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, 2000

                         COMMISSION FILE NO.: 000-22035


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

<TABLE>
<S>                                                              <C>
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
</TABLE>


     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 January 18, 2001 was approximately $51.2 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  January  18,  2001,  the  registrant  had  issued  and  outstanding
15,222,712 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.
                                 2000 FORM 10-K
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                        PAGE
                                                                                                        ----

<S>       <C>                                                                                            <C>
PART I

          Item 1.    Business                                                                             3
          Item 2.    Properties                                                                          11
          Item 3.    Legal Proceedings                                                                   12
          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               14
          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                          27
          Item 8.    Consolidated Financial Statements and Supplementary Data                            28
          Item 9.    Changes in and Disagreements with Accountants on Accounting and
                       Financial Disclosure                                                              43

PART III

          Item 10.   Directors and Executive Officers of the Registrant; Section 16(a) Beneficial
                       Ownership Reporting Compliance                                                    43
          Item 11.   Executive Compensation                                                              44
          Item 12.   Security Ownership of Certain Beneficial Owners and Management                      44
          Item 13.   Certain Relationships and Related Transactions                                      44

PART IV

          Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K                     44
</TABLE>


                                     Page 2
<PAGE>


PART I

     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,   analysts'   conference   calls  and  investor   presentations,   are
forward-looking statements about business strategies,  market potential,  future
financial  performance,  prospects  for new  business  and other  matters  which
reflect  management's  expectations  as of the date made.  Without  limiting the
foregoing,  the words  "believes,"  "anticipates,"  "may,"  "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.
Please  refer to a  discussion  of  these  and  other  factors  in this  Report,
including those  identified in "Risk Factors" and the Company's other Securities
and Exchange Commission filings.  The forward-looking  statements do not reflect
the potential impact of any future  acquisitions,  mergers or dispositions.  The
Company  disclaims  any intent or  obligation  to update  these  forward-looking
statements, whether as a result of new information, future events or otherwise.

Item 1. Business

Description of the Business

     Metro Information Services, Inc. incorporated July 1, 1979 in Virginia. The
headquarters  of  Metro   Information   Services,   Inc.  and  its  consolidated
subsidiaries  (collectively  "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 and solutions in 36 metropolitan markets in
the United States and Puerto Rico.  The Company's  more than 2,400  consultants,
approximately  61% of whom were salaried on December 31, 2000, work with clients
on all aspects of computer  systems and applications  development.  Services and
solutions  performed  by  Metro  include  application  systems  development  and
maintenance,  IT  architecture  and  engineering,  systems  consulting,  project
outsourcing  (including  managed  services) and general  support  services.  The
Company  supports  all  major  computer  technology  platforms   (client/server,
network,  mainframe,  Internet and mid-range  environments)  and supports client
projects using a broad range of software applications.  For example, the Company
custom develops  applications in Java, HTML, ASP and other Web-related languages
as well as Visual  Basic,  C++,  Oracle,  Informix,  and DB2.  The Company  also
implements and supports Windows 2000,  Windows NT, Novell and UNIX based network
environments and supports numerous other application environments.

Development of the Business

     Between  1996 and April 1999,  Metro grew  significantly.  On December  31,
1995, the Company had 20 offices and 1,074 full-time consultants.  From December
31, 1995 through  December 31, 1999, Metro grew its revenue at a compound annual
growth rate of 36%, including revenue growth through  acquisitions.  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 to Web-based systems
and a trend in  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.  Between 1996 and 1999, 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


                                     Page 3
<PAGE>


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.

     On July 1, 1997, Metro completed its first two 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.  In January 1999,  the Company  completed its fourth
acquisition,  adding an office in Los Angeles,  California. 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.  Effective  August 13, 1999,  Metro completed its eighth
acquisition, adding offices in Washington, D.C., Baltimore, Maryland and Dallas,
Texas.  At the end of 1999,  the Company  had grown to 45 offices  located in 21
states  and  Puerto  Rico and  more  than  2,700  full-time  consultants.  These
acquisitions  were  financed with the balance of the proceeds from the Company's
January  1997  initial  public  offering,   cash  generated  by  operations  and
borrowings on the Company's lines of credit.

     Starting in May 1999,  the Company  experienced a slowdown in demand for IT
Services. During 1999, clients were reluctant to start new IT projects until the
full effect of  computer  problems  associated  with the advent of the Year 2000
were known.  This  slowdown  continued  throughout  2000.  On May 25, 2000,  the
Company's  executive  management approved a plan to close eight of the Company's
smaller  offices and combine  operations in two other markets.  By June 2, 2000,
offices  located  in  Memphis,  Milwaukee,   Minneapolis,  Orlando,  Pittsburgh,
Portland, Sacramento, and Salt Lake City closed. At the end of 2000, the Company
combined  operations in Baltimore and  Washington,  D.C. With the  restructuring
complete,  the Company  operates  in 36 markets in the United  States and Puerto
Rico.

     Despite the slowdown in demand for IT services, which resulted in no growth
in 2000,  Metro  grew its  revenue  at a  compound  annual  growth  rate of 30%,
including  revenue growth through  acquisitions,  from December 31, 1996 through
December  31,  2000.  At the  end of  2000,  the  Company  had  2,446  full-time
consultants,  down from 2,770 at the end of 1999.  Revenue  over the same period
fell only by 0.3%.  The  decline in  consultant  count  occurred  as the Company
rapidly transitioned its workforce towards newer technologies.

     On December  12,  2000,  the  Company  announced  that it will  conduct its
business under two primary  brands:  Metro IT Consulting and Metro IT Solutions.
The Metro IT  Consulting  brand will  appear in each of the  thirty-six  markets
Metro serves.  IT Consulting will primarily focus on providing  traditional time
and material augmentation  services. IT Consulting will also be the primary lead
generator for IT Solutions.  The Metro IT Solutions  brand will provide  project
management,  project  methodologies,  and systems integration focused e-Business
Solutions.  IT Solutions  will take over the role formerly  performed by Metro's
Business  Technology  Solutions  Team  and  coordination  provided  through  our
Solutions  Centers in Virginia Beach,  VA, Los Angeles,  CA and Harrisburg,  PA.
While these brands will not be  separately  identifiable  as separate  operating
units,  these  brands  represent  the latest step in a strategy to increase  the
amount of solutions work the Company provides to its clients.

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

Industry Overview

     Since May 1999,  the Company and the rest of the IT Services  industry have
experienced  a slowdown in demand for IT  Services.  During  1999,  clients were
reluctant  to start new IT projects  until the full effect of computer  problems
associated  with the advent of the Year 2000 were known.  The industry  slowdown
continued  throughout  2000.  As a result,  the focus in 2000 was to  complete a
major  shift in the work force  towards  newer  technologies.  As a result,  the
growth  rate the  Company  enjoyed in earlier  years has not yet  returned.  The
Company  expects  to see a  better  environment  for  growth  in 2001 as  client
spending  priorities  become clear and clients  complete  the initial  phases of
their  e-Business  strategies.  Retention  of existing  consultants  and finding
enough new consultants for the newer technologies, with the right skills, is our
greatest challenge.


                                     Page 4
<PAGE>


     Rapid technological advances have accelerated the growth of the IT industry
in the 1990's.  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. The Company believes the significant shift towards
using the Internet for consumer and business transactions presents another major
opportunity for the Company. As a result, the Company is continuing to shift its
employees  towards  Internet,  client/server  and network skills that support an
Internet-based  economy.  At the same time, the Company will continue to provide
the broad  variety of IT services  our clients  use to support  their  business.
There is a  shortage  of IT  consultants  qualified  to support  these  systems.
Accordingly,  business  has  turned to IT  services  firms,  such as  Metro,  to
develop, support and strengthen their internal IT departments and systems.

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 educational  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 36 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.

     In  1998,   1999  and  2000,   the  Company   provided  IT  consultants  to
approximately  476, 788 and 730 clients,  respectively  (excluding  clients that
generated less than $25,000 in revenue during such year).  In each of 1998, 1999
and 2000,  at least 85% of the  Company's  revenue  came from  clients  who were
clients in the prior year,  excluding  the effect of  acquisitions  completed in
1999.

     The Company's 10 largest clients accounted for approximately  31.3%,  21.7%
and 23.2% of the Company's  revenue in 1998,  1999 and 2000,  respectively.  The
Company's largest client accounted for approximately  4.4%, 3.6% and 5.2% of the
Company's revenue in 1998, 1999 and 2000, 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 believe to
be their principal  business area. The  approximate  percentage of the Company's
revenue by industry group for the years ended  December 31, 1998,  1999 and 2000
follows:


                                     Page 5
<PAGE>


                                        1998         1999         2000
                                        ----         ----         ----

Banking                                 11.0%         7.3%         4.1%
Communications                          10.2%         9.2%        11.3%
Financial Services                       8.6%         9.7%         7.9%
Food                                     1.1%         0.7%         5.6%
Healthcare                               6.2%         8.2%         6.0%
Industrial                               3.0%         2.0%         0.2%
Insurance                                2.5%         2.0%         2.6%
Manufacturing & Distribution             9.4%         8.5%        10.3%
Oil & Gas                                1.2%         1.4%         1.9%
Other Services                           6.5%        10.7%        12.2%
Publishing & Broadcasting                2.1%         3.2%         3.4%
Retail                                   4.4%         4.1%         3.4%
Government                               7.2%         8.9%         8.0%
Technology                              11.8%        14.2%        16.8%
Transportation                           6.1%         3.0%         2.0%
Utilities                                2.9%         2.4%         1.7%
Other                                    5.8%         4.5%         2.6%
                                       -----        -----        -----

Total Percent of Billings              100.0%       100.0%       100.0%
                                       =====        =====        =====

     Provide  a Wide  Range  of  Value-Added  IT  Services  and  Solutions.  The
Company's  consultants  provide  a  wide  range  of IT  services  and  solutions
including planning, managing, building, implementing and maintaining IT systems.
The Company  supports all major computer  technology  platforms  (client/server,
network,  mainframe,  Internet and mid-range environments) and supports projects
using a broad range of software  applications.  For example,  the Company custom
develops applications in Java, HTML, ASP and other Web-related languages as well
as Visual Basic, C++, Oracle,  Informix and DB2. The Company also implements and
supports  Windows 2000,  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  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.

     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 also permit timely sharing of information on a Company-wide basis.

Growth Strategy

     The Company has competed with relative  success 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 26% over the last 10 years and 30%
over the last five years.  The difficult  environment  in 2000 caused revenue to
decrease 0.3% as compared to a 47% increase experienced during 1999. Until


                                     Page 6
<PAGE>


July 1, 1997, all of this growth was achieved through  internal growth.  On July
1, 1997, the Company completed two acquisitions and effective  December 2, 1998,
the  Company  completed  a  third   acquisition.   The  Company  completed  five
acquisitions  in 1999.  The Company now plans to focus on internal  growth until
industry  conditions  become more favorable.  See  "Management's  Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Liquidity  and
Capital Resources."

     The Company's internal growth strategy consists of two 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.  This  component  is now the primary
component of the growth strategy.

     Expand  Range of  Solutions  and  Services.  For several  years the Company
opened up to four offices per year. The Company  developed a national  expansion
strategy and  successfully  replicated  its  business  model in its newly opened
offices.  In May 2000, a restructuring plan to reduce costs and focus on growing
offices that have critical  mass,  structure  and the  capability to deliver the
broad range of Metro's  services and solutions was  implemented.  In conjunction
with the plan,  eight  smaller  offices  were  closed  and  corporate  staff was
reduced.  With offices in 36 markets in the United States and Puerto Rico, Metro
has good national  geographic  coverage  other than in the  northeastern  United
States.  While  opening  new  offices in the  Northeast  remains a  possibility,
(subject to available  financing),  management prefers to acquire a company that
serves this market.  In addition,  for 2001 we plan to concentrate our resources
on continuing to transition our work force towards newer  technologies  and grow
our IT Solutions capabilities.

Services and Solutions

     IT services are primarily  provided by the Company through  supplemental IT
services  arrangements  and, to a lesser  extent,  through  project  outsourcing
services (including managed services)  arrangements.  Substantially all services
are billed on a time and materials basis.  For 2000, the Company  estimates that
supplemental IT services accounted for more than 85%, and systems consulting and
project  outsourcing  services  accounted  for less than 15%,  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  client/server,  object
oriented, network, mainframe,  mid-range 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, 2000,  approximately
66% of the  Company's  consultants  were  working  in  the  application  systems
development  and  maintenance   services  area,  11%  in  IT  architecture   and
engineering   services,  4%  in  systems  consulting  services,  5%  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 is seeking to
increase  its  systems  consulting  and project  outsourcing  business to 20% of
revenue in the next 24 months. This goal is subject to a number of uncertainties
and may not be achieved.

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


                                     Page 7
<PAGE>


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, 2000, the Company
employed 35  individuals  performing  new client  acquisition  functions  and 56
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.  The Metro IT Solutions brand supports the efforts of our offices.  IT
Solutions  provides technical and quality assurance support to offices with such
opportunities  and  acts  as  a  catalyst  to  match   opportunities   with  our
capabilities on a national level.

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  executives,   (ii)  business
development  managers,  (iii)  professional  staff  recruiters,  (iv) consultant
development managers and (v) a division director who leads the office Leadership
Team,  all of whom are  supported by  administrative  assistants.  Most division
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 Chief Executive Officer,  John H. Fain;  President
and Chief Operating  Officer,  Andrew J. Downing;  and Chief Financial  Officer,
Robert J. Eveleigh;  working in conjunction with the Chief  Technology  Officer,
Vice Presidents - Operations  (VPO), the Vice Presidents - Business  Development
(VP-BDs),  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 sales, client service and consultant support.

     Executive Management.  During 2000, the Executive Management Team consisted
of Mr.  Fain,  Mr.  Downing,  Mr.  Eveleigh  and up to four  Vice  Presidents  -
Operations. 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,  payroll and training functions. ISO is an international standard for
quality assurance and consistency in operating procedures.

