. Akins as custodian for the benefit of Mr. Fain's daughter under
     the Virginia Uniform Transfers to Minors Act of which Mr. Fain disclaims
     beneficial ownership.

(3)  Includes 60,759 shares of the Common Stock owned by a trust established by
     Mr. Downing and his wife, Cheryl O. Downing, of which his wife is the sole
     trustee. Also includes 2,000 option shares awarded in 1997 and 1,000 option
     shares awarded in 1998 which are currently exercisable under the Incentive
     Stock Option Plan. The business address of The Downing Irrevocable Trust
     1997 is 2401 Haversham Close, Virginia Beach, VA 23454.

(4)  Includes 3,000 option shares awarded in 1997 and 1,000 option shares
     awarded in 1998 which are currently exercisable under the Incentive Stock
     Option Plan.

(5)  Includes 4,000 option shares awarded in 1997 and 1,000 options shares
     awarded in 1998 which are currently exercisable under the Outside Directors
     Stock Plan. Mr. Becker's business address is P.O. Box 1448, Ellsworth, ME
     04605.

(6)  Includes 2,000 option shares awarded in 1997 and 1,000 option shares
     awarded in 1998 which are currently exercisable under the Incentive Stock
     Option Plan.

(7)  Includes 2,000 option shares awarded in 1997 and 1,000 option shares
     awarded in 1998 which are currently exercisable under the Incentive Stock
     Option Plan.

(8)  Includes 4,000 option shares awarded in 1997 and 1,000 option shares
     awarded in 1998 which are currently exercisable under the Outside Directors
     Stock Plan. Mr. Loving's business address is 900 Laskin Road, Virginia
     Beach, Virginia 23451.


                                    Page 51
<PAGE>

(9)  Includes 2,000 option shares awarded in 1997 and 1,000 option shares
     awarded in 1998 which are currently exercisable under the Incentive Stock
     Option Plan.

(10) The business address of The Fain Family Irrevocable Trust 1993 is P.O. Box
     8888, Virginia Beach, Virginia 23450.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      There were no related party transactions required to be disclosed under
this Item for 1998.

      The Audit Committee of the Board of Directors is responsible for reviewing
all transactions between the Company and any officer or director of the Company
or any entity in which an officer or director has a material interest. Any such
transactions must be on terms no less favorable than those that could be
obtained on an arms-length basis from independent third parties. The Audit
Committee was formed in April 1997 and met once during 1997 and once during
1998.

PART IV

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

(a)(1)    Financial Statements:

          The following consolidated financial statements are included in Part
          II, Item 8 of this report:

                  Independent Auditors' Report
                  Consolidated Statements of Income for the Years Ended December
                       31, 1996, 1997 and 1998
                  Consolidated Balance Sheets as of December 31, 1997 and 1998
                  Consolidated Statements of Changes in Redeemable Common Stock
                       and Shareholders' Equity for the Years Ended December 31,
                       1996, 1997 and 1998
                  Consolidated Statements of Cash Flows for the Years Ended
                       December 31, 1996, 1997 and 1998

(2)       Financial Statement Schedules:

           Financial statement schedules required to be included in this report
           are shown in Schedule II attached or in the financial statements and
           notes thereto included in Item 8 of this report or have been omitted
           because they are not applicable.

(3)        Exhibits:

           1.1    Form of Underwriting Agreement by and among Registrant and
                  Selling Shareholders and the Underwriters, incorporated by
                  reference to Exhibit 1.1 to the Registration Statement on Form
                  S-1 as previously filed with the Commission on January 6,
                  1997.

           3.1    Amended and Restated Articles of Incorporation of Registrant,
                  as filed in Virginia on November 20, 1996, incorporated by
                  reference to Exhibit 3.1 to the Registration Statement on Form
                  S-1 as previously filed with the Commission on December 12,
                  1996.

           3.2    Amended and Restated Bylaws of Registrant, incorporated by
                  reference to Exhibit 3.2 to the Registration Statement on Form
                  S-1 as previously filed with the Commission on December 12,
                  1996.

           4.1    See Amended and Restated Articles of Incorporation of
                  Registrant, incorporated by reference to Exhibit 4.1 to the
                  Registration Statement on Form S-1 as previously filed with
                  the Commission on December 12, 1996 (included as Exhibit 3.1).

           4.2    Specimen Stock Certificate, incorporated by reference to
                  Exhibit 4.2 to the Registration Statement on Form S-1 as
                  previously filed with the Commission on January 22, 1997.

                                    Page 52
<PAGE>

           10.1   Registrant's 1997 Stock Incentive Plan and related form of
                  stock option agreement, incorporated by reference to Exhibit
                  10.1 to the Registration Statement on Form S-1 as previously
                  filed with the Commission on January 6, 1997.

           10.2   Registrant's 1997 Employee Stock Purchase Plan as amended
                  through June 9, 1998.* 

           10.3   Registrant's Outside Directors Stock Plan, incorporated by
                  reference to Exhibit 10.3 to the Registration Statement on
                  Form S-1 as previously filed with the Commission on January
                  6, 1997.

           10.4   Employment Agreement dated as of December 10, 1996 between
                  Registrant and John H. Fain, incorporated by reference to
                  Exhibit 10.11 to the Registration Statement on Form S-1 as
                  previously filed with the Commission on January 6, 1997.