     Finance.  The Finance Department is responsible  primarily for internal and
external  financial  reporting,  general  accounting,  time entry and reporting,
billing, accounts receivable,  facilities acquisition and administration,  legal
services, risk management and contracting.

     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.

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


                                     Page 8
<PAGE>


technology will be adequate to deter  misappropriation of its proprietary rights
or third party development of similar proprietary software.  See "Risk Factors -
Intellectual Property Risks."

     The  Company  has  registered  or is in  the  process  of  registering  the
following   service   marks:   Metro   Information   Services(SM),    Metro   IT
Consulting(SM), Metro IT Solutions(SM),  vSMART(SM), talentVortex(SM), and Minds
Making Technology Work(SM).

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.

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.  With  the  recent  shift  towards  the  Internet,  a  number  of  new
competitors have entered the market.  These  competitors are typically small but
well funded  services firms focused  exclusively  on helping  businesses use the
Internet to change their relationships with customers and suppliers. Competition
may also come from  application  service  providers  (ASPs).  ASPs offer to host
standard  or slightly  customized  versions  of  packaged  software  systems for
businesses.  ASPs may attract  clients who are  dissatisfied  with their  custom
software solutions or have difficulty  managing their packaged software systems.
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,  timely  availability  of  qualified  consultants,  price,  breadth of
services offered and reputation.  As the Company attempts to increase the amount
of systems consulting and project outsourcing it performs,  prior experience and
referrals to prior  successful  engagements will play a more significant role in
getting new business.

     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.

     Managed Services providers are an emerging competitive  challenge.  Managed
Services  providers  coordinate the distribution of Client  requirements and the
responses  to those  requirements  as well as  performing  billing  and  payment
services.  The Managed  Services  providers fees are typically paid by suppliers
out of the suppliers' revenues from the Client, thereby reducing  profitability.
At the same time, the Company views the growth of Managed


                                     Page 9
<PAGE>


Services as an opportunity and has developed its own Managed Services  offering,
under the name  vSMART(SM).  The Company  expects this offering will become more
widely  used in 2001 but will not become a  significant  portion of our  overall
business.

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.  This approach generates 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. A strict
qualification  process  that  utilizes   Company-stated   standards  to  qualify
candidates,  both on a technical and  professional  basis, is incorporated  into
this approach.

     The Company identifies  candidates through a variety of sources,  including
the  Internet,   referrals  from  employees  and  clients,  local  and  national
advertising,  recruiting agencies,  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 the  Company's  offices
equal access to candidate qualifications. 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, 2000, the
Company had 100 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.  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  2000,
approximately 0.9% of revenue was spent on training and education.

Employees

     Approximately  90% of the Company's 2,446  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  remaining  consultants  are
subcontractors.

     As of December 31, 2000,  the Company had 2,788  employees,  2,733 of which
were  full-time and 55 were part-time  (working 30 hours or less in a week).  Of
the 2,733 full-time  employees,  2,203 were consultants and 530 were general and
administrative staff. Of the 2,203 consultants,  the Company classifies 1,482 as
Regular Staff Members ("RSMs") and 721 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.


                                    Page 10
<PAGE>


     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.  See "Risk  Factors - Ability to Attract and
Retain Consultants."

     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.

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  29,000 square feet at a current annual rent
of $470,571, and a term expiring in 2004. As of December 31, 2000, the Company's
36  offices  aggregated  approximately  234,000  square  feet and are  leased at
minimum  current  annual rents of $3,974,623  for various  terms,  with no lease
commitment  extending  past  the  year  2010.  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.

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

 Date Opened/Acquired          Office Location
 --------------------          ---------------
 July 1979.................... Hampton Roads (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
 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
 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
 May 1998..................... Tallahassee, Florida
 December 1998*............... Palo Alto/Silicon Valley (Menlo Park), California
 January 1999*................ Los Angeles (El Segundo), California
 February 1999*............... Irvine, California
 February 1999*............... San Francisco (San Bruno), California
 March 1999*.................. Harrisburg (Camp Hill), Pennsylvania
 March 1999*.................. Altoona, Pennsylvania
 March 1999*.................. Hagerstown, Maryland
 August 1999*................. Washington, DC (McLean, Va)
 August 1999*................. Baltimore, Maryland

*Indicates an office that was acquired.


                                    Page 11
<PAGE>


Item 3. Legal Proceedings

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

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, 2000.

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,  64, 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, 45, is a Director, President and Chief Operating Officer
of the Company.  Until January 1, 2001,  Mr.  Downing  served as 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,  41, 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 Williams Mullen Clark &
Dobbins,  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 2002 Annual Meeting.

     John H. Fain, 52, is Chairman of the Board of Directors and Chief Executive
Officer  of the  Company.  Until  January  1,  2001,  Mr.  Fain  also  served as
President.  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 2003 Annual Meeting.


                                    Page 12
<PAGE>


     A. Eugene  Loving,  Jr.,  58, 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 2002 Annual
Meeting.  Mr. Loving is a member of Metro's Audit Committee and its Compensation
Committee.

Other Executive Officers of the Registrant

     Charles A.  Adams,  39,  became a Vice  President  -  Business  Development
effective April 1, 1999. Mr. Adams joined the Company in 1989.  Between 1995 and
April 1, 1999, Mr. Adams served as Marketing  Director of the Company's  Dallas,
Texas office,  Expansion  Director for new offices and Director of the Company's
Austin, Texas office.

     Bradley B. Breseman,  50, 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.

     Bruce F. Gannett,  45, joined the Company in May 1999 as a Vice President -
Operations. Between 1995 and 1999, Mr. Gannett served as a Senior Vice President
of Sykes Enterprises,  Inc., President of L&L Foods of Tampa, Florida and a Vice
President of Judge  Technical  Services,  Inc., an IT services  company based in
Philadelphia, Pennsylvania.

     Arthur C.  Harwood,  52,  became a Vice  President -  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 - Business Development.

     Michael G.  Martin,  45, is a Vice  President - Business  Development.  Mr.
Martin joined the Company in 1989 and has served as a Vice  President - Business
Development  since  January  1998.  He served as  marketing  director of Metro's
Winston-Salem,  North  Carolina  office  from  1989  until  being  named  a Vice
President - Business Development.

     Scott Mayo, 36, is a Vice President  responsible for the Metro IT Solutions
brand.  Mr.  Mayo  joined  the  Company  in  February  2000 and was named a Vice
President  effective  January  1,  2001.  He served as the  Technical  Solutions
Manager  until being named a Vice  President.  Before  joining  Metro,  Mr. Mayo
served as a Branch Manager for Compuware in Richmond, Virginia. Mr. Mayo spent 6
years in a management  capacity with Compuware and its  predecessors and 8 years
in various technical roles.

     Edward N. Myers,  Jr., 57, became a Vice  President - Operations  effective
January  2000.  Mr. Myers  joined the Company in 1999 when the Company  acquired
D.P.  Specialists,  Inc. Before joining Metro,  Mr. Myers served as President of
D.P.  Specialists,  Inc. for 13 years.  From January  1999 to January  2000,  he
served as Division Director in the Company's Los Angeles, California office.

     Kathleen A. Neff,  50, is Chief  Technology  Officer and  President  of the
Metro IT  Consulting  brand.  Ms. Neff  joined  Metro in 1980 and served as Vice
President - Business  Development  from  January 1996 to  September  1999.  From
January  1983 to  December  1995,  she served as the  Technical  Director of the
Company's  Richmond,  Virginia office. She was named Chief Technology Officer in
1999 and became President of the Metro IT Consulting brand on January 1, 2001.

     R. Lawrence  Whitley,  40, 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.


                                    Page 13
<PAGE>


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 sales price
per share of the Company's  Common Stock for 1998,  1999 and 2000 as reported by
The Nasdaq Stock Market:

           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

           1999:                          High                     Low
           -----                          ----                     ---
           First Quarter                $37.000                  $15.250
           Second Quarter               $27.000                  $14.750
           Third Quarter                $18.938                  $12.250
           Fourth Quarter               $26.250                  $12.000

           2000:                          High                     Low
           -----                          ----                     ---
           First Quarter                $28.063                  $14.000
           Second Quarter               $15.000                  $ 6.000
           Third Quarter                $ 9.500                  $ 6.125
           Fourth Quarter               $ 8.188                  $ 4.250

     Holders.  The Company estimates that there were approximately  3,000 record
holders of the Company's Common Stock on January 18, 2001.

     Dividends.  No dividends were  distributed to shareholders in 1999 or 2000.
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's  Discussion  and Analysis of
Financial   Condition   and  Results  of  Operations  -  Liquidity  and  Capital
Resources."


                                    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, 1996,  1997,  1998,  1999 and 2000 and the  Consolidated
Statements  of Income  Data for the  years  then  ended  were  derived  from the
Company's  Consolidated  Financial  Statements and Notes thereto.  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,
                                                                   ---------------------------------------------------------------
                                                                     1996         1997         1998          1999          2000
                                                                   ---------    ---------    ---------     ---------     ---------
                                                                                (In thousands, except per share data)
<S>                                                                <C>          <C>          <C>           <C>           <C>
Consolidated Statements of Income Data:
Revenue .......................................................    $ 113,963    $ 152,578    $ 213,892     $ 314,646     $ 313,591

Cost of revenue ...............................................       79,752      106,080      148,322       222,681       221,566
                                                                   ---------    ---------    ---------     ---------     ---------
Gross profit ..................................................       34,211       46,498       65,570        91,965        92,025
                                                                   ---------    ---------    ---------     ---------     ---------
Selling, general and administrative expenses ..................       24,347       30,264       40,349        58,140        67,385
Depreciation and amortization .................................          763        1,158        1,851         5,584         8,082
Restructuring charge ..........................................           --           --           --            --           403
                                                                   ---------    ---------    ---------     ---------     ---------
Total operating expenses ......................................       25,110       31,422       42,200        63,724        75,870
                                                                   ---------    ---------    ---------     ---------     ---------
Operating income ..............................................        9,101       15,076       23,370        28,241        16,155
Net interest income (expense) .................................         (260)         729          781        (2,875)       (6,718)
                                                                   ---------    ---------    ---------     ---------     ---------
Income before income taxes ....................................        8,841       15,805       24,151        25,366         9,437
Income taxes(1) ...............................................           --        6,178        9,534        10,223         4,302
                                                                   ---------    ---------    ---------     ---------     ---------
Net income ....................................................    $   8,841    $   9,627    $  14,617     $  15,143     $   5,135
                                                                   =========    =========    =========     =========     =========
Net income per share - basic ..................................    $    0.71    $    0.66    $    0.98     $    1.01     $    0.34
                                                                   =========    =========    =========     =========     =========
Net income per share - diluted ................................    $    0.71    $    0.66    $    0.97     $    1.01     $    0.34
                                                                   =========    =========    =========     =========     =========
Weighted average number of shares of
common stock and potential dilutive securities
outstanding:
    Basic .....................................................       12,397       14,611       14,845        14,929        15,101
    Diluted ...................................................       12,397       14,662       15,001        14,986        15,145

Income before income taxes ....................................    $   8,841
Pro forma provision for income taxes(1) .......................        3,536
                                                                   ---------
Pro forma net income(1) .......................................    $   5,305
                                                                   =========
Pro forma net income per share - basic and diluted(1) .........    $    0.42
                                                                   =========
Pro forma weighted average shares
    outstanding - basic and diluted(2) ........................       12,669
</TABLE>

----------

(1)  Throughout  1996, the Company was an S corporation  for federal and certain
     state  income  tax  purposes.  The Pro forma  provision  for  income  taxes
     reflects  a  provision  for  income  taxes,  as  if  the  Company  was  a C
     corporation  for income tax purposes  during 1996, at an assumed  effective
     tax rate of 40%.  Effective  January  1,  1997,  the  Company  revoked  its
     S-election  subjecting it to corporate  income taxes at federal,  state and
     local levels.

(2)  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,
                                              ------------------------------------------------------------
                                                1996         1997         1998        1999          2000
                                              --------     --------     --------    --------      --------
                                                          (In thousands, except operating data)
<S>                                           <C>          <C>          <C>          <C>          <C>
Consolidated Balance Sheet Data:
Working capital ...........................   $  6,369     $ 34,560     $ 36,777     $ 42,047     $ 42,647
Total assets ..............................     21,572       58,533       81,000      190,179      189,280
Line of credit facilities .................      2,547           --           --       82,467       83,443
Redeemable common stock ...................      2,651           --           --           --           --
Total shareholders' equity ................      8,354       45,128       61,245       78,141       84,937

Operating Data:(1)
Offices ...................................         23           29           34           45           36
Employed consultants ......................      1,269        1,693        2,010        2,542        2,203
Subcontracted consultants .................         10           23           78          228          243
Total consultants .........................      1,279        1,716        2,088        2,770        2,446
Total employees ...........................      1,483        1,987        2,414        3,078        2,733
</TABLE>

----------

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

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

     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 in 36
metropolitan  markets in the United States and Puerto Rico.  The Company's  more
than 2,400  consultants,  61% of whom were  salaried on December 31, 2000,  work
with clients on all aspects of computer  systems and  applications  development.
Services  and  solutions   performed  by  Metro  include   application   systems
development  and  maintenance,   IT  architecture   and   engineering,   systems
consulting, project outsourcing (including managed services) and general support
services.   The  Company  supports  all  major  computer  technology   platforms
(client/server,  network,  mainframe,  Internet and mid-range  environments) and
supports  client  projects  using a broad  range of software  applications.  For
example,  the Company custom develops  applications in Java, HTML, ASP and other
Web-related  languages as well as Visual Basic,  C++, Oracle,  Informix and DB2.
The Company also  implements and supports  Windows 2000,  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,
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,
2000, the Company performed IT services for 730 clients  (excluding clients that
generated less than $25,000 in revenue during the year).

     IT services are primarily  provided by the Company through  supplemental IT
services  arrangements.  IT solutions  are  provided  through a  combination  of
systems  consulting,   project  outsourcing  (including  managed  services)  and
supplemental IT services arrangements.  Substantially all services and solutions
are  billed  on a time and  materials  basis.  At the end of 2000,  the  Company
estimates  that  supplemental  IT  services  accounted  for more  than 85% while
systems consulting and project outsourcing  services accounted for less than 15%
of the  Company's  revenue.  The  Company  is seeking to  increase  its  systems
consulting and project outsourcing business to 20% of revenue during the next 24
months.  This  goal is  subject  to a  number  of  uncertainties  and may not be
achieved.


                                    Page 16
<PAGE>


     Revenue  growth  is  derived  primarily  from  increases  in the  number of
consultants  placed with existing and new clients both through  internal  growth
and through acquisitions. The number of full-time consultants grew from 2,088 at
December 31, 1998 to 2,770 at December  31, 1999 and then  decreased to 2,446 at
December  31,  2000.  Over the same period,  the Company  increased  the average
billing rates charged to clients for consultants.

     Since May 1999,  the Company and the rest of the IT Services  industry have
experienced  a slowdown  in demand for IT  Services.  This  slowdown  has mostly
affected  mainframe  computer  services.  During 1999, clients were reluctant to
start new IT projects until the full effect of computer problems associated with
the  advent  of the Year  2000  were  known.  The  industry  slowdown  continued
throughout 2000. As a result, the focus in 2000 was to complete a major shift in
the work force towards  newer  technologies.  Conditions  improved in the latter
half of 2000, but have not yet returned to normal.  Management cannot reasonably
predict when or if the growth rate  previously  experienced  by the Company will
return.  The Company  expects to see a better  environment for growth in 2001 as
Client spending  priorities  become clear and Clients complete the initial phase
of their e-Business  strategies.  Retention of existing  consultants and finding
enough new consultants for the newer technologies, with the right skills, is our
greatest challenge.

     Metro's  revenue  grew  40.2% in 1998 to $213.9  million,  47.1% in 1999 to
$314.6 million and decreased 0.3% in 2000 to $313.6  million.  In 1998, 1999 and
2000, the Company's 10 largest clients accounted for approximately  31.3%, 21.7%
and  23.2%,  respectively,  of the  Company's  revenue  and its  largest  client
accounted for approximately 4.4%, 3.6% and 5.2%, respectively, of revenue.

     Revenue growth during 1998 was achieved  almost entirely  through  internal
growth,  although  revenue  growth  includes  revenue  from one  acquisition  in
December 1998. Revenue growth in 1999 is attributable to acquisitions  completed
by the Company between December 1998 and August 1999. Without these acquisitions
1999 revenue would have increased  approximately  5.6%.  Between January 1, 1998
and January 31,  2000,  the  Company  opened 12 new offices and  acquired 12 new
offices.  In May 2000, the Company closed 8 smaller offices  including 7 offices
opened  between  January 1998 and January  2000.  Metro closed these  offices to
focus on growing  those  offices  that have the  critical  mass,  structure  and
capability  to deliver  the broad range of Metro's  services  and  solutions  to
Clients in their respective markets and reduce costs.  Revenue fell 0.3% in 2000
as the Company rapidly transitioned its workforce towards newer technologies.

     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  $498,000,  of which  $134,000  was  paid on July 1,  1997
(including  payoff of net assumed  liabilities)  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  services  company with one office in the Palo
Alto/Silicon  Valley area of California.  The purchase  price was  approximately
$11,849,000,  of which $11  million was paid at  closing,  $754,000  was paid in
February 1999 based on a net worth adjustment  calculation performed in February
1999 and direct costs of the acquisition were approximately $95,000.

     On January 1, 1999, the Company  acquired D.P.  Specialists,  Inc. and D.P.
Specialists Learning Center, LLC ("DPS"  collectively),  information  technology
consulting  services and personnel  staffing  businesses  located in El Segundo,
California  and  Woodbridge,  New Jersey for a purchase  price of  approximately
$17,907,000, including direct costs of the acquisition of approximately $90,000.
During  2000,  $7,837,164  was paid  based on the  acquired  business  attaining
certain operating income targets for the twelve months ended December 31, 1999.

     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 approximately  $20,611,000,  of which  $17,976,000 was paid at
closing,  $352,000  was  paid in April  1999  based  on a net  worth  adjustment
calculation performed in April 1999 and approximately $183,000 represents direct
costs related


                                    Page 17
<PAGE>


to the  acquisition.  During  2000,  $2,100,000  was paid based on the  acquired
business  attaining certain operating income targets for the twelve months ended
January 31, 2000.

     On 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 approximately  $28,398,000,  of which  $24,046,000 was paid at
closing,  $3,654,000  was  paid  in  March  1999  based  on a  consultant  count
adjustment  on March 8,  1999,  $591,000  was paid in April  1999 based on a net
worth adjustment  calculation performed in April 1999 and approximately $107,000
represents direct costs of the acquisition.

     On August 13, 1999,  the Company  acquired all of the membership and equity
interests of Acuity Technology  Services,  LLC and Acuity Technology Services of
Dallas,  LLC  ("ATS"  collectively),  both of which are  information  technology
consulting  services and  personnel  staffing  businesses  located in Washington
D.C.,   Baltimore,   Maryland  and  Dallas,   Texas  for  a  purchase  price  of
approximately  $52,410,000,  of which $39,425,000 was paid at closing,  $666,000
was paid in November 1999 and  approximately  $158,000  represents  direct costs
related  to the  acquisition.  During  2000,  $12,160,830  was paid based on the
acquired  business  attaining  certain  operating  income targets for the twelve
months ended August 31, 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.  In  particular,  readers  should be aware of the  rapid  change in
demand for technology  from 1999 to the present.  Demand for mainframe  services
has  shifted to Web  services.  In  addition,  the demand for  solutions  versus
staffing services appears to be less strong as core clients become familiar with
Web technologies and begin to seek more staffing services.

Results of Operations

     For purposes of the following discussion, as of December 31, 1998, 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.  As of December 31, 1999 and December 31, 2000, a
mature  office is an office that was owned by the Company for at least 24 months
and a new office is an office opened or acquired within the last 24 months.

     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:

                                                       Percentage of Revenue
                                                    --------------------------
                                                      Year Ended December 31,
                                                    --------------------------
                                                     1998       1999      2000
                                                    -----      -----     -----
Revenue ..........................................  100.0%     100.0%    100.0%
Cost of revenue ..................................   69.3       70.8      70.7
                                                    -----      -----     -----
Gross profit .....................................   30.7       29.2      29.3
                                                    -----      -----     -----
Selling, general and administrative expenses .....   18.9       18.5      21.5
Depreciation expense .............................    0.8        0.8       1.0
Amortization expense .............................    0.1        0.9       1.5
Restructuring charge .............................     --         --       0.1
                                                    -----      -----     -----
Total operating expenses .........................   19.8       20.2      24.1
                                                    -----      -----     -----
Operating income .................................   10.9        9.0       5.2
                                                    -----      -----     -----
Interest income ..................................    0.4        0.1        --
Interest expense .................................     --        1.0       2.2
                                                    -----      -----     -----
Net interest income (expense) ....................    0.4       (0.9)     (2.2)
                                                    -----      -----     -----
Income before income taxes .......................   11.3        8.1       3.0
Income taxes .....................................    4.5        3.3       1.4
                                                    -----      -----     -----
Net income .......................................    6.8%       4.8%      1.6%
                                                    =====      =====     =====


                                    Page 18
<PAGE>


<TABLE>
<CAPTION>
                                                                      Percentage Changes
                                                       --------------------------------------------------
                                                                    Year Ended December 31,
                                                       --------------------------------------------------
                                                       1999 Compared to 1998        2000 Compared to 1999
                                                       ---------------------        ---------------------
<S>                                                          <C>                            <C>
Revenue .............................................           47.1%                        (0.3)%
Cost of revenue .....................................           50.1                         (0.5)
Gross profit ........................................           40.3                          0.1
Selling, general and administrative expenses ........           44.1                         15.9
Depreciation expense ................................           59.2                         25.1
Amortization expense ................................        1,292.4                         61.9
Restructuring charge ................................             --                        100.0
Total operating expenses ............................           51.0                         19.1
Operating income ....................................           20.8                        (42.8)
Interest income .....................................           82.9                        (34.5)
Interest expense ....................................        5,196.2                        125.7
Income before income taxes ..........................            5.0                        (62.8)
Income taxes ........................................            7.2                        (57.9)
Net income ..........................................            3.6                        (66.1)
</TABLE>


     2000 compared to 1999

     Revenue.  Revenue  decreased  $1.1 million,  or 0.3%, to $313.6 million for
2000 from  $314.6  million  for 1999.  Excluding  the ATS  acquisition,  revenue
decreased  $34.4  million  or 10.9%.  The  decline  in  revenue is a result of a
declining consultant count, which started in 1999 and continued throughout 2000.
This decline was brought on by decreased  client  demand,  the  transition  from
mainframe to e-Business skilled  consultants,  slower revenue growth in existing
offices, lower bill rate increases and more non-billable  consultant time. As of
December 31, 2000,  compared to December 31, 1999, the total number of full-time
consultants decreased to 2,446 from 2,770, respectively,  and clients (excluding
clients that generated less than $25,000 in revenue during such year)  decreased
to 730 from 788, respectively.

     Cost of revenue. Cost of revenue decreased $1.1 million, or 0.5%, to $221.6
million  for 2000 from  $222.7  million  for  1999.  Cost of  revenue  decreased
slightly  due to pay rate  increases  staying  below bill rate  increases.  As a
percentage  of revenue,  cost of revenue  decreased to 70.7% for 2000 from 70.8%
for 1999.

     Gross  profit.  Gross  profit stood at $92.0  million for 2000  compared to
$92.0 million for 1999. As a percentage  of revenue,  gross profit  increased to
29.3% for 2000 from 29.2% for 1999.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased $9.2 million,  or 15.9%, to $67.4 million for
2000 from $58.1 million for 1999.  This increase is primarily due to the cost of
the Company's sales,  marketing and e-Business  initiatives,  the one-time costs
related  to the  offices  closed  May 31,  2000  and the  costs  related  to the
Tennessee sales and use tax audit.  These one-time costs include a write-down of
$343,000 for the value of retired or abandoned assets to net realizable value in
accordance  with  Financial  Accounting  Standards  Board  Opinion  No.  121. In
addition,  a bad debt reserve for uncollectible  Tennessee tax of $586,000 and a
penalty  of  $198,000  are  included  in  selling,  general  and  administrative
expenses.  As a  percentage  of revenue,  selling,  general  and  administrative
expenses increased to 21.5% for 2000 from 18.5% for 1999. The nonrecurring costs
included  in selling,  general  and  administrative  expenses  for 2000  totaled
$1,127,000,  before  income  taxes.  Excluding  these items,  as a percentage of
revenue,  selling,  general and  administrative  expenses increased to 21.1% for
2000 from 18.5% for 1999.

     Depreciation  expense.  Depreciation  increased $654,000, or 25.1%, to $3.3
million  for 2000 from  $2.6  million  for  1999.  This  increase  is  primarily
attributable to depreciation on additions to computer equipment and software and
an entire year of depreciation on the assets of companies  acquired during 1999.
As a percentage of revenue, depreciation increased to 1.0% from 0.8% in 1999.

     Amortization  expense.  Amortization  expense  increased  $1.8 million,  or
61.9%,  to $4.8  million for 2000 from $3.0 million for 1999.  This  increase is
attributable to amortization of goodwill and other intangible  assets related to
the


                                    Page 19
<PAGE>


Company's  acquisitions.  As  a  percentage  of  revenue,  amortization  expense
increased to 1.5% for 2000 from 0.9% for 1999.

     Operating  income.  Operating income decreased $12.1 million,  or 42.8%, to
$16.2  million for 2000 from $28.2 million for 1999. As a percentage of revenue,
operating  income  decreased to 5.2% for 2000 from 9.0% for 1999. The decline in
operating   income  margin  is  the  result  of  higher  selling,   general  and
administrative expenses and higher depreciation and amortization expenses.

     Interest  income.  Interest income decreased by $49,000 to $94,000 for 2000
from  $143,000  for 1999.  This  change  reflects  a  decrease  in cash and cash
equivalents due to the Company's cash being used for acquisitions.

     Interest  expense.  Interest  expense  increased  by $3.8  million  to $6.8
million for 2000 from $3.0 million for 1999. Of this amount, $895,000 relates to
a Tennessee  Department of Revenue  audit of the  Nashville and Memphis  offices
completed  September  29,  2000.  The State of Tennessee  found that  consulting
services  provided  to  clients  connected  with the  installation,  alteration,
development,  or programming of computer software are subject to Tennessee sales
or use tax. The  remaining  amount  reflects an increase in the average level of
borrowings  during  the  period  related  to the use of cash to make the ATS and
other 1999 acquisitions.

     Income  before income taxes.  Income  before income taxes  decreased  $15.9
million,  or 62.8%,  to $9.4 million for 2000 from $25.3  million for 1999. As a
percentage of revenue,  income  before  income taxes  decreased to 3.0% for 2000
from 8.1% for 1999.

     Income taxes.  The Company's  effective tax rate for 2000 and 1999 is 45.6%
and 40.3%, respectively. The rate increase is the result of higher than expected
non-deductible  expenses,  which  increased the Company's  taxable  income above
previous  estimates,  and  non-federal  income  taxes.  The increase is also the
result of higher income tax rates in the states where the Company's acquisitions
operate.  As a percentage  of revenue,  income taxes  decreased to 1.4% for 2000
from 3.3% for 1999.  Income  taxes  decreased  $5.9  million  or 57.9%,  to $4.3
million for 2000 from $10.2  million for 1999.  These  decreases are a result of
the earnings decline the Company has experienced during 2000.