           10.5   Employment Agreement dated as of December 10, 1996 between
                  Registrant and Andrew J. Downing, incorporated by reference to
                  Exhibit 10.12 to the Registration Statement on Form S-1 as
                  previously filed with the Commission on January 6, 1997.

           10.6   Employment Agreement dated as of December 10, 1996 between
                  Registrant and Richard C. Jaeckle, incorporated by reference
                  to Exhibit 10.14 to the Registration Statement on Form S-1 as
                  previously filed with the Commission on January 6, 1997.

           10.7   Employment Agreement dated as of December 10, 1996 between
                  Registrant and Kathleen A. Neff, incorporated by reference to
                  Exhibit 10.15 to the Registration Statement on Form S-1 as
                  previously filed with the Commission on January 6, 1997.

           10.8   Employment Agreement dated as of January 1, 1998 between
                  Registrant and Ronald D. Cheatham.*

           10.9   Employment Agreement dated as of January 1, 1998 between
                  Registrant and Michael G. Martin.*

           10.10  Employment Agreement dated as of January 1, 1999 between
                  Registrant and Arthur C. Harwood.*

           10.11  Lease dated September 19, 1996 between Tidewater Partners
                  Limited Partnership and Registrant for premises located at
                  Reflections II Office Building, Suite 300, 200 Golden Oak
                  Court, Virginia Beach, VA 23452, incorporated by reference to
                  Exhibit 10.16 to the Registration Statement on Form S-1 as
                  previously filed with the Commission on January 6, 1997.

           10.12  Tax Indemnification Agreement dated as of December 24, 1996
                  between Shareholders of Registrant and Registrant,
                  incorporated by reference to Exhibit 10.18 to the Registration
                  Statement on Form S-1 as previously filed with the Commission
                  on January 6, 1997.

           10.13  Employment Agreement dated as of January 29, 1997 between
                  Registrant and Robert J. Eveleigh, incorporated by reference
                  to Exhibit 10.20 to the Registration Statement on Form S-1 as
                  previously filed with the Commission on January 22, 1997.

           11     Computation of earnings per share and pro forma earnings per
                  share.*

           21     Subsidiaries of the Registrant.*

           23     Consent of KPMG LLP.*

           27     Financial Data Schedule.*

           99.1   Credit Agreement with NationsBank, N.A., Signet Bank and
                  Crestar Bank dated June 20, 1997, incorporated herein by
                  reference to Exhibit 99 to the Quarterly Report on Form 10-Q
                  for the quarter ended June 30, 1997.

           99.2   First Modification Agreement with NationsBank, N.A., Crestar
                  Bank and First Union National Bank dated January 15, 1999.*

           * Filed herewith.

(b)        Reports on Form 8-K during last quarter of 1997:

           Report dated December 2, 1998 reporting the acquisition of the
           assets of The Avery Group.


                                    Page 53
<PAGE>

                                                                     SCHEDULE II

                 METRO INFORMATION SERVICES, INC. AND SUBSIDIARY

                        VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
                                                                                       WRITE-OFF
                                                 BALANCE AT                               OF             BALANCE AT
                                                 BEGINNING         CHARGES TO        UNCOLLECTIBLE         END OF
                                                 OF PERIOD           REVENUE           ACCOUNTS            PERIOD
                                              ----------------- ------------------ ------------------ ------------------
<S>                                                 <C>               <C>                 <C>               <C>     
Allowance for Doubtful Accounts:
     Year ended December 31, 1996 ...........       $86,007           $110,010            $82,131           $113,886
     Year ended December 31, 1997 ...........       113,886            100,908             62,593            152,201
     Year ended December 31, 1998 ...........       152,201            330,806            110,336            372,671

</TABLE>


                                    Page 54

<PAGE>


                          INDEPENDENT AUDITORS' REPORT
                         ON FINANCIAL STATEMENT SCHEDULE

The Board of Directors and Shareholders
Metro Information Services, Inc.:

Under date of January 29, 1999, except as to Note 15, which is as of March 2,
1999, we reported on the consolidated balance sheets of Metro Information
Services, Inc. and subsidiary as of December 31, 1997 and 1998, and the related
consolidated statements of income, changes in redeemable common stock and
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998, which are included herein. In connection with
our audits of the aforementioned financial statements, we also audited the
related financial statement schedule. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.

In our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

                                                     /s/ KPMG LLP

Norfolk, Virginia
January 29, 1999

                                    Page 55

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 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.

                                           METRO INFORMATION SERVICES, INC.


Date: March 8, 1999                          By  /s/ JOHN H. FAIN
                                                 -----------------
                                                     John H. Fain

                                       PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER

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

        SIGNATURE                       TITLE                     DATE
        ---------                       -----                     ----


    /s/ JOHN H. FAIN        President and Director             March 8, 1999
--------------------------- (Principal Executive Officer)
       John H. Fain         


  /s/ ANDREW J. DOWNING     Executive Vice President and       March 8, 1999
--------------------------- Director
      Andrew J. Downing     


 /s/ ROBERT J. EVELEIGH     Treasurer, Chief Financial         March 8, 1999
--------------------------- Officer and Director (Principal
     Robert J. Eveleigh     Financial Officer)             



                                    Page 56