     Net income.  Net income decreased $10.0 million,  or 66.1%, to $5.1 million
for 2000 from $15.1  million for 1999.  As a percentage  of revenue,  net income
decreased to 1.6% for 2000 from 4.8% for 1999.

     Net income per share.  Diluted  net income per share  decreased  $0.67,  or
66.3%, to $0.34 for 2000 from $1.01 for 1999.

     1999 compared to 1998

     Revenue.  Revenue increased $100.7 million, or 47.1%, to $314.6 million for
1999 from $213.9  million for 1998. Of this  increase,  $89.9 million was due to
revenue from companies  acquired since December 1, 1998. This increase is also a
result of increased  billings to existing  clients,  the addition of new clients
and  increased  billing  rates  charged  for the  Company's  consultants.  As of
December 31, 1999,  compared to December 31, 1998, the total number of full-time
consultants increased to 2,770 from 2,088, respectively,  and clients (excluding
clients that generated less than $25,000 in revenue during such year)  increased
to 788 from 476,  respectively.  Revenue from the  Company's  30 mature  offices
increased $8.6 million,  or 4.0%, from the earlier period and the 15 new offices
(including  ten acquired  offices)  accounted  for the  remaining  $92.1 million
increase in revenue.

     Cost of revenue.  Cost of revenue  increased  $74.4 million,  or 50.1%,  to
$222.7 million for 1999 from $148.3 million for 1998. Cost of revenue  increased
primarily due to compensation and benefits  associated with growth in the number
of  consultants,   including  consultants  added  through  acquisitions.   As  a
percentage  of revenue,  cost of revenue  increased to 70.8% for 1999 from 69.3%
for 1998 primarily  because the percentage of employees who are hourly is higher
in 1999 than in 1998.  Hourly  employees  have a higher pay rate in  relation to
their billing rate but do not receive the same  benefits as salaried  employees.
To a lesser  extent,  cost of revenue rose due to lower  utilization of salaried
consultants.  Salaried  consultants  are paid even if they are not billing.  Pay
rates also rose faster than bill rates during 1999, increasing cost of revenue.


                                    Page 20
<PAGE>


     Gross profit.  Gross profit  increased  $26.4 million,  or 40.3%,  to $92.0
million for 1999 from $65.6 million for 1998. As a percentage of revenue,  gross
profit decreased to 29.2% for 1999 from 30.7% for 1998.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased $17.7 million, or 44.1%, to $58.1 million for
1999 from $40.4  million  for 1998.  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 computerized business systems
and hiring additional sales and marketing staff to support the Company's efforts
to provide  more  e-Business  services.  As a  percentage  of revenue,  selling,
general and  administrative  expenses decreased to 18.5% for 1999 from 18.9% for
1998.  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  expense.  Depreciation  increased $1.0 million,  or 59.2%, to
$2.6  million for 1999 from $1.6  million for 1998.  This  increase is primarily
attributable to depreciation on additions to computer equipment and software. As
a percentage of revenue, depreciation remained unchanged at 0.8%.

     Amortization  expense.  Amortization  expense  increased  $2.8 million,  or
1,292.4%,  to $3.0 million for 1999 from $0.2 million for 1998. This increase is
attributable to amortization of goodwill and other intangible  assets related to
the Company's  acquisitions.  As a percentage of revenue,  amortization  expense
increased to 0.9% for 1999 from 0.1% for 1998.

     Operating  income.  Operating income  increased $4.8 million,  or 20.8%, to
$28.2  million for 1999 from $23.4 million for 1998. As a percentage of revenue,
operating  income decreased to 9.0% for 1999 from 10.9% for 1998. The decline in
operating income margin is the result of lower gross margins, increased selling,
general and administrative  expenses and higher amortization  expenses not being
fully offset by increased revenues.

     Interest income. Interest income decreased by $695,000 to $143,000 for 1999
from  $838,000  for 1998.  This  change  reflects  a  decrease  in cash and cash
equivalents due to the Company's cash being used for acquisitions.

     Interest  expense.  Interest expense  increased by $2,961,000 to $3,018,000
for 1999 from $57,000 for 1998.  This change reflects an increase in the average
level of borrowings during the period related to the use of cash to make several
acquisitions.  The Company  increased  its debt level from zero at December  31,
1998 to $82,467,000 at December 31, 1999.

     Income  before income taxes.  Income  before  income taxes  increased  $1.2
million,  or 5.0%,  to $25.3  million for 1999 from $24.1 million for 1998. As a
percentage of revenue,  income  before  income taxes  decreased to 8.1% for 1999
from 11.3% for 1998.

     Income taxes.  The Company's  effective tax rate for 1999 and 1998 is 40.3%
and 39.5%,  respectively.  The increase is the result of higher income tax rates
in the states where the Company's  acquisitions operate.  Income taxes increased
$0.7 million or 7.2%, to $10.2 million for 1999 from $9.5 million for 1998. As a
percentage  of revenue,  income  taxes  decreased to 3.3% for 1999 from 4.5% for
1998.

     Net income.  Net income  increased $0.5 million,  or 3.6%, to $15.1 million
for 1999 from $14.6  million for 1998.  As a percentage  of revenue,  net income
decreased to 4.8% for 1999 from 6.8% for 1998.

     Net income per share.  Diluted  net income per share  increased  $0.04,  or
4.1%, to $1.01 for 1999 from $0.97 for 1998.


                                    Page 21
<PAGE>


Liquidity and Capital Resources

     The Company  used a portion of the proceeds  from the 1997  initial  public
offering  during 1998 for the  acquisition  of The Avery Group,  as described in
Note 4 of Notes to Consolidated  Financial Statements.  During 1999, the Company
acquired D.P.  Specialists,  Inc. and D.P. Specialists Learning Center, LLC, The
Professionals - Computer Management & Consulting, Inc., Krystal Solutions, Inc.,
Solution  Technologies,  Inc.  and Acuity  Technology  Services,  LLC and Acuity
Technology  Services  of  Dallas,  LLC,  as  described  in  Note 4 of  Notes  to
Consolidated  Financial  Statements.  These  acquisitions were financed with the
balance of the proceeds from the Company's January 1997 initial public offering,
cash generated by operations and borrowings on the Company's credit facilities.

     The  Company  funds  its  operations   primarily  from  cash  generated  by
operations.  Net  cash  provided  by  operations  was  $18,622,718  for 2000 and
consisted primarily of net income, adjusted for non-cash items of $13,542,652, a
decrease in accounts receivable of $4,797,465 and a decrease in prepaid expenses
of $2,064,315.  The Company's  working  capital was  $42,647,000 at December 31,
2000 compared to $42,047,000 at December 31, 1999.

     Net cash used in investing activities was $25,268,926 for 2000,  consisting
of  normal  acquisitions  of  property  and  equipment  used  in  operations  of
$2,359,550 and $22,149,994 of payments for the acquisitions described above. The
Company  has no  future  obligations  for  payments  under  its  1998  and  1999
acquisitions.  The Company's investing activities also include $791,463 spent on
developing new computer  systems.  The funds used in these  activities came from
the  Company's  lines of credit,  cash  generated by the  Company's  operations,
proceeds from the exercise of vested stock options and purchases of stock by the
ESPP.

     The Company has experienced a slowdown in demand for its services since May
1999.  This slowdown has reduced the rate of revenue  growth for the Company and
caused  earnings to fall. Cash flow from operations has been reduced as a result
of the slowdown. Management believes the short-term effect of this slowdown will
be to increase the likelihood the Company will have to borrow against  available
amounts under its lines of credit to fund growth.

     The  Company  increased  the  maximum  amount it may  borrow on its  credit
facilities  from   $39,900,000  to  $90,000,000  on  January  15,  1999  and  to
$125,000,000  on August 25, 1999.  Amounts  advanced under the facilities can be
used  for  acquisitions  and  general  working  capital  purposes.   The  credit
facilities  are  provided  in equal  amounts of  $35,000,000  by three banks and
$20,000,000  by a fourth bank. As of December 31, 2000, the Company had borrowed
$83,443,021 against these facilities. The facilities mature in June 2005 and may
be extended each year for an additional year. Until June 2005, interest, but not
principal, 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 other two have only LIBOR based interest rates.  All of the facilities
have  interest  rates  that  increase  as  the  balance  outstanding  under  the
facilities increases. The rates on such borrowings ranged from 7.66% to 7.79% on
December 31, 2000.  The  facilities  also contain  fees,  ranging from 0.125% to
0.380% 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 limit the amount of
dividends that can be paid. The covenants also impose limits on incurring  other
debt and  require  a  certain  debt  service  coverage  ratio to be  maintained.
Quarterly  testing  dates are required for these  covenants.  The  covenants may
prevent the Company from  borrowing the full  $125,000,000  of the facilities or
trigger  a  default  under the  credit  facilities.  As of  December  31,  2000,
approximately  $20.7  million was  available for  additional  borrowing  without
default.

     On March 20,  2000,  the Company  negotiated  more  favorable  terms on the
credit  facilities,  which are  expected  to allow the  Company to fully use the
maximum borrowing amount. The change increased the Maximum Funded Debt to EBITDA
ratio from 3.0 to 1.0 to 4.0 to 1.0 through September 30, 2001 and increased the
Funded Debt to  Capitalization  ratio to 65% through  December  31, 2000 and 60%
through  December 31, 2001.  At December  31, 2000,  the Maximum  Funded Debt to
EBITDA  ratio stood at 3.2 to 1.0.  The Company  plans to reduce its debt level,
increase  EBITDA or  negotiate a more  favorable  ratio by December  31, 2001 to
avoid  default  under its  credit  facilities.  A default  could have a material
adverse effect on the Company's business.


                                    Page 22
<PAGE>


     The interest  rates on the Company's  facilities  change from time to time.
Actions during 1999 and 2000 by the Federal  Reserve to increase  interest rates
increased the Company's  interest costs. The Federal Reserve recently  decreased
interest  rates. If the Federal Reserve  decreases  interest rates further,  the
Company's  interest cost is likely to decrease as well.  Assuming the Company is
in debt  $90,000,000  and  continues  to have  approximately  15,200,000  shares
outstanding,  a one percent  decrease in the interest rate will increase  annual
earnings per share by  approximately  3.2 cents.  A one percent  increase in the
interest  rate will  decrease  annual  earnings per share by  approximately  3.2
cents.

     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 the next year. New acquisitions,  however,
will require additional debt and equity financing.

     The Tennessee  Department of Revenue completed a tax audit during 2000. The
audit  resulted in the Company's  receipt of a Notice of Assessment on September
29, 2000 that  proposed the  imposition of  additional  Tennessee  sales and use
taxes and  related  interest  and penalty  attributable  to the  performance  by
Company  employees of services in the State of Tennessee,  which the  Department
determined to be taxable as "computer  software." In the Notice,  the Department
assessed  sales and use tax of  $2,357,147,  which the  Company  paid in October
2000.  Under Tennessee law, the ultimate  consumer is responsible for paying the
assessed  sales and use tax.  Accordingly,  the Company has billed the  assessed
amount to its customers.  A portion of this amount may not be collectible.  As a
result,  the  Company  has  recorded a reserve  of  $586,286  for  uncollectible
accounts.  The net current  receivable on the balance  sheet is  $1,044,095  and
appears in other current  assets at December 31, 2000.  The interest and penalty
paid on the liability  through  December 31, 2000 totaled $894,594 and $197,979,
respectively.  Collectively, the reserve, interest, and recorded penalty reduced
the  income  before  income  taxes  for the  year  ended  December  31,  2000 by
$1,678,859.

     The  Company  sold  183,760  shares of stock  under  the Metro  Information
Services,  Inc.,  Employee  Stock  Purchase  Plan (the  "ESPP") for an aggregate
purchase  price of $1,378,018  during the twelve months ended December 31, 2000.
The Company sold 128,102  shares for an aggregate  purchase  price of $1,603,143
during 1999 and 53,106  shares for an  aggregate  purchase  price of  $1,323,056
during 1998. The ESPP is described in Note 9 of Notes to Consolidated  Financial
Statements.

     During the years ended December 31, 2000, 1999 and 1998,  certain employees
exercised stock options which had vested pursuant to the 1997 Employee Incentive
Stock  Option  Plan.  Total  proceeds  from the  issuance  of stock  for  option
exercises during the years ended December 31, 2000, 1999 and 1998 were $283,401,
$148,940 and $177,120,  respectively.  The Company issued 17,400 shares of stock
for option exercises in 2000, 9,290 in 1999, and 11,070 in 1998.

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 2000. 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 2001 to offset pay rate increases in 2001, although there can be no assurance
that this will occur. Average pay rates for 2000 increased 9.6% over average pay
rates for 1999 as the Company  transitioned its workforce to newer  technologies
with higher  billing rates and pay rates.  Average pay rates for 1999  increased
7.6% over average pay rates for 1998.


                                    Page 23
<PAGE>


Recent Accounting Pronouncements

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  133  ("SFAS  No.  133"),  Accounting  for
Derivative  Instruments  and  Hedging  Activities.   SFAS  No.  133  establishes
accounting  and  reporting  standards  for  derivative  instruments,   including
derivative instruments embedded in other contracts,  and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning June
15,  2000.  In June  2000,  SFAS No.  138,  Accounting  for  Certain  Derivative
Instruments and Certain Hedging Activities, was released as an amendment to SFAS
No. 133.  SFAS No. 138 amends and  clarifies a limited  number of issues in SFAS
No. 133 that have caused  application  difficulties.  The implementation of SFAS
No.  133 and  SFAS  No.  138 have not had a  material  effect  on the  Company's
financial condition or results of operations.

     In December 1999, the  Securities  and Exchange  Commission  ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"),  Revenue Recognition in Financial
Statements.  SAB 101  provides  guidance on the  recognition,  presentation  and
disclosure  of revenue in financial  statements.  Implementation  of SAB 101 was
extended  by SAB 101B to the fourth  quarter  of fiscal  years  beginning  after
December 15, 1999. The Company, as required by the SEC, in the fourth quarter of
2000 implemented SAB 101. The  implementation  of SAB 101 has not had a material
effect on the Company's financial condition or results of operations.

     In September 1999, the Financial Accounting Standards Board (FASB) issued a
proposed  Statement,  Business  Combinations and Intangible  Assets,  that would
require all business  combinations  to be recorded using the purchase  method of
accounting.  This statement  would require any resulting  excess  purchase price
over the fair value of  acquired  net assets to be  charged to  earnings  over a
period  not to exceed 20 years.  Recently,  the FASB has  indicated  that it may
adopt a completely  different  approach to the issues  addressed in the proposed
statement.  Under the approach,  goodwill  would not be amortized to earnings or
expensed  against  earnings  annually  over  a  period  of up to  20  years,  as
originally proposed. Instead, goodwill would be reviewed for impairment and only
written down and expensed  against earnings in the periods in which the recorded
value of  goodwill  is more than its fair value.  The actual  pronouncement,  if
issued, will likely have substantial changes from the exposure draft. The actual
language  of the final  pronouncement  cannot be  determined  at this time.  The
statement  is not  expected  to be  final  until  June  2001.  The  Company  has
previously  used a  30-year  life  for  goodwill.  The  implementation  of  this
statement would have a material effect on the Company's  financial condition and
results of operations. If the newer approach were adopted, goodwill amortization
expense would  decrease to zero and only  impairments  would be charged  against
earnings.

Risk Factors

     Ability to Attract and Retain 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' rapidly changing 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.   The  Company  competes  for  these
individuals  with  other  providers  of  technical  staffing  services,   system
integrators,  providers of outsourcing services, computer consultants, temporary
personnel agencies and the Company's own clients. IT professionals who work with
the  Company  also work with the  Company's  competitors  from time to time.  IT
professionals  currently  working on projects for the Company may choose to work
for competitors on future assignments.  The Company's net revenues in any period
are  primarily  driven by the  number of IT  professionals  the  Company  has on
billable  assignments.  There can be no assurance  that the Company will attract
and retain the personnel it requires to conduct its operations  successfully  or
to 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.

     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 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,


                                    Page 24
<PAGE>


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.

     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.  With the recent shift
towards the Internet a number of new competitors have entered the market.  These
competitors   are  typically  small  but  well  funded  services  firms  focused
exclusively on helping  businesses to change their  relationships with customers
and suppliers via the Internet. In addition, competition may come in the form of
application  service providers (ASPs). ASPs offer to host a standard or slightly
customized  versions  of packaged  software  systems  for  businesses.  ASPs may
attract clients who are  dissatisfied  with their custom  software  solutions or
have difficulty managing their packaged software systems.  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.

     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.

     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.

     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  61% 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
1998,   1999  and  2000,  the  Company's  10  largest   clients   accounted  for
approximately 31.3%, 21.7% and 23.2%, respectively, of the Company's revenue and
its  largest  client   accounted  for   approximately   4.4%,   3.6%  and  5.2%,
respectively, of revenue.

     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


                                    Page 25
<PAGE>


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.

     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.

     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,
Chief  Executive  Officer,  or Andrew J. Downing,  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.

     Intellectual  Property Risks. A portion of the Company's  business involves
the  development  of software  applications  for  specific  client  engagements.
Although  the  Company  believes  that  its  services  do  not  infringe  on the
intellectual  property  rights of  others,  it may be the  subject of claims for
infringement,  which  even if  successfully  defended  could be costly  and time
consuming.  An  infringement  claim  against the Company  could  materially  and
adversely affect the Company in that the Company may:

o    experience  a  diversion  of the  Company's  financial  resources  and  the
     attention of management personnel;

o    incur damages and litigation costs, including attorneys' fees;

o    be enjoined from future use of the intellectual property;

o    be required to obtain a license to use the intellectual property, incurring
     licensing fees;

o    need to develop a  non-infringing  alternative,  which  could be costly and
     delay projects; and

o    have to indemnify  clients  with respect to losses  incurred as a result of
     the Company's infringement of the intellectual property.

     Health Plan Self Insurance Risks. The Company self-insures a portion of its
group health and dental plan. On December 31, 2000,  approximately  2,021 of the
Company's 2,733  full-time  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.

     Potential  Fluctuations  in  Quarterly  Operating  Results.  The  Company's
quarterly operating results may fluctuate significantly as a result of a variety
of factors,  many of which are outside the Company's  control.  Factors that may
affect the Company's quarterly revenues and operating results generally include:
costs relating the expansion of the Company's  business,  the size and timing of
Company  business  acquisitions,  the incurrence of merger costs,  the timing of
assignments  received  from  customers,  the  seasonal  nature of the  Company's
business due to variations in holidays and vacation schedules,  the introduction
of new services by the Company or its competitors,  price  competition,  general
economic   conditions  and  economic  conditions  specific  to  the  information
technology services, consulting or staffing industries.


                                    Page 26
<PAGE>


Quarterly  sales and operating  results can be difficult to forecast even in the
short term. Due to all of the foregoing  factors and others, it is possible that
the Company's revenues or operating results in one or more quarters will fail to
meet or exceed the  expectations of securities  analysts and investors.  In such
event,  the  trading  price  of the  Company's  common  stock  would  likely  be
materially adversely affected.

     Price  Volatility.  The market price of the Company's common stock could be
subject to significant fluctuations.  Factors that could cause such fluctuations
to occur  include  variations  in quarterly  operating  results,  the  Company's
prospects, changes in earnings estimates by securities analysts and by economic,
financial,  and other factors or market  conditions  that can affect the capital
markets generally. The market price may also be affected by the industry segment
of which the Company is a part,  fluctuations  in the  trading  prices of stocks
generally,  and  particularly  on the  NASDAQ,  actual or  anticipated  sales of
substantial  amounts of the  Company's  common  stock in the  market,  actual or
anticipated  sales of the  Company's  common  stock by  management  and by other
events that are  difficult to predict and are beyond the Company's  control.  In
addition,  the securities markets have experienced  significant price and volume
fluctuations from time to time in recent years that have often been unrelated or
disproportionate  to the operating  performance of particular  companies.  These
broad fluctuations may adversely affect the market price of the Company's common
stock.

     Risk Associated with Growth through Acquisitions. The Company has grown, in
part,  through the acquisition of other IT businesses.  The Company's ability to
acquire  other IT  businesses,  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.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

     The Company is exposed to market risk due to variable interest rates on the
Company's credit facilities. Actions during 1999 and 2000 by the Federal Reserve
to increase  interest rates increased the Company's  interest costs. The Federal
Reserve  recently  decreased  interest rates.  If the Federal Reserve  decreases
interest  rates  further,  the Company's  interest cost is likely to decrease as
well.  Assuming  the  Company  is in  debt  $90,000,000  and  continues  to have
approximately  15,200,000  shares  outstanding,  a one  percent  decrease in the
interest  rate will  increase  annual  earnings per share by  approximately  3.2
cents. A one percent increase in the interest rate will decrease annual earnings
per share by approximately 3.2 cents.

     The  Company  has  not  entered  into  derivative  financial  or  commodity
instrument transactions.  The Company's exposure to market risk from other types
of financial  instruments,  such as accounts receivable and accounts payable, is
not material.


                                    Page 27
<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 subsidiaries (the "Company") as of December 31,
1999 and 2000,  and the related  consolidated  statements of income,  changes in
shareholders'  equity  and cash  flows for each of the  years in the  three-year
period ended December 31, 2000. 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 auditing standards generally accepted
in the  United  States of  America.  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 subsidiaries as of December 31, 1999 and 2000 and the results
of their operations and their cash flows for each of the years in the three-year
period  ended  December 31,  2000,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

                                  /s/ KPMG LLP

Norfolk, Virginia
January 29, 2001


                                    Page 28
<PAGE>


                METRO INFORMATION SERVICES, INC. AND SUBSIDIARIES

                        Consolidated Statements of Income


<TABLE>
<CAPTION>
                                                                                             Year Ended December 31,
                                                                              -----------------------------------------------------
                                                                                   1998                1999                2000
                                                                              -------------       -------------       -------------

<S>                                                                           <C>                 <C>                 <C>
Revenue ................................................................      $ 213,891,637       $ 314,646,091       $ 313,590,997
Cost of revenue ........................................................        148,321,681         222,681,353         221,565,996
                                                                              -------------       -------------       -------------
Gross profit ...........................................................         65,569,956          91,964,738          92,025,001
                                                                              -------------       -------------       -------------
Selling, general and administrative expenses ...........................         40,349,100          58,140,040          67,385,432
Depreciation expense ...................................................          1,636,678           2,606,003           3,259,940
Amortization expense ...................................................            213,851           2,977,605           4,821,769
Restructuring charge (Note 13) .........................................                 --                  --             403,004
                                                                              -------------       -------------       -------------
     Total operating expenses ..........................................         42,199,629          63,723,648          75,870,145
                                                                              -------------       -------------       -------------
Operating income .......................................................         23,370,327          28,241,090          16,154,856
                                                                              -------------       -------------       -------------
Interest income ........................................................            837,557             143,478              93,987
Interest expense .......................................................            (56,991)         (3,018,355)         (6,811,897)
                                                                              -------------       -------------       -------------
     Net interest income (expense) .....................................            780,566          (2,874,877)         (6,717,910)
                                                                              -------------       -------------       -------------
Income before income taxes .............................................         24,150,893          25,366,213           9,436,946
Income taxes (Note 7) ..................................................          9,533,849          10,222,585           4,302,289
                                                                              -------------       -------------       -------------
Net income .............................................................      $  14,617,044       $  15,143,628       $   5,134,657
                                                                              =============       =============       =============

     Net income per share - basic (Note 8) .............................      $        0.98       $        1.01       $        0.34
                                                                              =============       =============       =============
     Net income per share - diluted (Note 8) ...........................      $        0.97       $        1.01       $        0.34
                                                                              =============       =============       =============

Weighted average number of shares of common stock
   and potential dilutive securities outstanding (Note 8):
      Basic ............................................................         14,845,465          14,928,870          15,101,423
      Diluted ..........................................................         15,001,176          14,985,934          15,144,529
</TABLE>


          See accompanying notes to consolidated financial statements.


                                    Page 29
<PAGE>


                METRO INFORMATION SERVICES, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                -------------------------------
                                                                                    1999               2000
                                                                                ------------       ------------
<S>                                                                             <C>                <C>
Assets:
Current assets:
  Cash and cash equivalents ................................................    $  4,612,538       $    603,699
  Accounts receivable, net (Notes 2 and 6) .................................      59,720,500         54,923,035
  Prepaid expenses .........................................................       4,442,488          2,378,173
  Other current assets less allowance for uncollectible sales tax
         of $586,286 at December 31, 2000 (Note 3) .........................              --          1,044,095
  Deferred income taxes (Note 7) ...........................................       1,287,699          2,193,480
                                                                                ------------       ------------
         Total current assets ..............................................      70,063,225         61,142,482
Property and equipment, net (Note 5) .......................................      12,412,632         11,889,307
Goodwill and other intangibles, net (Note 4) ...............................     107,395,150        115,972,945
Other assets ...............................................................         307,843            275,091
                                                                                ------------       ------------
Total assets ...............................................................    $190,178,850       $189,279,825
                                                                                ============       ============


Liabilities and Shareholders' Equity:
Current liabilities:
  Accounts payable .........................................................    $  4,202,391       $  4,029,196
  Earnouts payable .........................................................       8,750,000                 --
  Accrued compensation and benefits (Note 11) ..............................      15,063,453         14,466,277
                                                                                ------------       ------------
          Total current liabilities ........................................      28,015,844         18,495,473
Line of credit facilities (Note 6) .........................................      82,467,071         83,443,021
Deferred income taxes (Note 7) .............................................       1,555,131          2,404,451
                                                                                ------------       ------------
         Total liabilities .................................................     112,038,046        104,342,945
                                                                                ------------       ------------
Shareholders' equity:
  Preferred stock, $0.01 par
         value; authorized 1,000,000 shares; none
         issued and outstanding (Note 12) ..................................              --                 --
  Common stock, $0.01 par value, authorized
          50,000,000 shares; issued and outstanding 15,021,552
          shares at December 31, 1999 and 15,222,712 shares at
          December 31, 2000 (Notes 9 and 12) ...............................         150,216            152,227
  Paid in capital ..........................................................      39,336,189         40,995,597
  Retained earnings ........................................................      38,654,399         43,789,056
                                                                                ------------       ------------
         Total shareholders' equity ........................................      78,140,804         84,936,880
                                                                                ------------       ------------
Commitments and contingencies (Note 11)
Total liabilities and shareholders' equity .................................    $190,178,850       $189,279,825
                                                                                ============       ============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                    Page 30
<PAGE>


                METRO INFORMATION SERVICES, INC. AND SUBSIDIARIES

           Consolidated Statements of Changes in Shareholders' Equity


<TABLE>
<CAPTION>
                                                                                        Shareholders' Equity
                                                                 -------------------------------------------------------------------
                                                                       Common Stock
                                                                 -------------------------     Paid in      Retained
                                                                   Shares        Amount        Capital      Earnings        Total
                                                                 -----------   -----------   -----------   -----------   -----------

<S>                                                               <C>          <C>           <C>           <C>           <C>
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
under Employee Stock Purchase Plan ...........................        53,106           531     1,322,525            --     1,323,056
Net proceeds from issuance of shares of common stock
under 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
Net proceeds from issuance of shares of common stock
under Employee Stock Purchase Plan ...........................       128,102         1,281     1,601,862            --     1,603,143
Net proceeds from issuance of shares of common stock
under Employee Incentive Stock Option Plan ...................         9,290            93       148,847            --       148,940
Net income for 1999 ..........................................            --            --            --    15,143,628    15,143,628
                                                                 -----------   -----------   -----------   -----------   -----------
Balance as of December 31, 1999 ..............................    15,021,552       150,216    39,336,189    38,654,399    78,140,804
Net proceeds from issuance of shares of common stock
under Employee Stock Purchase Plan ...........................       183,760         1,837     1,376,181            --     1,378,018
Net proceeds from issuance of shares of common stock
under Employee Incentive Stock Option Plan ...................        17,400           174       283,227            --       283,401
Net income for 2000 ..........................................            --            --            --     5,134,657     5,134,657
                                                                 -----------   -----------   -----------   -----------   -----------
Balance as of December 31, 2000 ..............................    15,222,712   $   152,227   $40,995,597   $43,789,056   $84,936,880
                                                                 ===========   ===========   ===========   ===========   ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                    Page 31
<PAGE>


                METRO INFORMATION SERVICES, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                        ---------------------------------------------------
                                                                            1998               1999               2000
                                                                        -------------      -------------      -------------
<S>                                                                     <C>                <C>                <C>
Cash Flows from Operating Activities:
    Net income ......................................................   $  14,617,044      $  15,143,628      $   5,134,657
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation and amortization - cost of revenue .............          45,875             44,315             45,061
        Depreciation and amortization - operating expenses ..........       1,850,529          5,583,608          8,081,709
       Net loss on sale of property and equipment ...................          41,089             39,811            337,686
        Deferred income taxes .......................................        (192,403)           386,890            (56,461)
       Changes in operating assets and liabilities increasing
          (decreasing) cash and cash equivalents, net of the
           effects of acquisitions:
          Accounts payable from restricted cash .....................       1,264,524         (1,264,524)                --
          Accounts receivable .......................................      (9,664,564)        (7,891,996)         4,797,465
          Prepaid expenses ..........................................         (53,555)        (3,857,741)         2,064,315
          Other current assets ......................................              --                 --         (1,044,095)
          Other assets ..............................................         179,933            (49,404)            32,752
          Accounts payable ..........................................       2,922,251         (5,424,864)          (173,195)
          Accrued compensation and benefits .........................       2,027,850          1,079,938           (597,176)
                                                                        -------------      -------------      -------------
              Net cash provided by operating activities .............      13,038,573          3,789,661         18,622,718
                                                                        -------------      -------------      -------------
Cash Flows from Investing Activities:
     Acquisition of property and equipment ..........................      (3,494,790)        (3,544,543)        (2,359,550)
     Acquisition of computer software ...............................      (2,141,332)        (1,102,430)          (791,463)
     Acquisition of businesses ......................................     (12,443,771)       (97,251,067)       (22,149,994)
     Proceeds from sale of property and equipment ...................           8,130              6,183             32,081
                                                                        -------------      -------------      -------------
              Net cash used in investing activities .................     (18,071,763)      (101,891,857)       (25,268,926)
                                                                        -------------      -------------      -------------
Cash Flows from Financing Activities:
     Net borrowings under line of credit ............................              --         82,467,071            975,950
     Proceeds from shares issued under Employee Stock
       Purchase Plan ................................................       1,323,056          1,603,143          1,378,018
     Proceeds from shares issued under Employee Incentive
        Stock Option Plan ...........................................         177,120            148,940            283,401
                                                                        -------------      -------------      -------------
            Net cash provided by financing activities ...............       1,500,176         84,219,154          2,637,369
                                                                        -------------      -------------      -------------
Net decrease in cash and cash equivalents ...........................      (3,533,014)       (13,883,042)        (4,008,839)
Cash and cash equivalents at beginning of year ......................      22,028,594         18,495,580          4,612,538
                                                                        -------------      -------------      -------------
Cash and cash equivalents at end of year ............................   $  18,495,580      $   4,612,538      $     603,699
                                                                        =============      =============      =============
Supplemental disclosure of cash flow information:
     Cash paid for interest .........................................   $      56,991      $   3,261,046      $   6,563,030
                                                                        =============      =============      =============


     Cash paid for income taxes .....................................   $   9,004,978      $  11,047,931      $   3,092,863
                                                                        =============      =============      =============
</TABLE>

During  1998,  1999 and 2000,  non-cash  financing  activities  associated  with
acquisitions totaled $1,001,344, $8,750,000 and $0, respectively.


          See accompanying notes to consolidated financial statements.


                                    Page 32
<PAGE>


                METRO INFORMATION SERVICES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

     Nature of Business

     Metro   Information   Services,   Inc.   together  with  its   wholly-owned
consolidated  subsidiaries  Metro Information  Services of Northern  California,
Inc.,  Metro  Information  Services  of Los  Angeles,  Inc.,  Metro  Information
Services of Orange County,  Inc.,  Metro  Information  Services of Pennsylvania,
Inc. and Metro Information Services - ATS, 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, 2000,  the Company had 36 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  subsidiaries.  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.

     There are several  types of revenue that are  currently  immaterial  to the
Company's  gross  revenue but may  account for a greater  portion in the future.
These  primarily  include  sales of managed  services  and fixed fee  contracts.
Currently, the combined revenue from these types of sales accounts for less than
1% of the yearly gross revenue.  Accounting  for managed  services and fixed fee
revenue is different  from the services  billed on a time and  materials  basis.
Managed  services  revenue  represents fees for  administrative  services and is
reported on a net basis. Fixed fee revenue is recognized using the percentage of
completion  method.  All of these types of revenue are  currently  included with
revenue from consulting services on the income statement due to immateriality.

     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,
2000 and 1999 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.  The
carrying  amounts of the Company's line of credit  facilities  approximate  fair
value due to their variable interest rates.

     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.


                                    Page 33
<PAGE>


     Goodwill and Other Intangible Assets

     Goodwill and other intangible assets represent the excess of cost over fair
value of net tangible assets acquired through  acquisitions and are amortized on
a straight-line basis over their estimated useful lives,  generally 30 years for
goodwill and 3-20 years for other  intangible  assets.  Management  periodically
assesses whether there has been a permanent impairment in the value of goodwill,
customer base and other intangible assets. Impairment is determined by comparing
anticipated  undiscounted future cash flows to the carrying value of the related
goodwill,  customer base and other  intangibles.  If such assets are  considered
impaired,  the impairment is measured as the amount by which the carrying amount
of the assets exceeds the fair value of the assets.

     Income Taxes

     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.

     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 the current
year presentation.

(2) Accounts Receivable

     At  December  31, 1999 and 2000,  the  components  of accounts  receivables
consist of the following:

                                                         December 31,
                                                  -------------------------
                                                     1999          2000
                                                  -----------   -----------
     Billed revenue ...........................   $59,100,220   $57,264,101
     Unbilled revenue .........................     1,154,010       128,239
                                                  -----------   -----------
                                                   60,254,230    57,392,340
       Less allowance for doubtful accounts           533,730     2,469,305
                                                  -----------   -----------
                                                  $59,720,500   $54,923,035
                                                  ===========   ===========

(3) Sales Tax Assessment

     The Tennessee  Department of Revenue completed a tax audit during 2000. The
audit  resulted in the Company's  receipt of a Notice of Assessment on September
29, 2000 that  proposed the  imposition of  additional  Tennessee  sales and use
taxes and  related  interest  and penalty  attributable  to the  performance  by
Company  employees of services in the State of Tennessee,  which the  Department
determined to be taxable as "computer  software." In the Notice,  the Department
assessed  sales and use tax of  $2,357,147,  which the  Company  paid in October
2000.  Under Tennessee law, the ultimate  consumer is responsible for paying the
assessed  sales and use tax.  Accordingly,  the Company has billed the  assessed
amount to its customers.  A portion of this amount may not be collectible.  As a
result,  the  Company  has  recorded a reserve  of  $586,286  for  uncollectible
accounts.  The net current  receivable on the balance  sheet is  $1,044,095  and
appears in other current  assets at December 31, 2000.  The interest and penalty
paid on the liability  through  December 31, 2000 totaled $894,594 and $197,979,
respectively.  Collectively, the reserve, interest, and recorded penalty reduced
the  income  before  income  taxes  for the  year  ended  December  31,  2000 by
$1,678,859.


                                    Page 34
<PAGE>


(4) Acquisitions

     On December 2, 1998,  the Company  completed the  acquisition  of The Avery
Group ("Avery"),  an information  technology services company with one office in
the  Palo  Alto/Silicon  Valley  area of  California.  The  purchase  price  was
approximately  $11,849,000,  of which $11 million was paid at closing,  $754,000
was paid in February 1999 based on a net worth adjustment  calculation performed
in February 1999 and direct costs of the acquisition were approximately $95,000.

     On January 1, 1999, the Company  acquired D.P.  Specialists,  Inc. and D.P.
Specialists Learning Center, LLC ("DPS"  collectively),  information  technology
consulting  services and personnel  staffing  businesses  located in El Segundo,
California  and  Woodbridge,  New Jersey for a purchase  price of  approximately
$17,907,000, including direct costs of the acquisition of approximately $90,000.
During  2000,  $7,837,164  was paid  based on the  acquired  business  attaining
certain operating income targets for the twelve months ended December 31, 1999.

     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 approximately  $20,611,000,  of which  $17,976,000 was paid at
closing,  $352,000  was  paid in April  1999  based  on a net  worth  adjustment
calculation performed in April 1999 and approximately $183,000 represents direct
costs related to the acquisition.  During 2000, $2,100,000 was paid based on the
acquired  business  attaining  certain  operating  income targets for the twelve
months ended January 31, 2000.

     On 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 approximately  $28,398,000,  of which  $24,046,000 was paid at
closing,  $3,654,000  was  paid  in  March  1999  based  on a  consultant  count
adjustment  on March 8,  1999,  $591,000  was paid in April  1999 based on a net
worth adjustment  calculation performed in April 1999 and approximately $107,000
represents direct costs of the acquisition.

     On August 13, 1999,  the Company  acquired all of the membership and equity
interests of Acuity Technology  Services,  LLC and Acuity Technology Services of
Dallas,  LLC  ("ATS"  collectively),  both of which are  information  technology
consulting  services and  personnel  staffing  businesses  located in Washington
D.C.,   Baltimore,   Maryland  and  Dallas,   Texas  for  a  purchase  price  of
approximately $52,410,000 of which $39,425,000 was paid at closing, $666,000 was
paid in November 1999 and approximately $158,000 represents direct costs related
to the  acquisition.  During  2000,  $12,160,830  was paid based on the acquired
business  attaining certain operating income targets for the twelve months ended
August 31, 2000.

     Each of these acquisitions is accounted for as a purchase. 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.

     At  December  31,  1999 and 2000,  the  components  of  goodwill  and other
intangibles consist of the following:

<TABLE>
<CAPTION>
                                                                       December 31,
                                                   Useful       ---------------------------
                                                    Life            1999           2000
                                                -------------   ------------   ------------
<S>                                             <C>             <C>            <C>
     Goodwill .................................      30 years   $ 98,823,240   $106,101,935
     Customer base ............................ 10 - 20 years      9,874,500     17,122,300
     Other intangibles ........................   3 - 5 years      1,956,700        830,200
                                                                ------------   ------------
                                                                 110,654,440    124,054,435
            Less accumulated amortization                          3,259,290      8,081,490
                                                                ------------   ------------
                                                                $107,395,150   $115,972,945
                                                                ============   ============
</TABLE>


                                    Page 35
<PAGE>


     Unaudited Pro forma  consolidated  results of operations for the year ended
December 31, 1999 would have been as follows had the  acquisitions  of PCM, KSC,
STI and ATS occurred as of the beginning of the period:

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

     Revenue .................................................     $345,993
     Net income ..............................................     $ 14,853
     Net income per share - basic ............................     $   1.00
     Net income per share - diluted ..........................     $   0.99
     Weighted average number of shares of common stock
          and potential dilutive securities outstanding:
          Basic ..............................................       14,901
          Diluted ............................................       15,005

There is no difference between the pro forma and actual consolidated  results of
operations for the twelve months ended December 31, 2000 since the  acquisitions
occurred before January 1, 2000.

(5) Property and Equipment

     Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                  Useful     -------------------------
                                                                   Life          1999          2000
                                                                  ------     -----------   -----------
<S>                                                             <C>          <C>           <C>
     Land ....................................................        n.a.   $   129,221   $   129,221
     Buildings ...............................................  31.5 years       938,957       938,957
     Computer equipment and software .........................   3-7 years    13,256,857    13,828,027
     Furniture and equipment .................................   5-7 years     4,016,179     4,084,078
     Leasehold improvements ..................................     Various       771,723       844,112
     Automobiles .............................................     3 years        16,065        16,065
                                                                ----------   -----------   -----------
                                                                              19,129,002    19,840,460
               Less accumulated depreciation and amortization                  6,716,370     7,951,153
                                                                             -----------   -----------
                                                                             $12,412,632   $11,889,307
                                                                             ===========   ===========
</TABLE>

(6) Line of Credit Facilities

     The  Company  increased  the  maximum  amount it may  borrow on its  credit
facilities  from   $39,900,000  to  $90,000,000  on  January  15,  1999  and  to
$125,000,000  on August 25, 1999.  Amounts  advanced under the facilities can be
used  for  acquisitions  and  general  working  capital  purposes.   The  credit
facilities  are  provided  in equal  amounts of  $35,000,000  by three banks and
$20,000,000  by a fourth bank. As of December 31, 2000, the Company had borrowed
$83,443,021 against these facilities. The facilities mature in June 2005 and may
be extended each year for an additional year. Until June 2005, interest,  but no
principal, 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 other two have only LIBOR based interest rates.  All of the facilities
have  interest  rates  that  increase  as  the  balance  outstanding  under  the
facilities increases. The rates on such borrowings ranged from 7.66% to 7.79% on
December 31, 2000.  The  facilities  also contain  fees,  ranging from 0.125% to
0.380% 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 limit the amount of
dividends that can be paid. The covenants also impose limits on incurring  other
debt and  require  a  certain  debt  service  coverage  ratio to be  maintained.
Quarterly  testing  dates are required for these  covenants.  The  covenants may
prevent the Company from  borrowing the full  $125,000,000  of the facilities or
trigger  a  default  under the  credit  facilities.  As of  December  31,  2000,
approximately  $20.7  million was  available for  additional  borrowing  without
default.

     On March 20,  2000,  the Company  negotiated  more  favorable  terms on the
credit  facilities,  which are  expected  to allow the  Company to fully use the
maximum borrowing amount. The change increased the Maximum Funded Debt


                                    Page 36
<PAGE>


to EBITDA  ratio from 3.0 to 1.0 to 4.0 to 1.0  through  September  30, 2001 and
increased the Funded Debt to  Capitalization  ratio to 65% through  December 31,
2000 and 60% through December 31, 2001. At December 31, 2000, the Maximum Funded
Debt to EBITDA ratio stood at 3.2 to 1.0.

(7) Income Taxes

     The provision for income taxes for 1998, 1999 and 2000 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,
                                                  --------------------------------------------
                                                     1998             1999            2000
                                                  -----------      -----------     -----------
<S>                                               <C>              <C>             <C>
Current:
     Federal ...............................      $ 8,113,236      $ 8,177,304     $ 3,026,247
     State .................................        1,613,016        1,658,391         608,475
     Foreign ...............................               --               --         724,028
Deferred:
     Federal ...............................         (160,233)         321,657         (47,518)
     State .................................          (32,170)          65,233          (8,943)
                                                  -----------      -----------     -----------
         Total income tax expense ..........      $ 9,533,849      $10,222,585     $ 4,302,289
                                                  ===========      ===========     ===========
</TABLE>

     The 1998,  1999 and 2000 actual tax expense  differs  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:

                                                      Year Ended December 31,
                                                   ----------------------------
                                                   1998        1999        2000
                                                   ----        ----        ----
Statutory tax rate ............................    35.0%       35.0%       35.0%
Effect of:
    State and local income taxes, net of
        Federal tax benefit ...................     4.5         5.3         4.8
     Nondeductible business expenses ..........      --          --         4.1
     Foreign statutory rate differential ......      --          --         1.7
                                                   ----        ----        ----
     Effective tax rate .......................    39.5%       40.3%       45.6%
                                                   ====        ====        ====


     The components of the deferred tax asset and liability at December 31, 1999
and 2000 are as follows:

                                                      1999              2000
                                                      ----              ----
Current deferred tax asset:
    Self-insurance reserves ................      $   334,369       $   293,130
    Accrued expenses .......................          743,531           779,778
    Allowance for doubtful accounts ........          209,799         1,120,572
                                                  -----------       -----------
                                                  $ 1,287,699       $ 2,193,480
                                                  ===========       ===========
Long-term deferred tax liability:
    Depreciation and amortization ..........      $(1,424,267)      $(2,404,451)
    Other deferred tax liabilities .........         (130,864)               --
                                                  -----------       -----------
                                                  $(1,555,131)      $(2,404,451)
                                                  ===========       ===========

     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 1998,  1999 and 2000  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


                                    Page 37
<PAGE>


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.

(8) Earnings Per Share

     The following tables reconcile the numerators and denominators of the basic
and diluted earnings per share computations of net income:


<TABLE>
<CAPTION>
                                                                 Shares
                                               Net Income      Outstanding    Net Income
For the Year Ended December 31, 1998           (Numerator)    (Denominator)   Per Share
------------------------------------           -----------    -------------   ----------
<S>                                            <C>              <C>             <C>
Basic Net Income Per Share .................   $14,617,044      14,845,465      $0.98
                                                                                =====
Effect of Dilutive Securities - Incentive
   Stock Options deemed outstanding ........            --         155,711
                                               -----------     -----------
Diluted Net Income Per Share ...............   $14,617,044      15,001,176      $0.97
                                               ===========     ===========      =====


<CAPTION>
                                                                  Shares
                                                Net Income      Outstanding    Net Income
For the Year Ended December 31, 1999            (Numerator)    (Denominator)   Per Share
------------------------------------            -----------    -------------   ----------
<S>                                            <C>              <C>             <C>
Basic Net Income Per Share .................   $15,143,628      14,928,870      $1.01
                                                                                =====
Effect of Dilutive Securities - Incentive
   Stock Options deemed outstanding ........            --          57,064
                                               -----------     -----------
Diluted Net Income Per Share ...............   $15,143,628      14,985,934      $1.01
                                               ===========     ===========      =====


<CAPTION>
                                                                 Shares
                                               Net Income      Outstanding    Net Income
For the Year Ended December 31, 2000           (Numerator)    (Denominator)   Per Share
------------------------------------           -----------    -------------   ----------
<S>                                            <C>              <C>             <C>
Basic Net Income Per Share .................   $ 5,134,657      15,101,423      $0.34
                                                                                =====
Effect of Dilutive Securities - Incentive
   Stock Options deemed outstanding ........            --          43,106
                                               -----------     -----------
Diluted Net Income Per Share ...............   $ 5,134,657      15,144,529      $0.34
                                               ===========     ===========      =====
</TABLE>


See Note 9 for a description of the Incentive Stock Option Plan.

(9) 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 1998, 1999 and 2000.  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  option 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, 1998,  1999 and 2000 would have been reduced to
the Pro forma amounts indicated below.


                                    Page 38
<PAGE>


<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                               -------------------------------------------------------------------------------------------------
                                           1998                               1999                             2000
                               -------------------------------------------------------------------------------------------------
                                                   SFAS No.                          SFAS No.                         SFAS No.
                                     As              123               As              123               As             123
                                  Reported        Pro forma         Reported        Pro forma         Reported       Pro forma
                               -------------    -------------    -------------    -------------    -------------   -------------
<S>                            <C>              <C>              <C>              <C>              <C>             <C>
Net income ..................  $  14,617,044    $  13,903,986    $  15,143,628    $  13,719,741    $   5,134,657   $   3,913,460
                               =============    =============    =============    =============    =============   =============
Net income per share:
      Basic .................  $        0.98    $        0.94    $        1.01    $        0.92    $        0.34   $        0.26
                               =============    =============    =============    =============    =============   =============
      Diluted ...............  $        0.97    $        0.93    $        1.01    $        0.92    $        0.34   $        0.26
                               =============    =============    =============    =============    =============   =============
</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 1998,
1999 and 2000, the Outside  Directors  Stock Plan issued 2,000,  2,000 and 2,000
options,  respectively,  to outside directors and no options were exercised.  At
December 31, 2000, 14,000 options had been issued by the Plan.

     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 1,500,000  shares of Common Stock. On various dates during
1998,  1999, and 2000 certain  employees of the Company were granted  options to
purchase 246,000,  762,000 and 456,000 options respectively,  at the fair market
value on the date of grant.  All of the  options  issued in 1998,  1999 and 2000
vest  ratably  over  either  five or three  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:

                                            1998          1999         2000
                                            ----          ----         ----
     Expected life......................   5 years      5 years      5 years
     Risk free interest rate............    5.0%          5.5%         5.8%
     Expected volatility................     56%          62%          71%
     Annual dividend yield..............     0%            0%           0%


                                    Page 39
<PAGE>


A summary of the status of the Company's  1997 Employee  Incentive  Stock Option
Plan and Outside  Directors  Stock Plan as of December 31, 1998,  1999 and 2000,
and changes during the years then ended, is presented below:

<TABLE>
<CAPTION>
                                                            1998                       1999                      2000
                                                    ---------------------     ----------------------    -----------------------
                                                                 Weighted                   Weighted                  Weighted
                                                                 Average                    Average                   Average
                                                    Number of    Exercise     Number of     Exercise     Number of    Exercise
                                                     Shares       Price        Shares        Price        Shares       Price
                                                    ---------    --------     ---------     --------     ---------    --------
<S>                                                 <C>           <C>        <C>             <C>        <C>             <C>
Options at beginning of  year ..................     314,200      $15.97        523,970      $21.21      1,169,458      $18.80
Granted ........................................     248,000      $27.47        764,000      $17.31        458,000       $6.29
Exercised ......................................     (11,070)     $16.00         (9,290)     $16.03        (17,400)     $16.29
Forfeited ......................................     (27,160)     $19.89       (109,222)     $20.15       (209,132)     $18.55
                                                    --------                 ----------                 ----------
Options at end of year .........................     523,970      $21.21      1,169,458      $18.80      1,400,926      $14.78
                                                    ========                 ==========                 ==========

Options exercisable at year-end ................     138,310      $18.07        309,694      $19.13        482,426      $18.76
                                                    ========                 ==========                 ==========

Weighted average estimated fair value of
       options granted during the year .........    $  14.65                 $    10.02                 $     3.98
                                                    ========                 ==========                 ==========
</TABLE>

     Following  is a summary of the range of  exercise  prices and the  weighted
average contractual life of outstanding stock options at December 31, 2000:


<TABLE>
<CAPTION>
                                                         Options Outstanding                         Options Exercisable
                                            -----------------------------------------------      --------------------------
                                                        Weighted Average       Weighted                        Weighted
                                                          Remaining             Average                         Average
  Range of Exercise Prices                  Shares      Contractual Life     Exercise Price      Shares      Exercise Price
  ------------------------                  ------      ----------------     --------------      ------      --------------
<S>                                       <C>               <C>                  <C>             <C>             <C>
$6.188 to $6.25 ......................      447,000         9.7 years             $6.24                0          $0.00
$7.25 to $8.563 ......................        3,000         9.5 years             $8.08            2,000          $8.56
$13.50 to $14.625 ....................      188,734         8.7 years            $14.59           63,606         $14.52
$15.625 to $16.50 ....................      512,906         7.1 years            $16.28          295,100         $16.21
$18.50 to $19.25 .....................        6,000         7.7 years            $18.75            3,600         $18.92
$21.688 ..............................        1,000         9.1 years            $21.69                0          $0.00
$22.125 to $23.75 ....................       36,100         8.0 years            $22.62           14,800         $22.62
$25.813 ..............................        7,446         7.2 years            $25.81            3,335         $25.81
$27.25 to $28.00 .....................      178,640         7.2 years            $27.65           90,685         $27.66
$35.00 to $35.75 .....................       20,100         7.9 years            $35.07            9,300         $35.16
                                          ---------                                              -------
$6.188 to $35.75 .....................    1,400,926         8.2 years            $14.78          482,426         $18.76
                                          =========                                              =======
</TABLE>


Employee Stock Purchase Plan

     The Company  adopted  the ESPP on December  24,  1996.  Under the ESPP,  an
aggregate of 500,000 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 1998, 1999 and
2000,  the Company sold 53,106,  128,102 and 183,760  shares,  respectively,  of
Common Stock to the ESPP for a total of $1,323,056,  $1,603,143 and  $1,378,018,
respectively.  At December 31, 2000,  384,952  shares had been  purchased by the
Plan from the Company.


                                    Page 40
<PAGE>


     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:

                                              1998        1999        2000
                                              ----        ----        ----
     Expected life ......................    3 months    3 months    3 months
     Risk free interest rate ............    4.9%        4.7%        5.9%
     Expected volatility ................    31%         32%         44%
     Annual dividend yield ..............     0%          0%          0%

     The weighted  average fair value of those  purchase  rights granted in 2000
was $2.89.

(10) Profit Sharing Plan

     The Company  sponsors a 401(k) employee  benefit plan covering all eligible
employees of Metro Information Services, Inc., with a minimum of three months of
service. In addition,  certain of the Company's  subsidiaries  sponsor their own
401(k) employee  benefit plans covering all of their eligible  employees who met
the  minimum  service  requirements  of  their  plans.  Eligible  employees  are
permitted to make voluntary deductible  contributions to their plan. Some of the
plans require Metro Information Services, Inc., or the applicable subsidiary, to
make matching contributions on the eligible employee's contribution. The Company
made matching  contributions  of  $1,775,329,  $2,594,052  and $2,642,276 to the
plans for the years ended December 31, 1998, 1999 and 2000, respectively.

(11) Commitments and Contingencies

     The Company is obligated under various non-cancelable  operating leases for
office space.  Rent expense for the years ended December 31, 1998, 1999 and 2000
was  $1,930,184,  $3,494,091 and  $4,203,335,  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, as of December 31, 2000 are as follows:

        2001    .................................................  $ 4,080,499
        2002    .................................................    3,959,409
        2003    .................................................    3,521,844
        2004    .................................................    2,179,825
        2005    .................................................    1,008,051
        Thereafter...............................................    2,566,423
                                                                   -----------
                                                                   $17,316,051
                                                                   ===========

     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
$5,535,831,  $6,204,018  and  $6,913,922  for the years ended December 31, 1998,
1999 and 2000,  respectively.  Included in accrued  compensation and benefits on
the  accompanying  consolidated  balance sheets is a reserve for claims incurred
but not yet  reported of $960,924  and  $751,296 at December  31, 1999 and 2000,
respectively.


                                    Page 41
<PAGE>


(12) Shareholders' Equity

     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.

     Common Stock

     The Common Stock shareholders have the sole right to vote.

(13) Restructuring Charge

     On May 25, 2000,  the  Company's  Executive  Management  approved a plan to
close eight of its smaller offices and combine  operations in two other markets.
By June 2, 2000, offices located in Memphis,  Milwaukee,  Minneapolis,  Orlando,
Pittsburgh, Portland, Sacramento, and Salt Lake City had been closed.

     During June 2000, the Company recorded a restructuring  charge of $746,600.
The  charge  represents   management's  estimate  of  the  ultimate  obligations
associated  with executing the plan at the time the estimates were made.  During
the third quarter, the restructuring charge for costs to exit certain facilities
was revised as the Company  negotiated an early end to some leases and subleased
other facilities. The Company expects to complete all steps in the restructuring
plan by May 31, 2001.

     The following table shows the initial  accruals made by the Company and the
remaining liability as of December 31, 2000:

                                             Costs
                                            incurred
                                             through                Balance as
                                 Initial    December   Revision to  of December
                                 Balance    31, 2000    estimates    31, 2000
                                 -------    --------    ---------    --------
Cost to exit certain facilities  $608,233   $277,338    $(319,842)    $11,053
Severance and
  termination related accruals    114,767     93,267      (21,500)         --
Relocation costs                   23,600     21,346       (2,254)         --
                                 --------   --------    ---------     -------
Total restructuring costs        $746,600   $391,951    $(343,596)    $11,053
                                 ========   ========    =========     =======

(14) 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, 2000.  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.


                                    Page 42
<PAGE>


<TABLE>
<CAPTION>
                                                   First          Second         Third        Fourth
Statements of Income Data                          Quarter        Quarter       Quarter       Quarter
-------------------------                          -------        -------       -------       -------
                                                      (Dollars in thousands except per share data)
<S>                                                 <C>           <C>           <C>           <C>
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%

1999:
    Revenue ...................................     $72,473       $78,309       $81,253       $82,611
    Gross profit ..............................      20,970        23,023        24,020        23,951
    Operating income ..........................       6,909         8,393         7,066         5,874
    Net income ................................       4,041         4,603         3,708         2,792
    Net income per share - basic ..............     $  0.27       $  0.31       $  0.25       $  0.19
    Net income per share - diluted ............     $  0.27       $  0.31       $  0.25       $  0.19
    Gross profit percentage ...................        28.9%         29.4%         29.6%         29.0%
    Operating income percentage ...............         9.5%         10.7%          8.7%          7.1%

2000:
    Revenue ...................................     $80,197       $77,812       $77,880       $77,702
    Gross profit ..............................      22,411        22,864        23,614        23,135
    Operating income ..........................       3,302         3,370         4,685         4,799
    Net income ................................       1,163         1,148         1,178         1,646
    Net income per share - basic ..............     $  0.08       $  0.08       $  0.08       $  0.11
    Net income per share - diluted ............     $  0.08       $  0.08       $  0.08       $  0.11
    Gross profit percentage ...................        27.9%         29.4%         30.3%         29.8%
    Operating income percentage ...............         4.1%          4.3%          6.0%          6.2%
</TABLE>


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

     None.

PART III

     The  information  required  by Part III,  Items 10, 11, 12, and 13 has been
incorporated  herein by reference to the Company's  2001 Proxy  Statement as set
forth below, in accordance with General Instruction G(3) of Form 10-K.

Item 10.  Directors  and  Executive  Officers of the  Registrant;  Section 16(a)
     Beneficial Ownership Reporting Compliance

     Information  relating  to  directors  of the Company  and  compliance  with
Section  16(a)  of the  Exchange  Act  is set  forth  in the  sections  entitled
"Election  of  Directors"  and "Section  16(a)  Beneficial  Ownership  Reporting
Compliance" in the Company's 2001 Proxy Statement and is incorporated  herein by
reference.   Pursuant  to  General   Instruction  G(3)  of  Form  10-K,  certain
information  concerning the executive officers of the Company is set forth under
the caption entitled  "Executive  Officers of the Company" in Part I, Item 1, of
this Form 10-K.


                                    Page 43
<PAGE>


Item 11. Executive Compensation

     Information regarding compensation of officers and directors of the Company
is set forth in the section entitled  "Executive  Compensation" in the Company's
2001 Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     Information  regarding ownership of certain of the Company's  securities is
set forth in the section entitled "Security  Ownership of Management and Certain
Beneficial  Owners" in the Company's  2001 Proxy  Statement and is  incorporated
herein by reference.

Item 13. Relationships and Related Transactions

     Information  regarding certain  relationships and related transactions with
the  Company is set forth in the section  entitled  "Certain  Relationships  and
Related  Transactions" in the Company's 2001 Proxy Statement and is incorporated
herein by reference.

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, 1998, 1999 and 2000

               Consolidated Balance Sheets as of December 31, 1999 and 2000

               Consolidated  Statements of Changes in  Shareholders'  Equity for
                    the Years Ended December 31, 1998, 1999 and 2000

               Consolidated  Statements  of  Cash  Flows  for  the  Years  Ended
                    December 31, 1998, 1999 and 2000

     (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.

          2.1    Audit Committee Charter,  dated June 12, 2000,  incorporated by
                 reference to Exhibit 2.1 to the  Quarterly  Report on Form 10-Q
                 for the quarter ended June 30, 2000.

          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.

          3.3    Amended and Restated  Articles of  Incorporation of Registrant,
                 effective  as of June 13,  2000,  incorporated  by reference to
                 Exhibit  3.1 to the  Quarterly  Report  on  Form  10-Q  for the
                 quarter ended June 30, 2000.


                                Page 44
<PAGE>


          3.4    Amended and  Restated  Bylaws of  Registrant,  incorporated  by
                 reference to Exhibit 3.2 to the  Quarterly  Report on Form 10-Q
                 for the quarter ended June 30, 2000.

          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.

          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,  incorporated  herein by  reference  to
                 Exhibit  10.2 to the  Annual  Report  on Form 10-K for the year
                 ended December 31, 1998.

          10.3   Registrant's  1997 Employee  Stock Purchase Plan as amended and
                 restated through June 8, 1999, incorporated herein by reference
                 to Exhibit  10.1 to the  Quarterly  Report on Form 10-Q for the
                 quarter ended September 30, 1999.

          10.4   Registrant's  1997 Stock  Option Plan as amended  and  restated
                 through  March 18,  1999,  incorporated  herein by reference to
                 Exhibit  10.2 to the  Quarterly  Report  on Form  10-Q  for the
                 quarter ended September 30, 1999.

          10.5   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.

          10.6   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.

          10.7   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.

          10.8   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.

          10.9   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.

          10.10  Employment  Agreement  dated  as of  January  1,  1998  between
                 Registrant  and  Ronald  D.  Cheatham,  incorporated  herein by
                 reference to Exhibit 10.8 to the Annual Report on Form 10-K for
                 the year ended December 31, 1998.

          10.11  Employment  Agreement  dated  as of  January  1,  1998  between
                 Registrant  and  Michael  G.  Martin,  incorporated  herein  by
                 reference to Exhibit 10.9 to the Annual Report on Form 10-K for
                 the year ended December 31, 1998.

          10.12  Employment  Agreement  dated  as of  January  1,  1999  between
                 Registrant  and  Arthur  C.  Harwood,  incorporated  herein  by
                 reference  to Exhibit  10.10 to the Annual  Report on Form 10-K
                 for the year ended December 31, 1998.

          10.13  Employment   Agreement  dated  as  of  April  1,  1999  between
                 Registrant and Charles Adams,  incorporated herein by reference
                 to Exhibit  10.3 to the  Quarterly  Report on Form 10-Q for the
                 quarter ended September 30, 1999.

          10.14  Employment   Agreement  dated  as  of  April  1,  1999  between
                 Registrant  and  Bruce  F.  Gannett,   incorporated  herein  by
                 reference to Exhibit 10.4 to the Quarterly  Report on Form 10-Q
                 for the Quarter ended September 30, 1999.

          10.15  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.

          10.16  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.


                                      Page 45
<PAGE>


          10.17  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.

          10.18  Asset Purchase Agreement, dated as of November 30, 1998, by and
                 among The Avery Group and Kathleen Avery and Metro  Information
                 Services of Northern California,  Inc.,  incorporated herein by
                 reference to Exhibit 2 to the Current  Report on Form 8-K filed
                 with the Commission on December 17, 1998.

          10.19  Asset Purchase  Agreement,  dated as of January 1, 1999, by and
                 among D.P.  Specialists,  Inc.  and D.P.  Specialists  Learning
                 Center,  LLC and Edward N.  Myers,  Jr. and DeeAnn C. Myers and
                 Metro  Information  Services  of Los  Angeles,  Inc.  and Metro
                 Information Services, Inc., incorporated herein by reference to
                 Exhibit 2 to the  Current  Report  on Form 8-K  filed  with the
                 Commission on January 15, 1999.

          10.20  Asset Purchase Agreement,  dated as of February 1, 1999, by and
                 among The  Professionals  - Computer  Management &  Consulting,
                 Inc. and Krystal  Solutions,  Inc. and Theodore  Schindler  and
                 Cathy  Schindler and The Schindler  Family 1996 Trust and Metro
                 Information  Services,  Inc. and Metro Information  Services of
                 Orange  County,  Inc.,  incorporated  herein  by  reference  to
                 Exhibit 2 to the  Current  Report  on Form 8-K  filed  with the
                 Commission on February 16, 1999.

          10.21  Asset  Purchase  Agreement,  dated as of March 1, 1999,  by and
                 among Solution  Technologies,  Inc. and Larry A. Putt,  John F.
                 Jurasits,  Jr.,  Notarfrancesco  Trust, Putt Trust, C. Jurasits
                 Trust and D. Jurasits Trust and Metro  Information  Services of
                 Pennsylvania,   Inc.  and  Metro  Information  Services,  Inc.,
                 incorporated  herein by  reference  to Exhibit 2 to the Current
                 Report on Form 8-K filed with the Commission on March 10, 1999.

          10.22  Membership Interest Purchase Agreement,  dated as of August 13,
                 1999, by and among Acuity Technology  Services,  LLC and Acuity
                 Technology  Services  of Dallas,  LLC and Michael  Berkman,  W.
                 Braun Jones, Jr., Mark Scofield, Mark H. Brahms, and Rod Rohrer
                 and  Metro   Information   Services  -  ATS,   Inc.  and  Metro
                 Information Services, Inc., incorporated herein by reference to
                 Exhibit 2 to the  Current  Report  on Form 8-K  filed  with the
                 Commission on August 30, 1999.

          10.23  Registrant's  1997 Employee  Stock Purchase Plan as amended and
                 restated through January 1, 2000,  incorporated by reference to
                 Exhibit  10.1 to the  Quarterly  Report  on Form  10-Q  for the
                 quarter ended June 30, 2000.

          21     Subsidiaries  of the  Registrant,  incorporated by reference to
                 Exhibit 21 on Form 10-K for the year ended December 31, 1999.

          23     Consent of KPMG LLP.*

          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,
                 incorporated  herein by reference to Exhibit 99.2 to the Annual
                 Report on Form 10-K for the year ended December 31, 1998.

          99.3   Second Modification and Joinder Agreement with Bank of America,
                 N.A.,  Crestar  Bank,  First Union  National  Bank and Wachovia
                 Bank,  N.A.,  dated  August 25,  1999,  incorporated  herein by
                 reference  to exhibit 99 to the  Quarterly  Report on Form 10-Q
                 for the quarter ended September 30, 1999.

          99.4   Third  Modification  Agreement  with  Bank  of  America,  N.A.,
                 Crestar  Bank,  First Union  National  Bank and Wachovia  Bank,
                 N.A., dated March 20, 2000.

          * Filed herewith.

(b)       Reports on Form 8-K during last quarter of 2000:

          None


                                    Page 46
<PAGE>


<TABLE>
<CAPTION>
                                                                                                       SCHEDULE II

                                 METRO INFORMATION SERVICES, INC. AND SUBSIDIARIES

                                         Valuation and Qualifying Accounts


                                                                                      Write-off
                                                       Balance at                         Of           Balance at
                                                       Beginning      Charges to     Uncollectible       End of
                                                       Of Period        Income          Accounts         Period
                                                     ------------------------------------------------------------
<S>                                                    <C>            <C>               <C>            <C>
Allowance for Doubtful Accounts:

      Year ended December 31, 1998 ..................  $152,201       $  330,806        $110,336       $  372,671
      Year ended December 31, 1999 ..................   372,671          751,553         590,494          533,730
      Year ended December 31, 2000 ..................   533,730        2,822,713         887,138        2,469,305

Allowance for Sales Tax Receivable:

      Year ended December 31, 1998 ..................        --               --              --               --
      Year ended December 31, 1999 ..................        --               --              --               --
      Year ended December 31, 2000 ..................        --          586,286              --          586,286
</TABLE>


                                    Page 47
<PAGE>


                          INDEPENDENT AUDITORS' REPORT
                  ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

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

Under date of January 29, 2001, we reported on the  consolidated  balance sheets
of Metro Information Services, Inc. and subsidiaries as of December 31, 1999 and
2000,   and  the  related   consolidated   statements  of  income,   changes  in
shareholders'  equity  and cash  flows for each of the  years in the  three-year
period ended December 31, 2000,  which are included  herein.  In connection with
our audits of the  aforementioned  consolidated  financial  statements,  we also
audited the related consolidated financial statement schedule. This consolidated
financial statement schedule is the responsibility of the Company's  management.
Our  responsibility  is to express an  opinion  on this  consolidated  financial
statement schedule based on our audits.

In our opinion,  the related  consolidated  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, 2001


                                    Page 48
<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:  February 6, 2001                         By  /s/ JOHN H. FAIN
                                                    -----------------
                                                       John H. Fain
                                                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.


<TABLE>
<CAPTION>
        Signature                            Title                             Date
        ---------                            -----                             ----

<S>                              <C>                                      <C>
   /s/ JOHN H. FAIN              Chief Executive Officer and Director
-------------------------------- (Principal Executive Officer)            February 6, 2001
        John H. Fain



  /s/ ANDREW J. DOWNING          President, Chief Operating
-------------------------------- Officer and Director                     February 6, 2001
      Andrew J. Downing


  /s/ ROBERT J. EVELEIGH         Treasurer, Chief Financial
-------------------------------- Officer and Director (Principal          February 6, 2001
      Robert J. Eveleigh         Financial Officer)
</TABLE>


                                    Page 49